Effect of coronavirus on commercial mortgage arrears TBD
Any impact of the coronavirus outbreak on commercial and multifamily loan delinquencies won’t be known for some time, the Mortgage Bankers Association said.
If it affects the performance of commercial loans, it would be in a position of strength. In the fourth quarter, delinquency rates in most MBA categories remained near record highs.
“The key drivers – strong real estate fundamentals, solid real estate values and low interest rates – continue to support the market,” said Jamie Woodwell, vice president of commercial real estate research at the MBA, in a statement. Press release. “It is too early to tell if and how concerns related to the coronavirus and the ensuing global slowdown will affect the performance of commercial real estate loans, but the corresponding decline in funding costs provides further near-term support.”
Following the release of the MBA report, the Federal Open Market Committee lowered the federal funds rate target by 50 basis points, citing the potential threat of COVID-19 to the U.S. economy.
The 30-day or longer overdue rate (including real estate) for commercial mortgage-backed securities is the only one not near an all-time high. As a result, it recorded the largest decline at 22 basis points from the third quarter and 70 basis points from the fourth quarter of 2018 at 2.07%. The highest for any fourth quarter since 2000 was 8.71% in 2012, and the lowest was 39 basis points in 2006 and 2007.
The funding source metrics are not compatible because the MBA uses the terminology of the data from which it is aggregated.
The late payment rate of 90 days or more for banks and savings banks was 2.42%, down 3 basis points from the third quarter and 6 basis points from the fourth quarter of 2019.
Fannie Mae’s 60-day or longer delinquency rate of 0.04% was 2 basis points lower both quarter-over-quarter and year-over-year.
However, Freddie Mac saw a 4 basis point increase from the third quarter and a 7 basis point increase from a year ago in its 60+ day late payment rate to 0.08. %.
Life insurers also saw their 60-day delinquency rate rise quarter over quarter, from 0.03% to 0.04% in the third quarter. But that was down from 0.05% in the fourth quarter of 2018.