Source: Mortgage Bankers Association
Delinquency rates for commercial mortgages continued to rise through the first three months of 2024. Increases were seen across most funding sources, pointing to challenges posed by maturing loans amid rising interest rates, uncertainty about property values and questions about the fundamentals of some properties.
It's important to recognize that different capital sources track delinquencies in different ways. And there's good reason for that. The rise in delinquency rates on bank commercial mortgages was caused by banks designating non-multifamily loans, especially office loans, as “zero accrued interest,” meaning that while loan payments may not be late, lenders do not expect them to be repaid in full. The rise in these loans, and the associated net charge-offs for the large banks, can be seen as evidence that financial institutions are trying to get ahead of potential future defaults.
Based on the unpaid principal balance (UPB) of the loans, the delinquency rates for each group at the end of the first quarter of 2024 are as follows:
Banks and thrifts (90+ days past due or nonaccrual): 1.03%, up 0.09 percentage points from 4Q23. Life insurance company portfolios (60+ days past due): 0.52%, up 0.16 percentage points from 4Q23. Fannie Mae (60+ days past due): 0.44%, down 0.02 percentage points from 4Q23. Freddie Mac (60+ days past due): 0.34%, up 0.06 percentage points from 4Q23. CMBS (30+ days past due or REO): 4.35%, up 0.05 percentage points from 4Q23.
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