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Stories about commercial lending on multifamily, office, retail and industrial properties.

Commercial Mortgage Performance Waning

90-day commercial delinquency lowest at life insurers

March 13, 2009

By Mortgage Daily staff

Despite rising defaults, commercial mortgages are still some of the best performing loans held by financial institutions. But construction lending is another story.

The 90-day delinquency rate on the $1.3 trillion in commercial mortgages owned by banks and thrifts insured by the Federal Deposit Insurance Corporation jumped 24 basis points from the third quarter to 1.62 percent, according to the Commercial/Multifamily Delinquency Report released Thursday by the Mortgage Bankers Association. At the end of 2007, late payments were 0.80 percent. The balance of delinquent loans at FDIC-insured institutions was $21 billion.

On $1.067 trillion in commercial mortgages owned by financial institutions as of Dec. 31, 2008, 30-day delinquency was just 2.7 percent, while $0.206 trillion in multifamily loans had a late-payment rate of 2.9 percent.

The low level of commercial defaults contrast far higher rates on 1-4 unit financing. Around $2.045 trillion in residential loans owned at yearend by banks and thrifts had a 30-day delinquency of 7.9 percent, and $0.668 trillion in home-equity holdings had a 30-day rate of 3.4 percent.

On the $0.592 trillion in bank-owned construction loans, however, delinquency was a whopping 11.4 percent. Many of the FDIC-insured institutions to fail this year had high concentrations of construction loans.

Commercial mortgage charge-off rates were lower than on other loan types held by financial institutions, while commercial 30-day delinquency was among the three lowest types.

"Commercial and multifamily mortgages are actually performing better than just about every other type of loan," MBA commercial executive Jamie Woodwell said in the statement. "Commercial/multifamily mortgages ended 2008 as some of the best performing loans held by commercial banks and thrifts."

Loans held in commercial mortgage-backed securities with delinquency of at least 30 days ended the fourth quarter at 1.17 percent -- surging from just 0.63 percent at the end of the third quarter. A year earlier, CMBS delinquency was 0.39 percent.

By number of loans, just 33 of more than 35,069 commercial mortgages for $253 billion held by life insurers were in default as of Dec. 31, 2008. Delinquency of at least 60 days on mortgages held by life insurance companies was 0.07 percent, edging up from 0.06 percent on Sept. 30, 2008. On Dec. 31, 2007, delinquency was 0.01 percent.

Delinquency of at least 60 days on multifamily mortgages managed by Fannie Mae nearly doubled, rising to 0.30 percent at the end of last year from 0.16 percent at the end of October and 0.08 percent on Dec. 31, 2007. Freddie Mac's 90-day delinquency rate on multifamily loans was at 0.01 percent, unchanged from the prior period and up from 0.02 percent the prior year.

MBA said the investor groups that it analyzed account for more than 80 percent of commercial mortgage debt outstanding.

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