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Commercial Mortgage Performance Lags Due to Economic Weakness

Economic weakness continues to negatively impact commercial mortgage performance. As a result, delinquency rates increased for all commercial/[IMAGE] multifamily mortgage investor groups in the first quarter of this year, the ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm (MBA) reported Wednesday.

""Weakness in the economy has continued to weigh on commercial properties, which in turn weighs on the mortgages they back,"" said Jamie Woodwell, MBA's VP of commercial real estate research.

MBA's first quarter 2010 ""Commercial/Multifamily Delinquency Report"":http://www.mortgagebankers.org/files/Research/CommercialNDR/1Q10CommercialNDR.pdf analyzed delinquency rates for five of the largest investor groups, including commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae, Freddie Mac, and commercial banks and thrifts. Together, these groups hold more than

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80 percent of commercial/multifamily mortgage debt outstanding, MBA said.

According to the report, the 30-plus day delinquency rate on loans held in CMBS rose 1.54 percentage points to 7.24 percent in the first quarter of this year. This, MBA said, is the highest rate recorded since the series began in 1997.

Meanwhile, delinquency rates for other groups remained below levels seen in the early 1990s, some by large margins, MBA said.

Between the fourth quarter of 2009 and the first quarter of 2010, the 60-plus day delinquency rate on loans held in life company portfolios inched up 0.12 percentage points to 0.31 percent.

During the same period, the 60-plus day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.16 percentage points to 0.79 percent, and the 60-plus day delinquency rate on multifamily loans held or insured by Freddie Mac increased 0.05 percentage points to 0.24 percent.

In addition, the 90-plus day delinquency rate on loans held by FDIC-insured banks and thrifts rose 0.32 percentage points to 4.24 percent.

Going forward, Woodwell said economic growth, specifically in areas of jobs and consumer spending, will be key to stabilizing the commercial property and mortgage markets.

About Author: Brittany Dunn

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