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UPDATE: Q3 Commercial Delinquency Rates

According to the Mortgage Bankers Association’s (MBA) latest Commercial Delinquency Report covering the third quarter of 2023, commercial delinquencies increased during this time period. 

“Not unexpectedly, delinquency rates on commercial mortgages increased for the third consecutive quarter,” said Jamie Woodwell, MBA’s Head of Commercial Real Estate Research. “Every major capital source saw delinquency rates rise, driven by higher interest rates, changes in some property market fundamentals, and uncertainty about property values. CRE market activity remains muted, further complicating the situation.” 

Woodwell continued, “CRE markets are large and heterogeneous. Data from MBA’s own survey released earlier in the quarter show wide differences in mortgage performance by property type. Deal vintage, term, market, and a host of other factors also play into which loans are facing pressure. These differences are likely to remain important in the year ahead.” 

MBA’s quarterly analysis looks at commercial delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, and Fannie Mae and Freddie Mac. Together, these groups hold more than 80% of commercial mortgage debt outstanding. MBA’s analysis incorporates the measures used by each individual investor group to track the performance of their loans. Because each investor group tracks delinquencies in its own way, delinquency rates are not comparable from one group to another. As an example, Fannie Mae reports loans receiving payment forbearance as delinquent, while Freddie Mac excludes those loans if the borrower is in compliance with the forbearance agreement.”

Based on the unpaid principal balance (UPB) of loans, delinquency rates for each group at the end of the third quarter of 2023 were as follows: 

  • Banks and thrifts (90 or more days delinquent or in non-accrual): 0.85% , an increase of 0.18 percentage points from the second quarter of 2023; 
  • Life company portfolios (60 or more days delinquent): 0.32%, an increase of 0.18 percentage points from the second quarter of 2023; 
  • Fannie Mae (60 or more days delinquent): 0.54%, an increase of 0.17 percentage points from the second quarter of 2023; 
  • Freddie Mac (60 or more days delinquent): 0.24%, an increase of 0.03 percentage points from the second quarter of 2023; and 
  • CMBS (30 or more days delinquent or in REO): 4.26%, an increase of 0.44 percentage points from the second quarter of 2023. 

Construction and development loans are generally not included in the numbers presented in this report but are included in many regulatory definitions of ‘commercial real estate’ despite the fact they are often backed by single-family residential development projects rather than by office buildings, apartment buildings, shopping centers, or other income-producing properties. The FDIC delinquency rates for bank and thrift held mortgages reported here do include loans backed by owner-occupied commercial properties. 

Click here to see the 12-page report in its entirety. 

About Author: Kyle G. Horst

Kyle G. Horst is a reporter for DS News and MReport. A graduate of the University of Texas at Tyler, he has worked for a number of daily, weekly, and monthly publications in South Dakota and Texas. With more than 10 years of experience in community journalism, he has won a number of state, national, and international awards for his writing and photography including best newspaper design by the Associated Press Managing Editors Group and the international iPhone photographer of the year by the iPhone Photography Awards. He most recently worked as editor of Community Impact Newspaper covering a number of Dallas-Ft. Worth communities on a hyperlocal level. Contact Kyle G. at [email protected].
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