WASHINGTON, DC (March 10, 2008) - The Mortgage Bankers Association (MBA) released its inaugural analysis of Commercial/Multifamily Mortgage Delinquency Rates for Major Investor Groups that shows delinquency rates ended 2007 at or near record lows for most major investor groupsFourth quarter delinquency rates for four of the five largest investor groups - commercial mortgage-backed securities (CMBS), life companies, Fannie Mae and Freddie Mac - remained at or near historically low levels. For the fifth group, FDIC-insured commercial banks and thrifts, delinquency rates were lower at 2007's year-end than during 5 of the previous 11 years and 10 of the previous 16 years.
"This is an important new analysis that helps cut through much of the recent 'noise' on commercial real estate finance," said Steve Graves, (photo top right) Managing Director & Chief Operating Officer of Principal Real Estate Investors and Chair of the Mortgage Bankers Association's Commercial Board of Governors. "Despite a great deal of attention being paid to economic uncertainty, it is reassuring to know that the performance of commercial and multifamily mortgage loans and bonds has remained so fundamentally sound."
The new MBA analysis looks at commercial/multifamily delinquency rates since 1996 and compares year-end rates for the five largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae and Freddie Mac. Together these groups hold more than 80 percent of commercial/multifamily mortgage debt outstanding.
"The analysis incorporates the same measures used by each investor group to track the performance of their loans," said Jamie Woodwell, (photo top left) Senior Director of commercial/multifamily research at the Mortgage Bankers Association. "While the numbers aren't comparable across different investor groups, within each group they show a common theme - for nearly every investor group, commercial/multifamily loans are currently performing at some of the strongest levels on record." 
CMBS delinquency rates at year-end 2007, for example, were lower than those at year-end of 9 of the previous 10 years. Life companies finished 2007 with a delinquency rate lower than at year-end of all 11 of the pervious 11 years. Fannie Mae finished with a rate equal to or lower than 10 of the previous 11 years. Freddie Mac finished with a rate lower than 10 of the previous 11 years. And FDIC-insured banks and thrifts finished the year with a delinquency rate lower than 5 of the previous 11 years.
To put this period in context, Chart 3 shows that for the two series with longer histories - commercial banks & thrifts and life insurance companies - delinquency rates for the period 1996 to 2007 (the period analyzed here) are considerably lower than during the preceding years. Using these longer series as a gauge, life companies' 2007 year-end delinquency rates were their lowest on record, and delinquency rates at commercial banks ended 2007 lower than 10 of the previous 16 years.
Each investor group tracks delinquencies in its own way, meaning delinquency rates are not comparable from one group to another. Based on the unpaid principal balance of loans (UPB), delinquency rates for each group at the end of the fourth quarter were as follows:
CMBS: 0.40 percent (30+ days delinquent or in REO);
Life company portfolios: 0.01 percent (60+days delinquent);
Fannie Mae: 0.08 percent (60 or more days delinquent);
Freddie Mac: 0.02 percent (60 or more days delinquent);
Banks and thrifts: 0.80 percent (90 or more days delinquent or in non-accrual).
To put these numbers in context, of 34,937 commercial/multifamily loans in life company portfolios, with a total unpaid principal balance of $245 billion, only 9 loans with an aggregate UPB of less than $19 million were 60+ days delinquent at the end of the quarter. Of $1.2 trillion of commercial/multifamily loans at FDIC-insured banks and thrifts, only $9 billion was 90+ days delinquent.
Contact:
Jason Vasquez
(202) 557-2950
jvasquez@mortgagebankers.org
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