Mortgage delinquency rates for commercial properties declined modestly in the second quarter of 2024, according to the Mortgage Bankers Association’s (MBA) latest commercial real estate finance (CREF) Loan Performance Survey.
The survey indicated that the balance of commercial mortgages that were not current decreased slightly in Q2 2024. By the end of the quarter, 97.0% of outstanding loan balances were current or less than 30 days late, up from 96.8% in the first quarter. Loans that were 90 or more days delinquent or in real estate owned (REO) remained steady at 2.5%. Meanwhile, the rate of loans 60 to 90 days delinquent fell from 0.3% to 0.2%, and the percentage of loans 30 to 60 days delinquent remained unchanged at 0.4%.
“The delinquency rate for most property types declined last quarter, with the exception of loans backed by office properties, which experienced an increase,” said Jamie Woodwell, MBA’s Head of Commercial Real Estate Research. “Even so, the pace of increase in the delinquency rate for office property loans appears to have slowed in recent quarters.”
Woodwell continued by saying, “Commercial properties are working through changes in interest rates, property values, and the fundamentals of some properties. Each property and loan faces a unique mix of conditions depending on that property’s type and subtype, market and submarket, owner, vintage, deal terms and more. As more loans mature throughout the year, more properties will be adjusting to these new conditions.”
The survey also revealed variances in delinquency rates across different property types. The share of delinquent office property loans increased to 7.1% from 6.8% the previous quarter.
Conversely, delinquency rates for other property types showed improvement:
- Lodging loans delinquency decreased to 5.8% from 6.3%.
- Retail loan balances delinquency fell to 4.5% from 4.7%.
- Multifamily loan balances delinquency declined to 1.1% from 1.2%.
- Industrial property loans delinquency dropped to 0.8% from 1.2%.
Among capital sources, Commercial Mortgage-Backed Securities (CMBS) loans had the highest delinquency rates despite a decrease during the quarter. CMBS loan balances 30 days or more delinquent fell to 4.8% from 5.2%. Non-current rates for other capital sources remained more moderate. FHA multifamily and healthcare loan balances 30 days or more delinquent increased slightly to 0.9% from 0.8%. Life company loan balances delinquency fell to 1.1% from 1.2%, and GSE loan balances delinquency remained steady at 0.4%.
The MBA’s CREF Loan Performance survey, which collected information on commercial and multifamily mortgage portfolios as of June 30, 2024, reflects data from surveys conducted since April 2020. Participants reported on $2.6 trillion of loans in March 2023, representing 55% of the total $4.7 trillion in commercial and multifamily mortgage debt outstanding (MDO).
