Coronavirus effect on commercial mortgage lates to be determined

Register now

Any impact from the coronavirus outbreak on commercial and multifamily loan delinquencies won't be known for some time, the Mortgage Bankers Association said.

If it does affect commercial loan performance, it would be from a position of strength. In the fourth quarter, delinquency rates across most of the categories the MBA tracks remained at near-record-low levels.

"The key drivers — solid property fundamentals, strong property values and low interest rates — continue to support the market," Jamie Woodwell, the MBA's vice president of commercial real estate research, said in a press release. "It is too early to tell if and how concerns tied to the coronavirus and the related global slowdown will affect commercial real estate loan performance, but the corresponding drop in financing costs are providing additional near-term support."

Following the release of the MBA report, the Federal Open Market Committee cut the fed funds rate target by 50 basis points, citing the potential threat of COVID-19 to the U.S. economy.

The 30-day-or-more (including real estate owned) late payment rate for commercial mortgage-backed securities is the only one not close to a record low. As a result, it had the largest decline at 22 basis points from the third quarter and 70 bps from the fourth quarter of 2018 to 2.07%. The high for any fourth quarter since 2000 was 8.71% in 2012, and the low was 39 bps in both 2006 and 2007.

Metrics across funding sources are not compatible because the MBA uses the terminology from the data provide it aggregates from.

The 90-day-or-more late payment rate for banks and thrifts was 2.42%, down 3 bps from the third quarter and 6 bps from the fourth quarter of 2019.

Fannie Mae's 60-day-or-more delinquency rate of 0.04% was 2 bps lower both on a quarter-to-quarter and year-over-year basis.

However, Freddie Mac had a 4-basis-point increase from the third quarter and a 7-basis-point rise from a year ago in its 60-day-plus late payment rate to 0.08%.

Life companies had a rise in their 60-day delinquency rate as well on a quarter-to-quarter basis, going to 0.04% from 0.03% in the third quarter. But this was down from 0.05% in the fourth quarter of 2018.

For reprint and licensing requests for this article, click here.
Delinquencies Distressed Coronavirus Multifamily Commercial mortgages CMBS Mortgage Bankers Association Mortgage defaults Fannie Mae Freddie Mac