A Mortgage Bankers Association analysis of data from the Federal Deposit Insurance Corp. shows that commercial and multifamily mortgages “have fared better through the credit crunch and recession than any other major type of loan held by banks and thrifts” in some respects.
“Over the course of 2011, and throughout the credit crunch and recession,” commercial and multifamily mortgages have had the lowest charge-off rates of any type of loan held by commercial banks and thrifts at 0.84% of their balance of commercial mortgages and 0.74% of their multifamily mortgages, down from 1.22% and 1.24% respectively in 2010, the association said in a report.
The MBA finds commercial and multifamily mortgage delinquency rates declined during the fourth quarter of 2011.
The rate of loans over 60 days delinquent fell 0.02 percentage points to 0.17% for loans held in life company portfolios and 0.11 pp to 0.22% for multifamily loans held or insured by Freddie Mac.
The over 90 days delinquency rate for loans held by FDIC-insured banks and thrifts fell 0.20% to 3.55%. Also, the rate of securitized commercial mortgage loans that were over 30 days past due fell 0.36 pp to 8.56%.
The aforementioned declines are a sign of continuing stabilization of commercial and multifamily mortgage delinquency rates, said MBA's VP of commercial real estate research, Jamie Woodwell, noting that this was counter to predictions that commercial mortgages would be “the next shoe to drop” or a “ticking time bomb” for the banking sector or the economy as a whole.
At the end of the fourth quarter, the delinquency rate for multifamily loans held by Freddie Mac was 6.59 pp lower than the series high of 6.81% in the fourth quarter of 1992, while the rate for multifamily loans held by Fannie Mae was 3.03 pp below the series high of 3.62% in the fourth quarter of 1991.
The fourth quarter 2011 delinquency rate for commercial and multifamily mortgages held by banks and thrifts was 3.03 pp lower than the series high of 6.58%, reached in the second quarter of 1991. The rate for loans held in CMBS was 0.46 pp below the series high of 9.02% in the second quarter of 2011.
The rate of multifamily loans held or insured by Fannie Mae that were 60 days or more past due increased 0.02 pp to 0.59%, according to MBA's commercial real estate/multifamily finance mortgage delinquency rates for major investor groups report. (It analyzes delinquency rates for five of the largest commercial and multifamily investor categories: commercial banks and thrifts, CMBS, life insurance companies, Fannie Mae and Freddie Mac-which together hold over 80% of commercial/multifamily mortgage debt outstanding.)
In other multifamily/commercial news, new research from the National Association of Real Estate Investment Trusts shows scarcity of new apartment construction, coupled with a record level of pent-up demand for apartment space, have created an approximately 2.5-million unit supply-demand imbalance in apartment inventory “likely to support strong financial performance by apartment REITs in 2012 and well beyond.”
“The distortion in supply and demand fundamentals for the U.S. multi-family housing market” caused by the financial crisis will support further declines in vacancies and rent increases even though new construction now is increasing to meet demand, said NAREIT VP of research and industry information Calvin Schnure. “It will take several years” to fill that gap and stabilize the apartment REIT operating fundamentals.
The apartment sector has been one of the best performing segments of the REIT market, the association said. Price returns are up 225% in February compared to “the REIT market's trough in March 2009.”
