Rising Rates: Commercial Mortgages in Delinquency

January 2, 2024
1 min read

Commercial Mortgage Delinquency Rates Rise

The delinquency rates for commercial mortgages have increased in the third quarter of 2023, according to the Mortgage Bankers Association’s Commercial Delinquency Report. This is the third consecutive quarter where delinquency rates have risen, and it has been driven by higher interest rates, changes in property market fundamentals, and uncertainty about property values.

Key points:

  • Delinquency rates on commercial mortgages have increased for the third consecutive quarter
  • Every major capital source has seen delinquency rates rise
  • Higher interest rates, changes in property market fundamentals, and uncertainty about property values are driving the increase

The commercial real estate (CRE) market remains muted, which further complicates the situation. The CRE market is large and diverse, and data from the MBA’s survey earlier in the quarter shows wide differences in mortgage performance by property type. Factors such as deal vintage, term, and market also play a role in which loans are facing pressure. These differences are expected to continue to be important in the coming year.

The delinquency rates for different capital sources 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%
  • Life company portfolios (60 or more days delinquent): 0.32%
  • Fannie Mae (60 or more days delinquent): 0.54%
  • Freddie Mac (60 or more days delinquent): 0.24%
  • CMBS (30 or more days delinquent or in REO): 4.26%

These rates have all increased compared to the second quarter of 2023. The increase in delinquency rates across all major capital sources highlights the challenges facing the commercial mortgage market. It is important for stakeholders in the market to closely monitor these trends and potential risks in order to make informed decisions.

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