|
One Bright Spot: Commercial Delinquencies Remain Low
By Ted Cornwell
With residential mortgage default rates hitting record highs, it's reassuring to note - at least for the time being - that commercial mortgage delinquencies remain near record lows for most investor groups, according to the Mortgage Bankers Association.
Steve Graves, managing director and COO of Principal Real Estate Investors, said the analysis helps "cut through much of the recent noise" on commercial real estate finance. Mr. Graves chairs the MBA'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," Mr. Graves said in an MBA report on commercial delinquencies.
The new MBA commercial mortgage delinquency data dates back to 1996. The data are divvied up among different commercial mortgage investor categories, with considerable disparities among them. Because the groups use different delinquency benchmarks, it is difficult to compare apples to apples.
Banks and thrifts had the highest delinquency rate, with 0.80% of commercial mortgages being 90-days or more past due.
Fannie Mae had a 0.08% 60-plus day delinquency rate, while Freddie Mac was at 0.02%. Only 0.01% life insurance companies were more than 60-days past due.
Among commercial mortgage-backed securities, 0.40% of loans were 30-days or more past due.
For CMBS, the delinquency rate at the end of 2007 was lower than in nine of the previous ten years. Ditto for Fannie Mae and Freddie Mac. Life insurance companies actually saw their insurance rate fall to the lowest level in the 11-year span of the analysis.
However, FDIC insured banks and thrifts ended 2007 with a delinquency rate that was lower in only five of the previous eleven years.
But to put it in perspective, the MBA points out that for life insurance companies, with $245 billion of outstanding loans, only nine loans with outstanding principal of less than $19 million were more than 60 days past due.
With commercial mortgage default rates remaining near record lows, what's the outlook? The MBA doesn't address that question, but some other analysts are concerned that performance could deteriorate. Analysts at JPMorgan, for instance, recently projected that commercial real estate values will fall by 10% to 20% during the course of an ongoing cyclical decline. If that forecast is accurate, the trend will put some pressure on commercial mortgage delinquency rates.
Click here for an archive of stories from the MSN newsletter.
| 
