Healthy economy pushes CMBS loan delinquency rate down further

Economic strength bolstered the performance of loans included in commercial mortgage-backed securities with delinquencies improving for the seventh quarter in a row, according to the Mortgage Bankers Association.

CMBS loans that are at least 30 days late or real estate owned fell to 2.61% in the opening quarter of 2019, a drop of 132 basis points year-over-year and 16 basis points from the prior quarter.

The delinquency rate on CMBS loans had its recent peak of 4.84% in the second quarter of 2017, while dropping to a low point of 0.39% in the fourth quarter of 2007.

"Steady U.S. economic growth continues to support the financing and values of commercial and multifamily properties," Jamie Woodwell, the MBA's vice president of commercial research and economics, said in the report. "Commercial/multifamily mortgage delinquencies remain at or near record lows for most capital sources, and it's hard to imagine loans performing better than they currently do. Given the environment, there's little reason to expect a marked deterioration of near-term performance."

Among banks and thrifts, measured by loans 90 days or more late or in nonaccrual status, the delinquency rate held at its series low of 0.48%. This was down 3 basis points from a year ago.

Life insurers, where mortgage investments qualify as delinquent at 60 days or more late, edged down to 0.04%, 1 basis point lower from the prior quarter but 2 basis points higher from the first quarter of 2018.

The government-sponsored enterprises were the only investor type that saw a quarterly increase in their commercial/multifamily delinquency rates.

For Fannie Mae, the 60-day delinquency rate rose 1 basis point to 0.07% from the fourth quarter of 2018 while falling from 0.13% annually. Freddie Mac's 60-day delinquency rate rose to 0.03%, up 2 basis points quarter-over-quarter and 1 basis point from the year before.

The MBA report compiles delinquency rates across five investor types and used the measurement standard each group established. As a result, rates across investor types aren't comparable.