Despite reports of emerging trouble in the CRE market recently, a report released Monday by the Mortgage Bankers Association found that delinquency rates for commercial/multifamily properties were at or near record lows to end 2007. Many media reports have suggested recently that commercial real estate is feeling the pinch of a slowing economy, and data is beginning to suggest this may be the case. But -- at least so far -- market unrest has not yet translated into increased delinquencies. Fourth quarter delinquency rates for four of the five largest investor groups – commercial mortgage-backed securities (CMBS), life companies, Fannie Mae and Freddie Mac – remained at or near historically low levels, the MBA said. For the fifth group, FDIC-insured commercial banks and thrifts, delinquency rates were lower at year-end than during 5 of the previous 11 years, and 10 of the previous sixteen. "This is an important new analysis that helps cut through much of the recent ‘noise’ on commercial real estate finance," said Steve Graves, COO of Principal Real Estate Investors and chair of 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." CMBS delinquency rates at year-end 2007, for example, were lower than those at year-end of nine of the previous 10 years. Fannie Mae and Freddie Mac finished the year with a rate equal to or lower than 10 of the previous 11 years, the MBA reported. Each investor group tracks delinquencies in its own way, meaning delinquency rates are not comparable from one group to another. Based on the unpaid principal balance of loans (UPB), delinquency rates for each group at the end of the fourth quarter were as follows:
  • CMBS: 0.40 percent (30+ days delinquent or in REO)
  • Life company portfolios: 0.01 percent (60+days delinquent)
  • Fannie Mae: 0.08 percent (60 or more days delinquent)
  • Freddie Mac: 0.02 percent (60 or more days delinquent)
  • Banks and thrifts: 0.80 percent (90 or more days delinquent or in non-accrual)
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