Q2 2023 Commercial Mortgage Delinquencies: Surge in US Commercial and Multifamily Loan Defaults

Discover the latest report on the surge of commercial and multifamily mortgage delinquencies in the United States during Q2 2023. Get insights on the investor-groups affected and the current state of outstanding commercial/multifamily mortgage debt.

Commercial and multifamily mortgage delinquencies in the United States witnessed a surge during the second quarter of 2023, according to the latest report released by the Mortgage Bankers Association (MBA). The report focuses on delinquency rates among various investor-groups such as commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, as well as Fannie Mae and Freddie Mac, which collectively account for over 80 percent of the outstanding commercial/multifamily mortgage debt.

Commercial/Multifamily Delinquency Rates by Investor-Groups

Each investor-group adopts its own criteria to assess the performance of their loans, making it challenging to compare delinquency rates across different groups. Fannie Mae, for instance, considers loans under forbearance as delinquent, whereas Freddie Mac excludes such loans if the borrower adheres to the forbearance agreement. Here is a breakdown of delinquency rates for each group based on the unpaid principal balance (UPB) of loans at the end of the second quarter of 2023:

1. Banks and Thrifts

Delinquency rate: 0.66 percent

Increase: 0.09 percentage points from Q1 2023

2. Life Insurance Companies

Delinquency rate: 0.14 percent

Decrease: 0.07 percentage points from Q1 2023

3. Fannie Mae

Delinquency rate: 0.37 percent

Increase: 0.02 percentage points from Q1 2023

4. Freddie Mac

Delinquency rate: 0.21 percent

Increase: 0.08 percentage points from Q1 2023

5. Commercial Mortgage-Backed Securities (CMBS)

Delinquency rate: 3.82 percent

Increase: 0.82 percentage points from Q1 2023

Insights from the Report

The MBA's analysis highlights the contrasting delinquency rates among different investor-groups. While the delinquency rates of banks and thrifts experienced a slight uptick by 0.09 percentage points from the previous quarter, life insurance companies witnessed a significant decrease of 0.07 percentage points. On the other hand, both Fannie Mae and Freddie Mac reported increases in delinquency rates, with Fannie Mae observing a rise of 0.02 percentage points and Freddie Mac experiencing a larger surge of 0.08 percentage points. The most substantial increase was seen in CMBS, with delinquency rates soaring by 0.82 percentage points.

Implications for the Market

These findings shed light on the current state of commercial and multifamily mortgage delinquencies in the United States. The rise in delinquency rates among certain investor-groups may be attributed to various factors, such as economic volatility, shifts in market conditions, and the impact of unforeseen events like natural disasters. It is crucial for lenders and investors to closely monitor these rates to ensure the overall stability and health of the real estate market.

The MBA's Commercial/Multifamily Delinquency Report for the second quarter of 2023 provides valuable insights into the performance of commercial and multifamily mortgage loans across different investor-groups. While delinquency rates differ among these groups due to variations in measurement criteria, it is evident that the market experienced a general uptick in delinquencies. These findings emphasize the importance of effective risk management strategies and proactive measures to safeguard the stability of the commercial and multifamily mortgage market in the face of evolving economic circumstances.