In the first quarter of 2024, U.S. commercial mortgage delinquencies saw a notable increase, according to the Mortgage Bankers Association’s (MBA) latest Commercial Delinquency Report.
“Commercial mortgage delinquency rates continued to rise during the initial months of 2024,” stated Jamie Woodwell, MBA’s Head of Commercial Real Estate Research. “This uptick was evident across most capital sources, reflecting the challenges posed by maturing loans in the context of higher interest rates, uncertain property values, and questions surrounding the fundamentals of certain properties.”
Woodwell further explained, “It is crucial to understand that different capital sources track delinquencies in various ways, each with valid reasons. The rise in delinquency rates for commercial mortgages at banks was primarily due to banks classifying non-multifamily loans—particularly office loans—as ‘nonaccrual.’ This classification means the loan might still be current on payments, but the lender does not expect full repayment.
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The increase in such loans and the related net charge-offs at major banks can be seen as institutions proactively addressing potential future defaults.”
The MBA’s quarterly analysis examines delinquency rates for five major investor groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, and Fannie Mae and Freddie Mac. Collectively, these groups hold more than 80 percent of outstanding commercial mortgage debt.
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The MBA’s analysis incorporates the performance tracking methods used by each investor group. Since each group has its own way of tracking delinquencies, the rates are not directly comparable. For instance, Fannie Mae reports loans under payment forbearance as delinquent, while Freddie Mac excludes such loans if the borrower adheres to the forbearance agreement.
