“Commercial and multifamily mortgages continued to perform well”

“Commercial and multifamily mortgages continued to perform well through the third quarter,” said Jamie Woodwell, vice president of commercial real estate research at MBA. “A much smaller share of loans backed by the property types hardest hit at the onset of the pandemic – lodging and retail – were delinquent. For those property types, very few new loans faced difficulties, and lenders continued to work through those that had.”

Mortgages backed by lodging and retail properties continued to see the greatest stress but also saw improvement through the third quarter. Delinquency rates for lodging loans were down from 9% in Q2 to 5.5% in Q3, while retail loan delinquencies were down from 5.9% to 5.3% quarter over quarter.

“Additionally, loans backed by property types that have been performing well throughout the pandemic – including multifamily, industrial, and office – continued to see few delinquencies,” Woodwell said.

The balance of office property loans that were delinquent in Q3 dropped three basis points to 1.5%, industrial loan delinquencies decreased two basis points to 0.6%, and multifamily mortgage delinquencies dipped two basis points to 0.4%.

“After a strong start to the year, commercial real estate is being hit by significant transitions in the space, equity, and debt markets,” Woodwell said. “As those forces unfold, they will no doubt have an impact on commercial mortgage loan performance in coming quarters and years. Given recent years’ growth in property values and incomes, the impacts will likely vary considerably.”