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LINGERING HEADWINDS MAKE ECONOMIC RECOVERY 'DISAPPOINTINGLY SLOW' While various economic reports hint at improvements in the nation's economy since the economic crisis was in full swing, improvement is meek and "recovery" seems too strong a word to describe the progress thus far. Federal Reserve Chairman Ben Bernanke calls the pace of recovery "disappointingly slow." In a speech before the New York Economic Club in late November, Bernanke pointed out some of the lingering headwinds preventing the economy from more momentous progress. Significant among these headwinds is the housing sector itself. To make his point, Bernanke quoted a few notable statistics. "House prices declined almost one-third nationally from 2006 until early [2012], construction of single-family homes fell two-thirds, and the number of construction jobs decreased by nearly one-third," he said. Home sales, prices, and construction have shown some forward movement in 2012, which Bernanke said is "encouraging" and expects to see residential investment become a "source of economic growth and new jobs over the next couple of years." However, a "powerful housing recovery" is still being prevented, and one of those obstacles is tight lending, according to Bernanke. 24 Outside the housing market, the credit and capital markets serve as another financial headwind for the nation's economy. In particular, the financial situation in Europe has been and continues to be a cause of stress and uncertainty. The third financial headwind Bernanke mentioned is U.S. fiscal policy. This concern can be divided into three major categories—the fiscal cliff, the federal debt limit, and monetary policy. "Uncertainty about how the fiscal cliff, the raising of the debt limit, and the longer-term budget situation will be addressed appears already to be affecting private spending and investment decisions and may be contributing to an increased sense of caution in financial markets, with adverse effects on the economy," Bernanke said. The fiscal cliff that looms if tax laws remain unchanged "would pose a substantial threat to the recovery," Bernanke said. Similarly, failing to approve a new federal debt limit would damage the economy. While the third category, monetary policy, "can do little to reverse the effects that the financial crisis may have had on the economy's productive potential," Bernanke asserted the Federal Reserve is doing everything in its power to contribute positively to the economy. MBA: COMMERCIAL, MULTIFAMILY DELINQUENCIES DECLINING Delinquencies among commercial and multifamily mortgages are down, according to the latest report from the Mortgage Bankers Association (MBA). Measured separately, the delinquency rates for commercial and multifamily mortgages held by Fannie Mae, Freddie Mac, and life companies are all "extremely low," according to Jamie Woodwell, VP for commercial real estate research at MBA. In fact, most are at least a few full percentage points below their record highs seen during the savings and loan (S&L) crisis. The rate of commercial and multifamily loans 60-plus days past due held by Fannie Mae declined 0.01 percentage points over the third quarter, arriving at a delinquency rate of 0.28 percent. This is 3.34 percentage points below the high of 3.62 percent Fannie Mae experienced in the fourth quarter of 1991. At Freddie Mac, the rate of multifamily loans 60 or more days delinquent was unchanged at 0.27 percent for the third quarter of 2012. Freddie Mac's multifamily delinquency rate is 6.54 percentage points below its high of 6.81 percent recorded in the fourth quarter of 1992. The rate of loans 90 or more days delinquent held by banks and thrifts declined 0.18 percentage points to 2.93 percent for the quarter. That's down 3.65 percentage points from the high of 6.58 percent recorded in the second quarter of 1991. Woodwell points out, "The delinquency rate on bank-held loans is at its lowest level since the beginning of 2009." The 60-plus day delinquency rate for commercial and multifamily loans held by life companies declined 0.03 percentage points during the third quarter to 0.12 percent for the quarter. The current rate is 7.41 percentage points below the high of 7.53 percent experienced in the second quarter of 1992. Life insurance companies also saw a decline in the delinquency rate among commercial mortgage-backed securities (CMBS) during the third quarter. The rate of CMBS loans 30 or more days delinquent fell by 0.11 percentage points to 8.86 percent. This is 0.16 percentage points below the high of 9.02 percent recorded in the second quarter of 2011. CMBS delinquencies remain "elevated," according to Woodwell, but are stabilizing.

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