DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.
Issue link: http://digital.dsnews.com/i/1523845
63 July 2024 J O U R N A L increasing by $12.8 billion (0.7%). CMBS, CDO, and other ABS issues grew their holdings by $11.0 billion (1.9%); agency and GSE portfolios and MBS raised their holdings by $10.2 billion (1.0%); and life insurance firms expanded their holdings by $7.0 billion (1.0%). In percentage terms, CMBS, CDO, and other ABS issues had the greatest increase in commercial/multifamily mortgage holdings (1.9%). In contrast, state and local government retirement plans saw their holdings fall 8.3%. Changes in Multifamily Mortgage Debt Outstanding Multifamily mortgage debt out- standing increased by $23.7 billion in Q4 2023, representing a 1.1% quarterly rise. In terms of dollars, agency and GSE portfolios, as well as MBS issuance, had the greatest increase in their holdings of multifamily mortgage debt, totaling $10.2 billion (1.0%). Banking and thrift institu- tions grew their holdings by $9.1 billion (1.5%), while life insurance firms gained by $3.8 billion (1.7%). Nonfinancial corporate businesses showed the greatest percentage increase in their holdings of multifamily mort- gage debt, at 3.2%. REITs' holdings of multifamily mortgage debt fell the most, by 9.7%. SNAPSHOT: Q1 COMMERCIAL MORTGAGE DELINQUENCIES A ccording to the Mortgage Bankers Association's (MBA) Q1 Commercial Delinquency Report, commercial mortgage delin- quencies increased in the first quarter of the year, strained by mortgage rates in the 7% range, and a tightening of credit standards. "Commercial mortgage delinquency rates continued to increase during the first three months of 2024," said Jamie Woodwell, MBA's Head of Commercial Real Estate Research. "The increase was seen across most capital sources, point- ing to the challenges caused by loans that are maturing amid higher interest rates, uncertain property values, and questions about some properties' fundamentals." MBA's quarterly analysis looks at commercial delinquency rates for five of the largest investor groups: com- mercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, and Fannie Mae and Freddie Mac (GSEs). Together, these groups hold more than 80% of commer- cial mortgage debt outstanding. MBA's analysis incorporates the measures used by each investor group to track the performance of their loans. Because each investor group tracks delinquencies in its own way, delinquency rates are not comparable from one group to another. As an example, Fannie Mae reports loans receiving payment forbearance as delin- quent, while Freddie Mac excludes those loans if the borrower is in compliance with the forbearance agreement. An Overview of Q1 Based on the unpaid principal bal- ance (UPB) of loans, delinquency rates for each group at the end of Q1 2024 were as follows: » Banks and thrifts (90 or more days delinquent or in nonaccrual): 03%, an increase of 0.09 percentage points from Q4 2023; » Life company portfolios (60 or more days delinquent): 52%, an increase of 0.16 percentage points from Q4 2023; » Fannie Mae (60 or more days de- linquent): 44%, a decrease of 0.02 percentage points from Q4 2023; » Freddie Mac (60 or more days de- linquent): 34%, an increase of 0.06 percentage points from Q4 2023; and » CMBS (30 or more days delinquent or in REO):35%, an increase of 0.05 percentage points from Q4 2023. "It is important to recognize that dif- ferent capital sources track delinquencies in different ways—and with good reason," Woodwell said. "The rise in delinquency rates for commercial mortgages at banks was driven by banks designating non-mul- tifamily loans—in particular, office—as 'nonaccrual,' meaning the loan may still be current on payments, but the lender does not expect to be paid in full. The increases in such loans, and the associated net-charge-offs at large banks, can be seen as evidence of the institutions working to get ahead of potential future defaults." Construction and development loans are generally not included in the numbers presented in this report but are included in many regulatory definitions of "commercial real estate" despite the fact they are often backed by single-fami- ly residential development projects rath- er than by office buildings, apartment buildings, shopping centers, or other income-producing properties.