Commercial Mortgages Slowing Down
Commercial Mortgages Slowing Down
According to reports last week by Mortgage Bankers Association, despite the credit crisis and recession, loans from commercial real estate have held up better compared to loans from banks and thrifts.
In the previous year, banks and thrifts charged off 0.8% of commercial mortgages and 0.7% of multifamily mortgages as bad debt.
The charge-off rate was almost one-half of the rates for all loans and leases held by banks and thrifts, which is 1.5%.
According to Jamie Woodwell, vice president of the commercial real estate research, for the banking sector or economy as a whole, commercial mortgages have showed to be neither ‘the next shoe to drop’ nor a ‘ticking time bomb’.
At the last part of 2011, commercial loans and multifamily loans by banks and thrifts had a delinquency rate of 3.5%, which is a decrease from the highest rate in quarter three of 2010 of 4.4%. On the other hand, residential mortgages had a delinquency rate of 7.7% in the last part of 2011.
As said by Jim Chynoweth, managing director of CBRE’s Albuquerque, vacancy rates were kept from elevating by the lack of new construction and it came to the extent that there were sudden rises in commercial mortgage default. Moreover, this was said to be the worst of commercial and multifamily mortgage defaults.
Other main investor groups in commercial and multifamily real estate had the following delinquency rates:
From 0.3% in the first half of 2010, only 0.2% of loans by insurance firms were two months or more late on payments.
From 9% in quarter two of 2011, only 8.6% of loans maintained in commercial mortgage-backed securities were a month or more delayed on payments.
From 0.4% in quarter one of 2011, only 0.2% of multifamily loans by Freddie Mac were two months or more late on payments.
From 0.8% in the first half of 2010, only 0.6% of multifamily loans held by Fannie Mae were two months or more delayed on payments.
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