Commercial and multi-family loan performance in March was its best in nearly a year, but short-term missed payments rose slightly month on month, the Mortgage Bankers Association reported.
A 95% share of commercial and multi-family loans, measured by balance, was current when they were paid in March, up from 94.8% in February, according to the MBA's CREF Loan Performance Survey.
"Commercial and multi-family mortgage arrears fell for the third straight month in March and are now at their lowest level since the pandemic that disrupted the economy and commercial real estate a year ago," said Jamie Woodwell, vice president of Commercial Real Estate Research of the MBA in a press release. "There are still significant differences in loan performance by property type, with higher default rates for residential and retail-backed mortgages."
The largest proportion of commercial mortgages in March was the proportion that has not been paid in 90 days or more, or that is now owned by real estate, at 3.2%. That was a 3.5% decrease in February. Last August, the first month the MBA provided this data, the percentage of loans that had not received payments for at least three months was 2.9%.
About 0.3% of the loans were delayed between 60 days and 90 days, unchanged from February, and 0.5% of the loans were delayed between 30 and 60 days, compared with 0.6% in the previous month.
However, the second largest group of past due March loans were those where a borrower missed the due date but was still less than 30 days late at 0.9%, up from 0.8% in February.
Although housing and retail remain the hardest hit segments of the pandemic, default rates on loans backed by these properties improved in February.
In terms of home loans, at the end of March it was 20.5%, measured against the outstanding balances, after 20.6% in the previous month.
Retail showed a better improvement at 9.5% from 10.8% in February.
Industrial property also saw a significant change in the percentage of late payments to 1.2% in March from 2.7% in the previous month.
Office properties with out-of-date payments remained at 2.4% compared to February, while multi-family late loans increased from 1.7% in the previous month to 1.8% in March.
Commercial mortgage-backed securities had the highest default rates by investor type as they included a high percentage of the hotel and retail loans contained in stores.
8.7% of loans in CMBS in March had out-of-date payments, up from 9.3% in February.
According to a separate report from Trepp, 6.58% of CMBS loans were delayed by 30 days or more in March, up 22 basis points from February. This is nine consecutive months of declining arrears on tracked loans.
In March 2020, the last month of relatively normal economic activity, the CMBS crime rate was 2.07%. The highest crime rate of all time was 10.34% in July 2012 when balloon loans fell due that could not be refinanced due to the difficult economic period.
The housing loans in CMBS had a crime rate of 16.38% in March, compared with 19.19% in February, but well above the 1.6% in March 2020, Trepp reported. For retailers, the crime rate was 11.83% in March, an improvement from 12.68% in February. in March 2020 it was 3.62%.
Among other main types of investors, 2.1% of the mortgages insured by the Federal Housing Administration were insured for multi-family and healthcare properties at the end of March, after 2.7% in the previous month, according to the MBA report.
The late payment rate for life insurance mortgages was 1.6% versus 2% in March and Fannie Mae and Freddie Mac loans were 1.2%, compared with 1.3% in February.