The Mortgage Bankers Association’s Commercial/Multifamily Delinquency Report for July 2020 reveals that the delinquency rate of commercial/multifamily mortgages fell to 1.68%, down from 1.88% in June and 1.76% in May. This is the lowest rate since the onset of the pandemic in March.
The delinquency rate of loans secured by multifamily dwellings fell to 1.26%, the lowest rate since April 2020. The delinquency rate of loans on nonfarm/nonresidential properties increased slightly but remained at very low levels overall, rising from 0.71% in June to 0.74% in July.
The data paints a positive picture of the health of the commercial mortgage industry. As the economy begins to recover from the pandemic-induced recession, commercial mortgage lenders are optimistic that delinquency rates will continue to decline in the coming months.
The commercial mortgage industry has experienced an unprecedented downturn during the pandemic. With many businesses in danger of closing and units of commercial real estate experiencing vacancy rates as high as 30% or higher, mortgage delinquencies have skyrocketed. A study conducted by the National Multi Housing Council found that one in three apartments across the U.S. were behind on rent payments in April.
Fortunately, the situation had begun to improve by July, with delinquencies falling to their lowest point since the start of the pandemic. The relatively low delinquency rate reflects several factors, including the enactment of rental assistance programs, which have helped many people remain in their homes, and repayment relief programs, which have allowed borrowers to defer payments for up to a year.
Moreover, the economy appears to be recovering, with consumer spending increasing and some sectors beginning to reopen. Many businesses have been able to resume operations, leading to an increase in cash flow and income. As a result, employers have been able to pay their employees, helping to reduce defaults on mortgages.
At the same time, commercial lenders have taken steps to mitigate risk. Some lenders have extended forbearance agreements, offering temporary relief on repaying Principal and Interest (P&I) payments. Others have offered term extensions, allowing borrowers to extend their loan terms up to 15 years and reduce their monthly payments. Lenders have also worked with borrowers to restructure loans to make them more affordable.
Overall, the outlook for the commercial mortgage industry is largely positive. Despite the economic uncertainty caused by the pandemic, delinquency rates remain low, indicating that the industry is on the road to recovery. Although it may take some time for the economy to fully recover, commercial lenders have responded to the crisis with a range of solutions that have helped to minimize delinquency and keep the market stable.
This article was contributed on Nov 01, 2023
