Commercial real estate delinquency dips [Albuquerque Journal, N.M.]
|By Richard Metcalf, Albuquerque Journal, N.M.|
|McClatchy-Tribune Information Services|
The 90-plus-day delinquency rate for loans held nationwide by FDICinsured banks and other financial institutions was 2.9 percent in July-September, down from 3.8 percent a year earlier, according to the latest commercial mortgage delinquency report from the
Commercial mortgages tend to have the lowest charge-off rates of any major loan type held by banks, the report notes. The delinquency data for banks does not include loans backed by owneroccupied commercial properties, which typically have different underwriting criteria.
"Banks hold the majority of real estate loans in the U.S." said
Commercial mortgagebacked securities, or CMBS, have only been around for about 15 years and became a popular financing tool during the robust dealmaking years of 2004-08.
These loans originate with banks, most commonly big ones like
The 30-plus-day delinquency rate for loans held nationwide in CMBS was 8.9 percent in July-September, essentially the same as it was a year earlier. For comparison, the 30-plusday delinquency rate for home loans was 7.6 percent during the same period, the
The CMBS delinquency rate for loans in the
"The CMBS lenders have been a bit less aggressive when lending in
CMBS loans here have tended to be a little more conservative, with more of a cushion against declines in value and net income, he said. In addition, the local market did not see "significant overbuilding" during the boom that has led to a high proportion of distressed properties in many larger metros.
The 60-plus-day delinquency rate was 0.1 percent in the third quarter, down from 0.2 percent a year earlier, for commercial mortgages in investment portfolios held by life insurance companies, major lenders in the commercial real estate market.
The money that life insurance companies put into real estate loans will one day be needed to pay insurance claims, thus the companies are conservative in how they lend, Gineris said. They typically lend to the cream of the crop, such as buyers with top credit purchasing higher-quality properties.
"All this leads to a lower delinquency rate for life (insurance) company lenders," he said.
What constitutes a delinquent loan varies among the lending groups, such as 90-plus days for banks, 30-plus days for CMBS and 60-plus days for life insurance companies. As a result, the association's report notes that "delinquency rates are not comparable from one group to another."
In addition to the private capital sources,
The 60-plus-day delinquency rate for loans held or guaranteed by
The low GSE delinquency rates stem largely from apartments being the strongest overall commercial property type in the country right now, Gineris said.
Altogether, the five lending groups -- banks, CMBS, life insurance companies and the two GSEs -- hold more than 80 percent of the outstanding commercial real estate mortgage debt, according to the association.
In general over the past 15 years, the five investor groups saw their lowest delinquency rates during 2004-08 and their highest rates in 2010. The recent highs in delinquency rates for each group were still well below the record highs set during the commercial real estate crash of 1991-92.
(c)2012 the Albuquerque Journal (Albuquerque, N.M.)
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