Commercial real estate loans showed continued increases in the rates of delinquencies, the Mortgage Bankers Association (MBA) reported in a recent survey.
MBA's Commercial/Multifamily Delinquency Report keeps records on delinquencies of commercial real estate loans.
Last quarter borrowers of commercial mortgage backed securities (CMBS) loans topped 4 percent during the quarter. They also reported that life insurance companies who own commercial loans had loans that fell behind at an increase by a 1/4 of a percent and the 60+ day rate on multifamily loans in Fannie Mae's portfolio increased by 0.11 percentage points to 0.62 percent.
The increase in delinquency rates is expected to continue throughout 2010 and peaking in 2011. There is about $300 billion in negative equity overhang that needs be refinanced in 2010 and 2011. Much of these loans will end up in foreclosure or sold as short sales or modified to either extend the loan maturity or reduce the principal balance.
The government recently announced guidance for prudent commercial loan work outs. This policy change, while beneficial for some borrowers only serves to extend the problem as banks are unwilling to write down loan balances when their government handlers and owners let them keep the loans on the books at full value in the absence of mark-to-market accounting.
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