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Multifamily Mortgages Continue to Perform Well
Published: July 01, 2008
By Anuradha Kher, Online News Editor
Washington, D.C.--Construction loans for multifamily projects in the United States are incorrectly counted in commercial real estate delinquency reports, according to the Mortgage Bankers Association's most recent Commercial/Multifamily Research DataNote.
The report says that in contrast to mortgages and loans supported by the single-family residential housing market, commercial/multifamily mortgages have continued to perform well and well within expectations.
But the FDIC's Quarterly Banking Profile (QBP) report, which releases data on the performance of loans at FDIC-insured banks, combines commercial and multifamily mortgages with construction loans in one category and the delinquency rate. This, the MBA report noted, makes the commercial and multifamily mortgage markets appear weaker than they are.
According to the report, combining commercial real estate loans with construction projects destined for family dwellings greatly inflates the delinquency rates reported for commercial and multifamily real estate loans.
"Once construction and development loans are excluded, commercial and multifamily mortgages have delinquency levels that are close to historic lows," MBA says.
At the end of the first quarter of 2008, the 30+day delinquency rate for commercial/multifamily mortgages was 1.81 percent, up 0.6 percentage points from a year earlier, according to the report.
"In stark contrast, the 30+day delinquency rate for construction loans ended the first quarter at 7.18 percent, up 6.0 percentage points from a year earlier. By blending the two, the Federal Reserve reported a combined delinquency rate of 3.72 percent, up 1.2 percentage points from a year earlier."
