U.S. Commercial Mortgage Delinquencies Drop

U.S. Commercial Mortgage Delinquencies Decline in September 2020

The delinquency rates for commercial and multifamily mortgages in the United States declined in September 2020, signaling stabilization in the real estate market after months of uncertainty, according to the Mortgage Bankers Association's (MBA) CREF Loan Performance Survey.

Jamie Woodwell, Vice President of Commercial Real Estate Research at MBA, noted that the overall performance of commercial and multifamily mortgages has improved in recent months:

"Commercial and multifamily mortgage performance has steadied, and in many instances, has begun to progressively improve," Woodwell said.

Despite this progress, some sectors continue to struggle, particularly lodging and retail, which were hit hardest by the recession.

Key Data & Trends

📉 Delinquency rates show improvement

The percentage of current commercial and multifamily loan balances increased from 93.6% in August to 94.3% in September, according to the Federal Reserve.

The rate of new delinquent loans fell by 25%, indicating that fewer loans are becoming past due each month.

🏨 Lodging & retail still under pressure

Hotels and retail properties continue to experience elevated delinquency rates, though some signs of recovery have emerged.

Many hospitality businesses are still struggling with low occupancy rates, and retail centers—especially shopping malls—remain affected by store closures and reduced foot traffic.

🏢 Other property sectors show resilience

Office buildings, industrial properties, and multifamily housing have lower delinquency rates, thanks to stable demand and the gradual economic rebound.

The rise of e-commerce has boosted demand for warehouse and logistics spaces, helping to strengthen the industrial real estate sector.

Why Are CMBS Loans More Affected?

Loans backed by commercial mortgage-backed securities (CMBS) have experienced higher delinquency rates than loans from other capital sources. This is primarily because:

CMBS loans have a high concentration in retail and hospitality properties, sectors that were hit hardest by the pandemic.

Unlike traditional bank loans, CMBS loans are often harder to restructure or modify, making them more vulnerable to defaults.

Market Outlook: What’s Next?

While delinquency rates are improving, challenges remain for certain segments of the market. The pace of recovery will depend on:

✔️ Economic recovery & employment growth – A stronger economy will help businesses meet their lease obligations, reducing defaults.

✔️ Federal support & stimulus measures – Government assistance could stabilize troubled sectors like hospitality and retail.

✔️ Consumer spending & travel trends – As travel and tourism slowly recover, hotel performance is expected to improve.

Overall, the declining delinquency rates suggest that the commercial real estate market is stabilizing, though some sectors will take longer to fully recover.