“This is an important new analysis that helps cut through much of the recent ‘noise’ on commercial real estate finance,” said Steve Graves, Managing Director & Chief Operating Officer of Principal Real Estate Investors and Chair of the Mortgage Bankers Association’s Commercial Board of Governors. “Despite a great deal of attention being paid to economic uncertainty, it is reassuring to know that the performance of commercial and multifamily mortgage loans and bonds has remained so fundamentally sound.”

The new MBA analysis looks at commercial/multifamily delinquency rates since 1996 and compares year-end rates for the five largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae and Freddie Mac. Together these groups hold more than 80 percent of commercial/multifamily mortgage debt outstanding.

“The analysis incorporates the same measures used by each investor group to track the performance of their loans,” said Jamie Woodwell, Senior Director of commercial/multifamily research at the Mortgage Bankers Association. “While the numbers aren’t comparable across different investor groups, within each group they show a common theme – for nearly every investor group, commercial/multifamily loans are currently performing at some of the strongest levels on record.”

CMBS delinquency rates at year-end 2007, for example, were lower than those at year-end of 9 of the previous 10 years. Life companies finished 2007 with a delinquency rate lower than at year-end of all 11 of the pervious 11 years. Fannie Mae finished with a rate equal to or lower than 10 of the previous 11 years. Freddie Mac finished with a rate lower than 10 of the previous 11 years. And FDIC-insured banks and thrifts finished the year with a delinquency rate lower than 5 of the previous 11 years.

To put this period in context, Chart 3 shows that for the two series with longer histories – commercial banks & thrifts and life insurance companies – delinquency rates for the period 1996 to 2007 (the period analyzed here) are considerably lower than during the preceding years. Using these longer series as a gauge, life companies’ 2007 year-end delinquency rates were their lowest on record, and delinquency rates at commercial banks ended 2007 lower than 10 of the previous 16 years.

Each investor group tracks delinquencies in its own way, meaning delinquency rates are not comparable from one group to another. Based on the unpaid principal balance of loans (UPB), delinquency rates for each group at the end of the fourth quarter were as follows:

• CMBS: 0.40 percent (30+ days delinquent or in REO);
• Life company portfolios: 0.01 percent (60+days delinquent);
• Fannie Mae: 0.08 percent (60 or more days delinquent);
• Freddie Mac: 0.02 percent (60 or more days delinquent);
• Banks and thrifts: 0.80 percent (90 or more days delinquent or in non-accrual).

To put these numbers in context, of 34,937 commercial/multifamily loans in life company portfolios, with a total unpaid principal balance of $245 billion, only 9 loans with an aggregate UPB of less than $19 million were 60+ days delinquent at the end of the quarter. Of $1.2 trillion of commercial/multifamily loans at FDIC-insured banks and thrifts, only $9 billion was 90+ days delinquent.

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.