Data point to gradual recovery in commercial lending, real estate markets

Jessica SarterCommercial Lending

The Federal Deposit Insurance Corporation reported on Wednesday that delinquency rates on commercial and multifamily mortgages fell during the fourth quarter of last year. Similar data from the Mortgage Bankers Association shows these kinds of loans have fared better through the recession than any other major type of credit package offered by lenders.

Specifically, the 30+ day delinquency rate on loans held in commercial mortgage-backed securities dropped 0.36 percentage points to reach 8.56 percent, the FDIC reported. MBA data  added that commercial and multifamily mortgages have held the lowest charge-off rates of any loans offered by commercial banks and thrifts.

"Commercial and multifamily mortgage delinquency rates continue to stabilize and improve in parallel with the broader economy," said Jamie Woodwell, vice president of commercial real estate research at the MBA. "And counter to what many have predicted, commercial mortgages have proved to be neither 'the next shoe to drop' nor a 'ticking time bomb' for the banking sector or the economy as a whole."

"The data show that, to the contrary, commercial and multifamily mortgages have generally performed well for most investor groups and have been the best performing loans held by banks and thrifts through this recession," Woodwell added.

Meanwhile, Bloomberg reports that demand for U.S. apartment buildings is surging, fueled by a scourge in home ownership rates and a move by investors to buy buildings. According to the source, this has helped creditors recover 75 percent of the value of defaulted mortgages on multifamily properties, reflecting the highest recovery rate on all commercial property.

Rental and delinquency trends aside, commercial business lending and real estate activity are viewed as critical to a recovering economy. Last week, Chandan Economics reported that banks increased their lending to commercial projects by $5 billion in the fourth quarter.