Multifamily CMBS delinquency rate and loan loss severity rise in June

problems with loan include rising CMBS delinquency and increased loan loss severity

Trepp reported that the delinquency rate for multifamily commercial mortgage-backed securities (CMBS) loans moved higher in June, rising 66 basis points. While the multifamily CBMS delinquency rate is still well below the rates for office, retail and lodging, its increase in June was the largest for any of the property types Trepp tracks.

Overall CBMS delinquency also moves higher

For delinquencies, Trepp focuses on loans that are 30 or more days delinquent. The current CMBS delinquency report provides data through June 2024. While it only looks at CMBS loans, it breaks out results by the type of property covered by the loans.

The delinquency rate on loans on multifamily property was 2.36 percent, up from 1.70 percent in May but down from 1.33 percent in April. One year ago, the delinquency rate on CMBS loans for multifamily property was 1.59 percent.

Trepp found that the overall delinquency rate of CMBS loans in June was 5.35 percent. This is up 38 basis points from last month’s level of 4.97 percent.

The report noted that loans that are past their maturity date but are still current on their interest payments are not counted as being delinquent. However, if they were included, the overall delinquency rate on CMBS loans would rise to 6.54 percent from the 5.35 percent reported above.

The history of the overall and multifamily CMBS delinquency rates as reported by Trepp since January 2020 is illustrated in the chart, below.

multifamily CMBS delinquency rate history

Office, lodging and retail all weaken

The other property types whose CMBS loan delinquencies were examined by Trepp were industrial, lodging, office and retail.

The CMBS delinquency rate for loans on office property took the second highest jump in the month, rising 61 basis points to 7.55 percent. The delinquency rate for retail property rose 48 basis points to 6.42 percent while the rate for lodging property rose 10 basis points to 6.32 percent. Industrial property continues to have by far the best CMBS delinquency rate at 0.62 percent, although this rate rose 12 basis points in the month.

The full Trepp delinquency report can be found here.

Loan loss severity rises

Trepp also reported on the volume and severity of loan losses on CMBS loans which were resolved in June, although it does not break down the data by the type of property covered by the loans. The history of this data since January 2023 is shown in the next chart. The chart shows the average loss incurred per resolved loan along with the percentage of the loan’s value that was lost during resolution.

loan loss severity history

The chart shows that the severity of CMBS loan losses increased to 74.3 percent in June with an average loss per loan of $12.4 million. The number of loans resolving in the June doubled from the month before to 12. However, the dollar value of the loans that resolved fell sharply to $200 million from $369 million in May.

While monthly loan loss data can be volatile, Trepp reported that the 12-month trailing average loss severity has been steadily climbing for nearly a year. From a loss severity rate of 50.9 percent in August 2023, the 12-month trailing average loss severity reached 74.3 percent in June.

The June loan loss severity report can be found here.