WASHINGTON, D.C. — The delinquency rates for commercial mortgages held by banks and in commercial mortgage-backed securities dropped slightly in the third quarter, according to the Mortgage Bankers Association.
Delinquencies for loans held by life insurance companies and held or insured by Freddie Mae and Freddie Mac rose, but are still at low levels, the Washington, D.C.-based trade group says.
The rate for loans more than 90 days delinquent owned by banks insured by the Federal Deposit Insurance Corp. decreased 0.19 percent to 3.75 percent between the second and third quarters.
The rate for loans that are 60-plus days delinquent and held in life company portfolios increased 0.07 percent to 1.19 percent in the third quarter. The delinquency rate of 60 days or more for multifamily loans held or insured by Fannie Maeincreased 0.11 percent to 0.57 percent, while those insured by Freddie Mac increased 0.02 percent to 0.33 percent.
“There were modest changes in commercial/family delinquency rates during the third quarter,” said Jamie Woodwell, MBA's vice president of commercial real estate research, in a statement.
“The delinquency rates for loans held by life insurance companies, Fannie Mae and Freddie Mac each ticked up slightly in the quarter, but remained at relatively low overall levels,” Woodwell said. “Delinquency rates for bank-held loans continued to decline from their cycle highs; and delinquency rates for loans held in CMBS fell slightly as loans made during the first half of the year were added to the base.”
In related news, higher loan origination volume in the single-family residential sector caused profits to rise at independent mortgage banks during the third quarter. Mortgage banks made an average profit of $1,263 on each loan they originated in the third quarter of 2011 from $575 per loan in the second quarter of 2011 and $364 per loan in the first quarter.
The commercial / multifamily sector tends to follow trends in the single-family sector by four to six quarters, industry experts say.
Higher sales volumes offset high production costs, causing the cost of origination to decrease as it was spread out across a larger number of loans, says Marina Walsh, MBA associate vice president of industry analysis, in a statement.
In basis points, the average production profit was 66.37 basis points in the third quarter, compared to 32.86 basis points in the second quarter. This was the most favorable quarterly result in production since the refinancing wave in the third quarter of 2010, when net profits were 71.46 basis points. Eighty-six percent of the firms in the study posted pre-tax net financial profits in the third quarter of 2011, compared to 70 percent in the second quarter.
— Liz Burlingame