Washington, DC – March 5, 2013 – (RealEstateRama) — An analysis of data from the Federal Deposit Insurance Corporation (FDIC) shows that commercial and multifamily mortgages fared better through the credit crunch and recession than any other major type of loan held by banks and thrifts, according to a DataNote released today by the Mortgage Bankers Association (MBA).
Analyzing year-end 2012 data from the FDIC, MBA found that throughout the credit crunch and recession, commercial and multifamily mortgages had delinquency rates lower than the average delinquency rate for banks’ overall books of loans and leases, and that the charge-off rates for commercial and multifamily mortgages were lower than for any other major loan type held by commercial banks and thrifts.
“Commercial and multifamily mortgages were a net positive for banks and thrifts through the credit crunch and recession,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “The amount of credit extended by banks stayed relatively constant during the recession, the delinquency rates for commercial and multifamily mortgages remained relatively subdued, and banks and thrifts saw far less in charge-offs for their commercial and multifamily mortgages than they did for other loan types.”
Among the findings:
• Over the course of the recession, the credit crunch and headlines about the lack of capital available for commercial real estate, the actual amount of commercial and multifamily mortgage debt extended and held by banks remained remarkably steady. In the case of multifamily mortgages, the year-end balance held by banks never declined during the recession, and the balance of commercial mortgages fell just three percent between the peak (2009) and trough (2011) before rising again in 2012. By contrast, the balance of construction loans fell 62 percent between 2007 and 2012, the balance of commercial and industrial loans fell 21 percent between 2008 and 2010 before rising again in 2011 and 2012, and the balance of single-family loans fell 14 percent between 2007 and 2012.
• Looking across the various loans and leases held by banks and thrifts, commercial and multifamily mortgages finished 2012 with 30+ day delinquency rates lower than the average for all loans and leases held by these institutions. At the end of the fourth quarter, commercial mortgages had a 30+ day delinquency rate of 3.55 percent, down from 4.67 percent at the end of 2011. Multifamily mortgages recorded a rate of 2.19 percent, down from 3.22 percent at the end of 2011.
• Throughout the credit crunch and recession and into 2012, commercial and multifamily mortgages had the lowest charge-off rates of any type of loan held by commercial banks and thrifts. In 2012, banks and thrifts charged off 0.55 percent of their balance of commercial mortgages and 0.32 percent of their multifamily mortgages, compared to charge-off rates of 0.84 percent and 0.74 percent respectively in 2011.
• In aggregate dollars, the charge-offs of commercial and multifamily mortgages by banks and thrifts also remained far below those of other loan types during the recession. From 2007 through 2012, banks and thrifts charged off (net) $212 billion of single-family mortgages, $205 billion of credit card loans, $95 billion of commercial and industrial loans, $85 billion of construction loans and $72 billion of other loans to individuals. By contrast, over the same period, they have had to charge-off only $41 billion in commercial mortgages and $8.5 billion in multifamily mortgages.
To view the DataNote, click here.
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 2,200 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.