Commercial loan default rate falls in first quarter as originations rise

The delinquency rate of commercial and multifamily mortgages held by banks declined during the first quarter as originations surged.

The delinquency rate of commercial and multifamily mortgages held by banks declined during the first quarter as originations surged.

Specifically, delinquencies among commercial and multifamily mortgages owned by life company portfolios fell to rate of just 0.14 percent, according to the Mortgage Bankers Association. In addition, during the first three months of 2012, the delinquency rate on commercial loans backed by Fannie Mae and Freddie Mac were at 0.37 and 0.23 percent, respectively.

In contrast, the delinquency rate of loans held in commercial mortgage-backed securities rose 0.29 percent to a total of 8.85 percent.

As this occurred, mortgage records indicate that the origination rate of commercial and multifamily loans surged 36 percent from the previous year.

"Borrowing and lending on commercial and multifamily properties continues to rebound from the lows seen during the Great Recession," said MBA vice president of commercial real estate research Jamie Woodwell.

Affordable interest rates and continued stabilization in the commercial real estate market are believed to be major factors behind the increase in activity, Woodwell added. Should this trend continue, it could result in even more construction activity in the near future.



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