Big Loans Move the Delinquency Rates

Trying to understand the state of loans from CMBS alone is difficult. The loan type is far from representative of all lending, and gives a biased view, although a publicly available one, which is better than nothing. The other issue is the dollar measurement because a few large deals going badly are enough to shift the overall balance of performance.

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Even though the average delinquency increase was 42 basis points, each of the lodging, multifamily, and office sectors saw their delinquency rates jump 80 basis points. Accounting for loans removed from the delinquency category, lodging was up 83 basis points to 6.92%. Multifamily was up 94 basis points to 4.18%. Office was up 101 basis points to a 10.38% rate. The only category delinquency rate that fell was for retail, off 25 basis points to 6.57%.

“Most bankers you talk to about this stuff are tired of talking about it because they think it’s been too overhyped,” Nathan Stovall, director of financial institutions research at S&P Global Market Intelligence, previously told GlobeSt.com. “Even a few months ago you had big firms saying, ‘There will be hundreds of banks failing.’ I don’t see that as the case at all.”

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CMBS isn’t traditional bank lending, but it is an indicator that gets a lot of attention. “In November 2024, the CMBS market experienced notable shifts in credit activity, from newly delinquent, cured, and modified loans,” wrote Vivek Denkanikotte, a Trepp research associate. Again, problems were concentrated by dollar volume in a smaller number of larger problematic loans.

For example, the $506.3 million JPMCC 2021-NYAH Portfolio loan for a portfolio of 53 multifamily buildings comprising 3,531 residential units and 23 commercial units throughout several of New York City’s boroughs. It now has a status of nonperforming matured balloon.

Trying to understand the state of the market means digging deeply enough to see not just average conditions, which are important, but the distribution of the problems.