Multifamily, Commericial Loans Fared Better During Recession

By: Esther Cho, DSNews.com

When economic times were especially shaky, commercial and multifamily mortgages held their ground in comparison to other loan types held by banks and thrifts, according to a DataNote from the Mortgage Bankers Association (MBA).

The DataNote was based on an analysis of year-end 2012 data from the Federal Deposit Insurance Corporation (FDIC).

“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,” said Jamie Woodwell, MBA’s VP of commercial real estate research.

For example during the recession, the association noted the amount of commercial and multifamily mortgage debt extended and held by financial institutions remained steady. In particular, the year-end balance held by banks and thrifts for multifamily mortgages never decreased during the recession. On the other hand, the balance of construction loans plunged 62 percent between 2007 and 2012, and for single-family loans, the balance declined 14 percent during the same time period.

Commercial and multifamily mortgages also ended last year with lower 30-plus delinquency rates compared to the average for other loans held by banks and thrifts. In a separate report, the MBA reported the 90-plus delinquency rate for loans held by FDIC-insured banks and thrifts fell by 0.32 percentage points in Q4 2012 to 2.62 percent.

In addition, commercial and multifamily mortgages had the lowest charge-off rates compared to other loan types.

In dollar terms, the charge-offs were lower as well. From 2007 to 2012, commercial and multifamily charge-offs totaled $41 billion and $8.5 billion, respectively. Meanwhile, the charge off amount for single-family mortgages among banks and thrifts was $212 billion. Institutions also charged-off $85 billion in construction loans and $205 billion in credit card loans.