Commercial Mortgage Delinquencies to Gain 0.5% in 3Q?
Delinquencies on commercial mortgages could rise to 2.4% for the third quarter, from 1.9% for the second quarter, according to an estimate from Foresight Analytics. The San Mateo, Calif.-based research firm bases its estimate on earnings reports and other bank filings since final figures for the third quarter are not yet out.
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This 50 basis-point spike in the commercial mortgage delinquency rate is the most rapid rate of increase since it started moving up in 2006, according to Foresight.
While the rate is still modest, “it could be an indication of more problems ahead, especially since the recent seizure in the credit markets really first hit in mid-September and would not be reflected in the third-quarter figures.”
On construction loans, including both residential and commercial-property, the research firm anticipates that delinquencies will spike to 10%, up from 7.7% in the second quarter. Although this is above the 9.7% delinquency on construction loans seen at year-end 1993, it still compares favorably with the 16.1% delinquency rate on construction loans at the end of 1992.
Delinquencies on construction loans are being impacted by nonaccrual loans, or loans that are nonperforming and for which the interest is overdue. Prospects for repayment of the loans are doubtful.
Foresight estimates that delinquencies on non-accrual construction loans will rise to 7.7% in the third quarter, up from 5.7% in the second quarter. Delinquencies on construction loans started moving up from 1.0% in the second quarter of 2006, when problems in the housing market became a concern.
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© 2012 Penton Media Inc.
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