Commercial Mortgage Delinquencies in California Up Only Slightly

The bad news is that commercial real estate loan defaults in California have tripled since last quarter and doubled since a year ago, according to the latest quarterly report from the California Mortgage Bankers Association. The good news is that even the latest, higher figure is only 0.06 percent, nearly a record low. The second-quarter CMBA survey found only seven loans that were more than 30 days delinquent, out of 10,794 commercial real estate loans included in the survey. In addition, 15 of the 17 commercial lenders that responded to the survey reported no loans more than 30 days delinquent. Further, on a dollar basis the delinquency percentage was even lower, with the delinquent loans totaling just $53.9 million, or 0.056 percent, of the $96.1 billion in loans covered by the survey. For the purposes of the survey, a loan was considered delinquent if it was two or more payments past due or if it was in foreclosure. The largest of the seven delinquent loans, for $23.4 million, is on a multi-family complex in Corona, and the next-largest is for only $8.1 million, on an office building in Los Angeles. There were no delinquent loans reported for industrial, hospitality or R&D properties or for mobile home parks. Although the survey represents “a very small sampling” of all of California’s commercial mortgage loans, survey author Peter H. Ulrich, CMB, commercial real estate consultant for the CMBA, told CPN, one of its virtues is that it has been based on a consistent group of lenders since its inception in 1990. “What’s important is the comparisons to previous time periods.” These survey participants, he explained, are primarily CMBA members who mostly service loans for insurance companies. Commercial mortgage-backed securities are, by and large, not included. == The survey results are, Ulrich concluded, “indicative of the health of the basic portfolio,” at least for CMBA members, which he characterized as careful underwriters. A slightly different perspective on commercial loan delinquencies in California is offered by Matt Anderson of Foresight Analytics L.L.C., Oakland, who agrees that the CMBA member portfolio probably includes somewhat safer-than-average commercial loans, at least in terms of typical LTV. “It’s not surprising that they’re performing better than some of the other indicators out there.” Foresight Analytics’ figures show an overall delinquency rate in California commercial mortgage loans, as of the first quarter, of 1.1 percent, which includes 30- to 89-day, over-90-day and non-accruing delinquencies. That’s compared with Foresight Analytics’ calculation of 1.8 percent for the same figure on a national basis. Overall, though, Anderson emphasizes the relative stability of the delinquency stats on both the California and national levels. “So far we’re not doing a replay of the early ’90s.”