Delinquency rate triples in US commercial mortgage market
Investor · Salt Lake City, UT · Member since 2019 · 38 posts · 20 votes
Delinquency rate triples in US commercial mortgage market
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Real Estate Agent · San Jose, CA · Member since 2015 · 84 posts · 50 votes
6yMost of my MF investments through syndication general partners are doing just fine. I do have one in Houston, that has currently suspended the preferred return and is evaluating the property performance on a quarter by quarter basis. What I've learned through Covid-19 and MF, that it is very important where your invested. For example my DFW area investments are all performing well with very little rent forebearance. Many fortune 500 companies are in the DFW area with lots of job diversification and a highly educated work force. Plus , Texas is business friendly ( unlike California) no state income tax, and an education system in the north suburbs that is excellent. Two things to remember, people have to eat and have a place to live. Class B, is affordable and is very recession resistant in the right areas.
5 Replies
- Investor · Ogden, UT · Member since 2018 · 295 posts · 208 votes6y
I have not seen/heard of any steep rise in delinquencies on commercial multifamily properties. Commercial encompasses a lot of different properties from retail, to restaurants, and to hotels and lodging - which accounts for big portion of the increase in delinquencies as stated by the article. With forbearance still in effect, I think it is too early to tell for residential and collections in the multifamily space have remained steady from what I have seen. I would be interested to see what a multifamily operator would have to input here.
- Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes6y
That depends a lot on the severity of a downturn. MY SWAG - In order, most likely to be delinq (NOT default):
1) Shared office
2) Hotels and self-storage
3) Entertainment venues (movies, gyms, concert halls, restaurants)
4) Office (if there is a shrink in the econ and WFH catches on)
5) Industrial (since it's shrunk pretty much)
6) Multi-units (same number of people and same number of apts need a place to go). Remember in apts 10% vacant = end of world, any other type of CRE would kill for that.
I think there's enough delinq and there's hope, banks will do work-outs. If it gets real bad then you'll get defaults.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Blake Dailey:
I have not seen/heard of any steep rise in delinquencies on commercial multifamily properties. Commercial encompasses a lot of different properties from retail, to restaurants, and to hotels and lodging - which accounts for big portion of the increase in delinquencies as stated by the article. With forbearance still in effect, I think it is too early to tell for residential and collections in the multifamily space have remained steady from what I have seen. I would be interested to see what a multifamily operator would have to input here.
Ya know for the resi mortgage industry and maybe all mortgages..
seems to me a re cast would work to stave off massive defaults.
so lets say homeowner cant make payments for 6 months then stabilizes.. lets say payments are 2k a month.. that's 12 total.
Maybe just recast the 250k mortgage at 262k have a new payment probably only go up say 15 bucks or something a month.. ??
lender servicer maintains their yield they paid for.. borrower keeps home.. and things stay stabilized.. ?
I know its probably too simple.. and I get the programs that are allowing folks to just add the payments to the end.. But seems like this could be a good option as well.
JLH
- Investor · Ogden, UT · Member since 2018 · 295 posts · 208 votes6y
Originally posted by @Jay Hinrichs:
Originally posted by @Blake Dailey:
I have not seen/heard of any steep rise in delinquencies on commercial multifamily properties. Commercial encompasses a lot of different properties from retail, to restaurants, and to hotels and lodging - which accounts for big portion of the increase in delinquencies as stated by the article. With forbearance still in effect, I think it is too early to tell for residential and collections in the multifamily space have remained steady from what I have seen. I would be interested to see what a multifamily operator would have to input here.
Ya know for the resi mortgage industry and maybe all mortgages..
seems to me a re cast would work to stave off massive defaults.
so lets say homeowner cant make payments for 6 months then stabilizes.. lets say payments are 2k a month.. that's 12 total.
Maybe just recast the 250k mortgage at 262k have a new payment probably only go up say 15 bucks or something a month.. ??
lender servicer maintains their yield they paid for.. borrower keeps home.. and things stay stabilized.. ?
I know its probably too simple.. and I get the programs that are allowing folks to just add the payments to the end.. But seems like this could be a good option as well.
JLH
I think that would be a good option for those that are in forbearance now. That would ease the transition back to paying as people are trying to figure out their new way forward. Much better than having that $12k due at once at the end of forbearance.
- Real Estate Agent · San Jose, CA · Member since 2015 · 84 posts · 50 votes6y
Most of my MF investments through syndication general partners are doing just fine. I do have one in Houston, that has currently suspended the preferred return and is evaluating the property performance on a quarter by quarter basis. What I've learned through Covid-19 and MF, that it is very important where your invested. For example my DFW area investments are all performing well with very little rent forebearance. Many fortune 500 companies are in the DFW area with lots of job diversification and a highly educated work force. Plus , Texas is business friendly ( unlike California) no state income tax, and an education system in the north suburbs that is excellent. Two things to remember, people have to eat and have a place to live. Class B, is affordable and is very recession resistant in the right areas.
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