Procurement News Notice |
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| PNN | 8216 |
| Work Detail | The quality of commercial real estate loans on bank books continued to improve in the second quarter with the exception of the nation’s energy markets. Nationally, the amount of delinquent CRE loans declined about 21% (about $4.6 billion) to $17.78 billion in the past year, according to the latest numbers from the Federal Deposit Insurance Corp. (FDIC). Construction loan delinquencies are down about 28%; multifamily down about 20%; and nonresidential down about 18%. Even in New York City, where there has been talk of overbuilding and overheated CRE pricing, banks with significant NYC market share have seen their CRE loan delinquencies decrease 20%. "For most capital sources, commercial and multifamily mortgage delinquency rates are near the lowest levels seen during the past 20 years," said Jamie Woodwell, Mortgage Bankers Association’s vice president of commercial real estate research. "Strong property fundamentals, rising property values and solid mortgage availability are all supporting these rates." The exception to the national trend was found in energy-sector markets where two years of low oil prices have caused total noncurrent CRE loan balances to increase for the first time in six years. In the second quarter of 2016, the volume of noncurrent CRE loans for Texas and North Dakota-based jumped to $890.3 million from $680.6 million a year ago. The biggest increase came from loans on nonresidential commercial properties, but delinquent multifamily loans increased as well, according to the FDIC report. “More recently, persistent stress in the energy sector has resulted in a decline in asset quality at banks that lend to oil and gas producers, as well as banks that serve local economies reliant on the energy sector,” said Martin J. Gruenberg, chairman of the FDIC. “We likely have not yet seen the full impact of low energy prices on the banking industry, particularly for consumer and commercial and industrial loans in energy-producing regions of the country.” Gruenberg said the FDIC would be closely monitoring the environment in which banks operate. Separate analysis by the Mortgage Bankers Assn. evaluated commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae, and Freddie Mac. Together these groups hold more than 80% of commercial/multifamily mortgage debt outstanding. Based on the unpaid principal balance (UPB) of loans, delinquency rates for groups other than banks at the end of the second quarter were as follows. Life insurance company portfolios (60 or more days delinquent): 0.11%, an increase of 0.05 from the first quarter of 2016; Fannie Mae (60 or more days delinquent): 0.07%, an increase of 0.01 percentage points from the first quarter of 2016; and Freddie Mac (60 or more days delinquent): 0.02%, a decrease of 0.02 percentage points from first quarter of 2016; and Coming in with the highest percentage level of delinquencies was CMBS (30 or more days delinquent or in REO): 4.04%, an increase of 0.17 percentage points from the first quarter of 2016. Morningstar Credit Ratings LLC expects the maturity payoff rate to continue to slide and drive the delinquency rate higher, as many of the loans coming due this year were written in 2006 under overly optimistic cash flow projections that never materialized. The amount of foreclosed properties held on bank books also decreased notably in the past 12 months with banks recording higher net profits on the sale of such assets. The amount of foreclosed CRE properties declined by $2.93 billion (28%) to $7.47 billion. Banks have recorded $42.7 million in gains on the sale of foreclosed properties this year -- nearly three times as much for the same period last year. Banks in the energy markets of Texas and North Dakota did, however, report a jump nearly 13% in the amount of foreclosed nonresidential commercial properties on their books. Overall CRE loan growth at U.S. banks was up more than $191 billion over the past 12 months - a growth rate of nearly 11%. |
| Country | United States , Northern America |
| Industry | Financial Services |
| Entry Date | 15 Oct 2016 |
| Source | http://www.costar.com/News/Article/CRE-Loan-Delinquencies-Near-Lowest-Level-in-20-Years/184725 |
