Commercial, Multifamily Mortgages Outperformed Other Loans During Crisis

Commercial, Multifamily Mortgages Outperformed Other Loans During CrisisMortgages for commercial use and multifamily housing seem to have fared much better than typical consumer loans during the credit crunch and recession for banks and thrifts, according to new data by the Mortgage Bankers Association.
The bankers found that commercial and multifamily mortgages had delinquency rates lower than the average rate for banks’ overall books of loans and leases. The charge-off rates for these mortgages were lower than for any other major loan type held by commercial banks and thrifts.
The MBA analyzed year-end 2012 data from the Federal Deposit Insurance Corp. on these mortgage products for businesses, developers and investors.
In the case of multifamily mortgages, the year-end balance held by banks never declined during the recession, and the balance of commercial mortgages fell just three percent between the peak (2009) and through 2011, before rising again in 2012.
In sharp contrast, the balance of construction loans fell 62 percent between 2007 and 2012; the balance of commercial/industrial loans fell 21 percent between 2008 and 2010 before rising again in 2011 and 2012; and the balance of single-family loans fell 14 percent between 2007 and 2012.
“Commercial and multifamily mortgages were a net positive for banks and thrifts through the credit crunch and recession,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “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.”
In aggregate, the charge-offs of commercial and multifamily mortgages by banks and thrifts also remained far below those of other loan types during the recession.
From 2007 through 2012, banks and thrifts charged off (net) $212 billion of single-family mortgages, $205 billion of credit card loans, $95 billion of commercial and industrial loans, $85 billion of construction loans and $72 billion of other loans to individuals.
However, over the same period, they have had to charge-off only $41 billion in commercial mortgages and $8.5 billion in multifamily mortgages.

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