Commercial Loan Default Rates & Trends in 2024
Posted on Monday, January 1st, 2024 at 9:00 am
Running a business is often an all-consuming task. When you are in the thick of it, you might find it hard to remember that other business owners are struggling with challenges that are similar to your own. However, it is important to remember that the issues you face are occurring within a broader economic landscape. Debt-related issues, such as loan defaults, are more common than you think. Comparing your own numbers with market trends can also help you determine whether your company’s debt situation needs more serious attention.
Each quarter, the Mortgage Banker’s Association (MBA) conducts a commercial real estate finance (CREF) Loan Performance survey. Here is what you need to know about commercial loan default rates in 2024 so far.
Key Findings from MBA’s CREF Loan Performance Survey
According to the MBA’s latest survey, overall mortgage delinquency rates for commercial properties remained unchanged in the first quarter of 2024 compared to the previous quarter. However, loans backed by office properties continued to experience a rise in delinquencies. This trend can be attributed to the ongoing challenges office properties face due to the increasing popularity of hybrid work arrangements. The survey revealed that 6.8 percent of office property loan balances were 30 days or more delinquent, up from 6.5 percent at the end of the previous quarter.
Other property types also saw varying levels of delinquency rates. Lodging loans had a delinquency rate of 6.3 percent, up from 6.1 percent, while retail property loans saw a decrease in delinquencies from 5.0 percent to 4.7 percent. Multifamily loan delinquencies remained stable at 1.2 percent, and industrial property loans experienced a slight increase from 0.9 percent to 1.2 percent.
Delinquency Rates by Capital Sources
The survey also analyzed delinquency rates based on different capital sources. CMBS (Commercial Mortgage-Backed Securities) loans had the highest delinquency rates, with 5.2 percent of loan balances being 30 days or more delinquent, a slight increase from 5.1 percent in the final quarter of 2023.
Other capital sources showed more moderate non-current rates. FHA multifamily and healthcare loans saw a decrease in delinquencies from 0.9 percent to 0.8 percent, while life company loans experienced an increase from 0.9 percent to 1.2 percent. GSE (Government-Sponsored Enterprise) loans had a delinquency rate of 0.4 percent, down from 0.5 percent in Q4 2023.
Factors Influencing Commercial Mortgage Performance
Several factors are contributing to the current trends in commercial loan default rates. Higher interest rates have made it more challenging for businesses to keep up with their mortgage payments. Additionally, uncertainty about property values has led to concerns about the long-term viability of certain investments.
Another significant factor is the volume of commercial mortgage debt maturing in 2024. With 20 percent of the $4.7 trillion in outstanding commercial mortgage debt set to mature this year, many businesses may face difficulties in refinancing or paying off their loans, potentially leading to increased rates of commercial real estate defaults.
How Our Law Firm Can Assist Businesses Facing Loan Defaults
If your business is struggling with loan defaults or overwhelming debt, it is essential to understand the legal options available to you. At Bradford Law Offices, our experienced business bankruptcy attorneys can help you understand how to make your way through these challenging times.
We can help by negotiating with lenders to explore potential loan modifications, forbearance agreements, or other solutions that may help you avoid default. If necessary, we can also represent you in bankruptcy proceedings, working to protect your assets and develop a plan to restructure your debts.
Need Help Assessing Your Debt Relief Options? Call Bradford Law Offices Today
The economic challenges that began during the COVID-19 pandemic continue to have a significant influence on today’s commercial property market. If your business is experiencing overwhelming debt or the possibility of loan defaults due to factors like these, you might feel uncertain about your company’s future. When facing such challenges, it is crucial to seek legal assistance from a skilled and knowledgeable business bankruptcy attorney who can help you explore your options.
The experienced Raleigh business bankruptcy lawyers of Bradford Law Offices have been helping businesses in North Carolina find their financial footing for nearly 30 years. Our team has a thorough understanding of the market pressures affecting companies in Raleigh and beyond. Let us give you the advocacy and support you need at this challenging time. Call us today at (919) 758-8879 or contact us via our online form to learn more about how we can assist you.