Multifamily Delinquencies Up Slightly

According to the CalculatedRisk newsletter, the multifamily delinquency rate for Fannie Mae loans on one to four residential properties has reached its highest rate since March 2011.

Before would-be investors and house-hackers start jumping up and down with anticipation, the rate is .63% of all small multifamily mortgages.

Why?

Likely it’s because investors used commercial loan products, which are fixed for a period of years, then reset. Interest rates today are several points higher than they were when those loans were taken out. That makes the building tougher to cash flow.

This problem is much more prevalent in the commercial sector, where it’s estimated that almost $1 trillion worth of loans on apartment buildings will mature this year. High interest rates mean the properties may not cash flow, which makes refinancing them difficult to impossible.

Will the banks foreclose? Who knows. It’s hard to imagine that after the Great Recession they have an appetite for foreclosure.

I imagine a more likely scenario may be a negotiation with the bank to do a short-term extension of terms until something can be worked out.