Dive Brief:
- The commercial-backed mortgage securities special servicing rates for apartments rose 69 basis points to 2.33% in November, according to a new report from Trepp, a data and analytics firm. Multifamily’s 60 basis point increase was the largest jump in the commercial real estate sector.
- Sharp increases in multifamily, office and lodging drove the overall commercial real estate servicing rate up 23 basis points to 5.20% in November. The rate increased from 5.12% six months ago. However, it fell from 6.95% 12 months ago.
- Although apartment servicing rates jumped in November, they haven’t gone past 3% since 2017, according to Trepp. Still, they currently sit at their highest rate since October 2021.
Dive Insight:
The transfer of a group of properties in San Francisco into special servicing helped push the apartment CMBS rate up in November. The pool, known as the Veritas multifamily portfolio, backs $447 million in loans, according to Trepp. San Francisco-based Veritas declined to provide comment about the loan.
“It’s hard to say if the increase in special servicing in November for multifamily is a harbinger of what’s in store for the sector in 2023 since a significant portion of November’s increase can be attributed to one loan,” Trepp Head of Research Stephen Buschbom and Research Associate Jack LaForge told Multifamily Dive in an email.
Still, Buschbom and LaForge noted that there were headwinds facing apartment owners, including decreasing occupancy and declining new lease rates
“The multifamily sector has enjoyed a long streak of low rates, rising rents and tight occupancy so a bit of softness is to be expected as inflation cools,” they said.
Delinquencies rise
The jump in the multifamily servicing rate comes on the heels of separate reports from Trepp and the Mortgage Bankers Association showing increasing loan delinquencies.
Multifamily CMBS delinquencies jumped 98 basis points in October to 1.81% in November, according to Trepp. That was driven by problems with a couple of large loans, including the one backing the 538-unit Parkhill City apartments in Queens, New York, according to Trepp. Overall, the commercial real estate rate sat at 2.99%.
MBA’s third quarter Commercial/Multifamily Delinquency Report showed that delinquency rates remained low overall. Loans that were 60 or more days delinquent for Fannie Mae decreased by 0.08 percentage points from the second quarter to 0.26% in the third. However, those loans increased by 0.06 percentage points to 0.13% for Freddie Mac.
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