Across all sectors, nearly half of all bank-held commercial mortgages are held by institutions with $10 billion or more in assets, RCA says. These larger banks have the highest default rate at 5.04%.

However, their exposure to commercial real estate loans, including multifamily, is relatively small: 11.9% of all their loans as of Q1, compared to 33.4% for banks with between $100 million and $10 billion in assets. Yet, offsetting that higher exposure for small- and mid-sized institutions is a lower default rate.

Also lower, in terms of both dollar volume and basis points, are quarterly increases in defaults for lenders of all sizes. Although the volume of commercial mortgages in default continues to rise, the Q1 increase of $3.7 billion is the smallest one-quarter increase since the fourth quarter of 2008, RCA says. Similarly, the 34 basis point rise in the default rate from the fourth quarter 2009 is the smallest increase since Q4 ’08.

The story is similar in the multifamily mortgage sector. The $600-million increase in dollar volume of multifamily mortgage defaults is the lowest quarterly rise since 4Q08, while the 21-basis-point rise in the default rate is the smallest increase since the fourth quarter 2007.

That decrease in the rate of increase shouldn’t be interpreted as a light at the end of the tunnel, though, at least not when it comes to commercial defaults. "While conditions in the economy and labor markets show early signs of improvement, commercial real estate fundamentals remain weak," writes Chandan. "In particular, lease rollovers will remain dilutive to property cash flow for the near- to medium-term. Rising default rates reflect challenges in refinancing loans at maturity given lower property values and constraints on credit availability but also reflect property owners’ difficulties in meeting recurring principal and interest obligations during the life of the loan."