Freddie Mac Sees Jump in Serious Multifamily Delinquencies

There’s more news that increases the food for thought about multifamily stability. Bill McBride’s CalculatedRisk Newsletter reported a large relative jump in the Freddie Mac multifamily mortgage serious delinquency rate between December 2023 and January 2024.

McBride called the change “no surprise” while rightly calling the monthly increase “very large.”

“The multifamily rate increased recently as rent growth has slowed (and rents are falling in some areas), vacancy rates have increased, and borrowing rates have increased sharply,” he wrote.

Even though the rate, 0.44%, is comparatively low, it is still a notable development because the GSEs have long prided themselves on the very low rate of multifamily delinquencies in their portfolios.

For some historical context, GlobeSt.com went through the available previous monthly volume summaries to compile some comparative statistics and better show developments. Here are the serious delinquency rates from December 2013 through December 2023: 2013, 0.09%; 2014, 0.04%; 2015, 0.02%; 2016, 0.03%; 2017, 0.02%; 2018, 0.01%; 2019, 0.08%; 2020, 0.16%; 2021, 0.08%; 2022, 0.12%; and 2023, 0.28%.

And now, the rates from January 2013 through January 2024: 2013, 0.18%; 2014, 0.05%; 2015, 0.03%; 2016, 0.04%; 2017, 0.03%; 2018, 0.02%; 2019, 0.01%; 2020, 0.08%; 2021, 0.16%; 2022, 0.07%; 2023, 0.12%; and 2024, 0.44%.

One more series, through 2023 and into 2024: January 2023, 0.12%; February 2023, 0.13%; March 2023, 0.13%; April 2023, 0.19%; May 2023, 0.20%; June 2023, 0.21%; July 2023, 0.23%; August 2023, 0.25%; September 2023, 0.24%; October 2023, 0.26%; November 2023, 0.28%; December 2023, 0.28%; and January 2024, 0.44%.

Freddie Mac says that the multifamily serious delinquency rate is based on the unpaid principal balance of mortgage loans at least two monthly payments past due or in the process of foreclosure. The agency excludes loans in forbearance so long as the borrower remains compliant with the forbearance agreement. The definitions suggest that the total percentage of loans facing trouble in some form is likely larger. Some of the additional cases could further develop into the serious category.

Multifamily has become a worry. The minutes of the Federal Reserve’s January FOMC meeting mentioned multifamily by name with office as a real estate concern. Not long ago, the type was regularly linked with industrial as the most preferred for investment.

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