Delinquencies

The delinquency rate that Kroll Bond Rating Agency tracks improved last month but JER's recent Chapter 11 filing and 2024 forecasts suggest it's still under pressure.

Income-producing loans secured by real estate are under pressure at banks, the government-sponsored enterprises, insurers, and in CMBS to varying degrees.

Stress tests suggest systemically important depositories could weather current risks. Meanwhile, single-family arrears remain low, but that business could be impacted.

The withdrawal of pandemic housing relief and high home prices have heightened consumer strain, according to nonprofit Money Management International.

The 51 basis point increase was inevitable after the late payment rate reached a record low in the third quarter, the Mortgage Bankers Association said.

Foreclosure starts also increased by over 19% between October and November but remain below pre-pandemic levels.

Recent reports highlight the question of how much wage growth can do to sustain loan performance as pandemic relief gets rolled back, consumer costs rise and the housing market cools.

Late payments on office loans have trended upward recently, but longer lease periods may mitigate the potential for distress in that sector, the Mortgage Bankers Association said.

The relatively low share of borrowers who were distressed in June adds to signs that the offramp from government relief measures may not lead to an overwhelming wave of foreclosures.

Consumers are booking rooms at levels not seen since early 2020 and loan delinquencies have fallen sharply as a result. Still, business travel remains sluggish and new COVID variants are spreading, threatening the hotel industry’s recovery.