Community Bank Multifamily Loans See Rising Distress
CRED iQ’s latest analysis of multifamily loans held by community banks shows a dramatic rise in delinquent loans and realized losses. CRED iQ’s data shows that over $6.1 billion of community bank loans secured by apartment buildings are delinquent.
The $6.1 billion of delinquent loans yields a 0.97 percent delinquency rate based on a total multifamily loan amount of $629.7 billion. For this analysis, CRED iQ’s definition of delinquency includes any loan that reported a payment later than 30 days, 60 days, 90 days or worse.
The last time there was more than $6 billion of delinquent apartment loans held by community banks was in March 2012. Apartment distress totaled $12.7 billion in March 2010 during the peak in the 2008-2010 Global Financial Crisis. At that time in 2010, multifamily’s delinquency rate rose to 5.9 percent. It took about four years for the spike in delinquency to drop back down to less than 1 percent.
CRED iQ also examined losses attributed to apartment loans with community banks. As of Sept. 30, 2024, total losses amounted to $504 million, the highest level since 2013. Quarterly realized losses for apartment loans peaked in December 2010 at $2.6 billion. Realized losses have been steadily trending upward for eight straight quarters, according to CRED iQ’s analysis.
Community bank vs. CMBS performance
CRED iQ’s latest data, tracking over $2 trillion in commercial real estate loans, shows a marked uptick in multifamily distress. As of January 2025, the distress rate for multifamily properties within the commercial mortgage-
backed securities (CMBS) universe jumped to 12.9 percent — an increase of 40 basis points from December 2024. That’s a stark contrast to January 2024, when the rate lingered at a modest 2.6 percent. Distress here combines delinquency (loans 30-plus days late) and special servicing (loans flagged for potential trouble), offering a broader lens than delinquency alone.
Breaking it down, CRED iQ’s April 2024 report offers a historical pivot point: Multifamily distress spiked from 3.7 percent to 7.2 percent, driven by a massive $1.75 billion loan tied to San Francisco’s Parkmerced residential complex. Fast forward to this past January, and the trend has only accelerated. While exact delinquency figures vary by month, the trajectory suggests multifamily is grappling with pressures that aren’t letting up.
Delinquency rates for multifamily loans, particularly those tied to CMBS, have been ticking upward in recent months. According to CRED iQ, a leading CMBS data provider, the multifamily delinquency rate hit 4.5 percent in January — up from 3.8 percent from a year prior.
The Federal Reserve’s rate hikes in 2022–2023 are still rippling through the market. Many multifamily loans originated in the low-rate era are now maturing or facing refinancing at higher costs. Owners who locked in interest rates of 2 to 3 percent a few years back are staring down 5 to 6 percent today, straining cash flows — especially for properties with slim margins or high leverage.
What’s the outlook? CRED iQ’s data suggests 2025 could be a bumpy ride. With $500 billion in CRE loans maturing this year (a statistic echoed across industry reports), multifamily faces a refinancing cliff. If rates ease — say, a 25-basis-point cut by mid-2025 — some pressure might lift. But oversupply won’t vanish quickly, and big loans like Parkmerced’s (another recent default) could linger as distressed if unresolved.
CRED iQ’s distress rate hit a record 11.5 percent across all CRE this January. If multifamily keeps pacing ahead, we might see 14 to 15 percent by year’s end absent a major turnaround.
Mike Haas is the founder and CEO of CRED iQ.
