Commercial mortgage delinquency rises in third quarter

Commercial mortgage delinquency increased modestly in the third quarter of 2026, according to the Mortgage Bankers Association. The MBA survey, the association's commercial real estate finance loan performance survey, found that the balance of commercial mortgages that were not current rose during the quarter. Commercial mortgage delinquency remains historically low across most capital sources, the association said, even as higher rates and weaker fundamentals in multifamily and office markets weigh on performance. Commercial mortgage delinquency is therefore rising from a low base, rather than from a level that signals broad distress.

Mike Fratantoni, the association's senior vice president and chief economist, said challenging fundamentals, particularly in the multifamily and office markets, along with higher rates, are having an impact on performance. He also warned that a large number of scheduled maturities coming due amid the recent rise in interest rates will continue to be a headwind for commercial mortgage performance in the quarters ahead. Borrowers who must refinance at higher rates face larger payments, and lenders must judge whether the property income covers those payments.

Offices still the weak spot

Commercial mortgage delinquency varied by property type in the third quarter, and office continued to exhibit the highest delinquency rates. The survey did not publish a single office rate in the summary released by the association, but it said the trend in the share of loans that were delinquent was mixed across the major property types. Office loans have faced pressure from changes in working patterns, weaker demand for older buildings, and higher costs for refinancing. Multifamily loans also featured in the association's warning about challenging fundamentals, as landlords in some markets face slower rent growth and higher operating costs.

The MBA survey collected information on commercial and multifamily mortgage portfolios as of September 30, 2026. The MBA survey covers multifamily loans as well as office loans, and multifamily loans featured in the warning about weaker fundamentals. It builds on similar surveys conducted since April 2020. Participants reported on $3 trillion in loans as of September 2026, representing 59 percent of the $5 trillion in total commercial and multifamily mortgage debt outstanding as of the second quarter of 2026. That coverage gives the survey a wide view of the market, but it does not cover every loan, and results can differ for lenders outside the survey.

Banks, CMBS and insurers

Commercial mortgage delinquency by capital source showed CMBS loans at the highest levels. About 4.97 percent of CMBS loan balances were 30 or more days delinquent, up from 4.82 percent in the prior quarter. CMBS loans are bundled into securities and sold to investors, and they often cover properties that were financed at higher leverage or in weaker markets. Delinquency rates for other capital sources remained relatively low compared with their historical norms, the association said.

Life company loan balances had a delinquency rate of 1.33 percent, up from 1.19 percent. Government sponsored enterprise loan balances had a rate of 1.16 percent, up from 1.11 percent. Federal Housing Administration loan balances had a rate of 0.90 percent, down from 1.06 percent. Those lower rates show that loans held by life companies, government sponsored enterprises and the Federal Housing Administration performed better than CMBS loans in the quarter. The gap between CMBS and other sources is a regular feature of the survey, because the loan types and property mixes differ.

What lenders expect

Commercial mortgage delinquency in the quarters ahead will depend in part on how many maturities borrowers can refinance, the association said. Scheduled maturities coming due while interest rates are higher than when the loans were made can push payments up, even for properties whose income has not fallen. Lenders may extend some loans, require more equity, or work with borrowers on new terms. Borrowers with strong income and lower leverage have more room to agree new terms, while borrowers with weaker income face harder talks.

The survey result for the third quarter does not, on its own, show that commercial property lending is in trouble. Delinquency rates remain historically low across most capital sources, according to the association, and the increase in the quarter was modest. The warning about maturities is a forward look, not a count of loans already in trouble. Readers should watch the next survey for whether CMBS delinquency keeps rising, whether office delinquency stays highest, and whether life company, government sponsored enterprise and Federal Housing Administration rates move in the same direction.