Multifamily CMBS Loan Distress Keeps Rising

As the multifamily sector works through oversupply and slow rent growth in many markets, owners are feeling the pressure of an interest rate environment that won’t let up.

Bisnow/Taylor Driscoll

Houston Chronicle’s Marissa Luck, Morgan Group’s Evan Schapiro and Mortgage Association’s Judith Ricks

The percentage of multifamily CMBS loans that have been delinquent for 30 or more days rose 0.7 percentage points to 7.28% last quarter, according to a Mortgage Bankers Association report released Tuesday. 

The rate of Fannie Mae loans that were 60 or more days delinquent ticked up 4 basis points last quarter to 0.78%, the report said. Both rates have been steadily rising since 2023. 

Mortgage Bankers Association Associate Vice President Judith Ricks attributed this rise to the higher-for-longer interest rate environment coupled with geopolitical uncertainty. She said this is creating a weaker refinancing market for multifamily borrowers that are falling behind on their mortgages. 

“A lot of that is coming from the economic uncertainty that we have, what the economy looks like today, and the geopolitical situation looks like today is very different than on Jan. 1,” Ricks said Tuesday at the National Association of Real Estate Editors Conference in Miami. 

Courtesy of Mortgage Bankers Association

CMBS loan delinquencies over 30 days have been on the rise since 2023.

Late last year, many borrowers were able to refinance loans due to “economic fundamentals that were really conducive to refinancing and modifications,” Ricks said. 

But macroeconomic headwinds like the Iran war this year have cooled that market. 

The Federal Reserve has kept the benchmark interest rate flat at three consecutive meetings, and yields for 10-year Treasuries hit a peak of 4.6% in May and stood just under 4.5% as of Wednesday.

“I think that what you’re going to end up seeing is that origination loans are going to be quite a bit lower in 2026, and a lot of that is some of the inability to refinance, particularly in comparison to 2025,” Ricks said.

Ricks said MBA is now predicting the Fed will keep rates flat and “possibly” increase them by the end of the year, a vastly different prediction from the beginning of 2026.

As multifamily borrowers face a more difficult environment to refinance, many are also having trouble achieving rent growth. U.S. apartment rents were up 0.7% year-over-year in May, according to Apartments.com.

Ricks said she is tracking an uptick in delinquent loans originated between 2023 and 2024 that is contributing to the rise in delinquency rates. 

“We’re hearing about near short-term delinquencies in your 2023 and 2024 vintages of multifamily [loans], so we’re trying to research that a little more and get a little more hard data on that, but that’s the area where we’re hearing about some of that weakness in the market,” she said.