​The Global Financial Crisis (GFC) of a dozen years ago was at its core a housing crisis. More specifically, it was a single-family mortgage crisis as imprudent lending led to a huge surge in home sales in a bubble that simply could not be sustained. The resulting collapse led to the biggest economic shock since the Great Depression. Until, perhaps, now. The other segment of residential housing, the rental market, skated through almost unscathed. While almost nine million people lost their jobs, including renters, millions of families lost homes and had to turn to rent, keeping the multifamily market afloat.

As is the case for residential mortgages, every month Ginnie Mae publishes data on loan-level delinquencies for its commercial real estate programs. The structure is a bit different than for single family, with different categories (the dominant one being FHA multifamily, but also hospitals and nursing homes). In this short post we look at recent performance for FHA multifamily and nursing homes.
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Traditionally, multifamily DQs for FHA are low because these loans are concentrated in affordable housing, where there is a persistent condition of excess demand. The costs of eviction are low and new tenants are ready to move in. But this is not necessarily the case in the COVID-19 era as the economic impact falls most heavily on the lower income working class, so there are fewer people who can afford affordable housing without support from government income programs such as jobless benefits.

During the 2008 global financial crisis, the agency multifamily CMBS (commercial mortgage backed securities) and the RMBS (residential mortgage backed securities) markets performed differently as measured by delinquency rates. For example, at the peak of the financial crisis in Feb. 2010, single family Fannie Mae loans had a 90+ day delinquency rate of 5.6% in Feb. 2010, compared with their multifamily 60+ day delinquency rate of just 0.8% in Jun. 2010. However, the historical performance cannot guarantee the same relationship will hold during the current Coronavirus pandemic. The huge surge in unemployment currently being experienced will fall equally on renters and homeowners alike. The CARES act provides forbearance to households with mortgages, but there is no such broad program for renters[1].