Multifamily REO Holding at $63.8B in 2020’s 4th Quarter as Distress Continues to Build

The Q4 figures are in, and multifamily loans and REO remained stable as the year came to a close. However, distress mounts heading into 2021.

Distressed Multifamily Loans and REO

Between large amounts of capital still needing to be deployed and new government stimulus and rent payments, the multifamily sector may be one of the healthiest when it comes to mortgage debt. Yet, there are opportunities for investors in distressed assets, if you know where to look.

For now, it still seems like slim pickings for multifamily investors this quarter. Banks reported holding just $63.8B in multifamily REO at the end of 2020. That’s down slightly from Q3.

Q4 2020 U.S. Multifamily Loans and REO
Q4 2020 U.S. Multifamily Loans and REO

However, digging deeper into the data, it is clear that there is quite a bit of built-up distress in the pipeline. Plus, even more newly defaulting loans are being reported.

Check out which banks are holding these assets inside BankProspector.

This includes $1.12B in 30 to 89 day late multifamily loans, up from just $764.5M in the middle of 2020. There are also 10x the amount of 90 day plus late MF mortgage loans now compared to Q1 2020. Nonaccrual stage loans have also been building over the past year to just under $1B.

Looking Ahead

New confidence in rental performance is likely to only fuel demand for multifamily through 2021. New inventory between construction and repurposing of other commercial property types may help lift activity and prices in this sector. Now is the time to take advantage of late-stage non-performing debt while the yields are most attractive.

Log in to BankProspector to find current multifamily REO investment opportunities.

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