Distressed Pro: Recent Episodes
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Florida just posted the worst foreclosure rate in the country, one filing for every 2,106 homes, with Charlotte and Polk counties leading the carnage.
June’s national numbers dropped 3% month over month, but that dip sits against a market still running 21% hotter than last June.
Lenders slowed new foreclosure starts even as banks accelerated REO completions, up 17% from May.
South Carolina, Indiana, Nevada, and Illinois round out the top five, a reminder that distress is showing up far outside the coastal markets everyone watches.
Top stories of the weekClick any headline to read the full story.
U.S. Foreclosure Rates by StateForeclosure filings climbed 21% year over year in June. REO completions rose even faster, up 23% annually and 17% from May alone. Florida, South Carolina and Indiana top the state rankings as inventory keeps surfacing across those markets.
Condo Prices Fell by 15% to 33% in 30 Bigger Cities AlreadyCondo prices have dropped 15% to 33% across 30 major cities, with some back to 2006 levels. Miami and San Francisco owners face assessments, rising HOA fees and tighter financing. New supply adds pressure, tilting leverage to buyers.
Rents Buckle as Supply Surges, Growth FadesRents are slipping in Austin, Denver, Phoenix and D.C. as a wave of new apartment supply lands while population growth cools in those metros. CMBS delinquencies above 7% show the strain hitting loans, widening the gap with single-family rents.
Builder Confidence Remains Stuck Near Post-Recession LowsBuilder confidence sits at 34, its 15th straight month under 40. Thirty-seven percent of builders are cutting prices outright, and 63% are leaning on incentives instead. That signals a builder base retreating from land rather than expanding into it.
Here’s Why the Housing Market is Hurting So Much This SummerPending home sales dropped 5.4% in June as mortgage rates climbed to 6.64%. Builder confidence sits at 34, and 63% of new construction now carries incentives. That combination has shifted the summer market decisively toward buyers.
300,000 Empty Lots Could Close America’s Housing Shortage by 6%Zillow counts over 300,000 empty lots on the market, 17.4% of all listings nationwide, concentrated in Florida and Texas. That inventory could close 6% of the housing shortfall, though weak builder confidence limits how fast it gets absorbed.
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Homes are sitting on the market longer than they have in a decade.
Single-family listings just hit a 10-year high, and condos are climbing even faster toward a 14-year record.
Buyers are pulling back as rates climb to 6.49%, leaving sellers holding properties at prices the market won’t clear.
That standoff is already forcing price cuts across overbuilt metros, and distressed investors are watching those cracks widen.
Top stories of the weekClick any headline to read the full story.
Inventory Piles Up as Buyers Sit OutSingle-family listings climbed to a 10-year high in June, and condo inventory reached its highest level in 14 years. Sales kept sliding even as mortgage rates pushed to 6.49%. Price cuts are already surfacing in overbuilt metros, worth watching before they show up in national medians.
Flip Margins Widen Despite Fewer DealsMore than half of major metros saw flipping margins widen last quarter, even though total flip volume fell. Spartanburg, Flint, and Shreveport topped the list with gross returns above 100%, proof that cheap acquisition costs still open room for distressed deals in select markets.
Record Median Price Hides a Softening MarketJune sales extended their sideways run, with inventory holding at 4.6 months even as the median price set a fresh record of $440,600. Strong national prices like this often mask softening at the local level, exactly the kind of divergence Wolf Street’s inventory numbers point to.
The Housing Shortage Isn’t Going AwayThe national housing shortage held near 4.7 million units for the first time in years, as construction finally kept pace with demand. That gap helps explain why national prices stay firm even as resale inventory builds in specific metros. High-deficit markets remain the toughest places to find a discount.
Where Inflation Is Squeezing Homeowners HardestCalifornia, Colorado, Florida, and other high-cost states are watching inflation eat further into household budgets through housing, insurance, and energy bills. These pressure points tend to be where borrower stress surfaces first, giving distressed investors an early map of where sellers may need to move fast.
This is an archived newsletter. Subscribers got it a week ago. Subscribe free and it lands in your inbox every Thursday, the day it goes out.
Foreclosure listings just hit their highest share since 2020.
But the real story is the discount.
Foreclosed homes are now selling nearly 27% below estimated value, giving buyers a rare opening in a market where affordability has been brutal.
More distressed listings mean more legwork and more risk, but also entry prices you won’t find anywhere else in this market.
Top stories of the weekClick any headline to read the full story.
Foreclosure Listings Climb to a 2026 HighForeclosure listings reached their highest share since 2020 this week. Distressed homes are selling near 27% below estimated value, opening the door for investors chasing fixer-upper deals in expensive markets.
Where Flippers Found the Best Margins in Q1Purchase price, renovation costs, and resale value decided flip profits in Q1. Boston and Atlanta gave investors wide margins to work with, while Dallas-Fort Worth showed how a thin spread can squeeze a deal.
Home Prices Growing Slower, But Outright Prices Still at All-Time HighsApril home prices dipped 0.1% after seasonal adjustment, a sign of cooling growth. Overall values still sit at record highs, and several Western and Sun Belt markets are already posting annual declines.
Buyers Stay on the Sidelines This WeekRates held near 6.58% this week, and mortgage demand slipped again as buyers stayed cautious. Distressed and foreclosure inventory keeps growing even as rate-locked owners hold regular resale supply tight, giving investors room to negotiate on homes that sit longer.
Rental Affordability Reaches a New May HighNearly three in four rentals are now within reach for a median-income household, the strongest May reading in years. Concessions on almost 40% of listings add to the shift, as new supply hands renters more leverage.
Sub-3% Mortgage Holders Are Holding FirmHomeowners with mortgages below 3% stopped paying them off early, halting the recent unwind of the lock-in effect. Nearly half of all borrowers still carry rates below 4%, keeping conventional resale supply tight and turnover slow.
This is an archived newsletter. Subscribers got it a week ago. Subscribe free and it lands in your inbox every Thursday, the day it goes out.
Foreclosures pulled back in May, but the pressure is still running hotter than last year.
That is the part investors should watch.
May brought 40,355 filings nationwide, with Florida, South Carolina, Maryland, Nevada and Indiana showing the highest rates.
Distress is becoming a state-by-state story, and the best opportunities are starting to look local.
Top stories of the weekClick any headline to read the full story.
U.S. Foreclosure Rates by StateForeclosure activity cooled from April, but the pressure is still higher than last year. May brought 40,355 filings nationwide, with Florida, South Carolina, Maryland, Nevada and Indiana posting the highest rates. Distress is still showing up locally first.
US Government Sold $518 Billion of Treasury Securities this WeekTreasury yields jumped after a huge week of government borrowing and a sharper tone from the Fed. The U.S. sold $518B of securities, while 6-month to 2-year yields spiked as traders priced in tighter policy and higher short-term rates.
Homeowners Tapped $47 Billion in Equity in the First QuarterHomeowners are pulling cash from their homes again, tapping $47B in equity in Q1, the highest first-quarter level since 2021. With $11T in available equity and many owners locked into low-rate mortgages, HELOCs are becoming the easier route.
Home Flipping Returns Edge Up After Seven Quarters of DeclineFlipping returns finally ticked higher after seven straight quarters of decline. The typical flip made a 25.4% return in Q1, but the real story is local. Pittsburgh and Buffalo posted huge margins, while major Texas metros barely cleared single digits.
Mortgage Applications Give Back Some of Last Week’s GainsMortgage demand slipped after last week’s bounce as rates moved with inflation data and geopolitical headlines. Total applications fell 3.8%, led by a 5% drop in refis, while purchase demand eased but stayed 3% above last year’s pace.
What’s Really Behind the Current Housing Affordability CrisisZillow says the affordability crisis comes down to one basic problem: America is short 4.7 million homes. Buyers are also dealing with higher rates, tight listings and private networks that hide inventory, making access to available homes even more important.
This is an archived newsletter. Subscribers got it a week ago. Subscribe free and it lands in your inbox every Thursday, the day it goes out.
North Texas just became the new center of gravity for Texas CRE distress.
June foreclosure auctions are carrying $1.3B in troubled loans, the highest total since tracking began last May.
Dallas, Collin, and Tarrant counties account for 30 of the 48 loans heading to the block, and the stress has spread beyond apartments.
Downtown Austin hotels, a six-location car wash chain, and 11 repeat auction properties show how messy the workout pipeline has become.
Top stories of the weekClick any headline to read the full story.
Dallas Leads Distress Surge as Texas CRE Foreclosures Top $1B Again in JuneTexas CRE distress just crossed $1.3B in loans flagged for June foreclosure auctions, with North Texas carrying most of the weight. Dallas, Collin, and Tarrant counties account for 30 of the 48 troubled loans now heading to the block.
Foreclosures Hit Six-Year High as Ownership Costs SoarForeclosure filings hit a six-year high in Q1, and the pressure is showing up beyond the mortgage payment. Owners with low-rate loans are still getting squeezed as insurance, taxes, HOA fees, utilities, and maintenance costs keep rising.
Loans for Home Purchase at 12-Year LowPurchase loans fell to a 12-year low in Q1, showing how thin the buyer pool has become. ATTOM says home-buying loans dropped 19% to 581,261, with purchase activity falling across nearly every metro it analyzed.
April 2026 New Home Sales – Lowest For Any April Since 2022New home sales fell to 622,000 in April, the weakest April pace since 2022. Inventory climbed to 9.4 months of supply, putting builders in a tougher position as resale listings compete for fewer active buyers.
Why Delaware Keeps Ranking Highest for Home ForeclosuresDelaware led the nation in April foreclosure rates, but the bigger lesson is how foreclosure rankings can distort the signal. With only 267 filings, the state shows why investors need to separate percentage spikes from real distressed-sale volume.
Top 10 U.S. Metros Leading the Yearly Growth in Purchase Mortgage OriginationsPurchase activity declined across 99% of ATTOM’s analyzed metros, but a few markets still moved against the trend. Fort Wayne and Indianapolis led the annual gains, making them useful liquidity exceptions in an otherwise weaker lending market.
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Credit stress is starting to show up in places that were supposed to stay under control.
It shows up first in the weaker parts of the market, and right now condos are one of the clearest signals.
Prices are already down 15% to 33% in two dozen bigger markets, with some cities giving back gains all the way to 2005 and 2006 levels.
Cheap money pushed a lot of values higher, but this reset is starting to show which assets had real support and which ones were just riding the cycle.
Top stories of the weekClick any headline to read the full story.
Here Come The BankruptciesCredit stress is spreading from consumers to private credit, CRE and corporate borrowers. Student loan, auto loan, office and multifamily delinquencies are all moving higher, while bankruptcies hit a 15-year high in 2025.
Oh Dear, Condo Prices already Dropped by 15% to 33% in 24 Bigger MarketsCondo prices are already down 15% to 33% in two dozen bigger markets, with Cape Coral and Oakland leading the reset. In some cities, values have round-tripped back to levels first seen around 2005 and 2006. The condo bubble is now showing up in the data.
Prices of Single-Family Homes already Down 10% to 26% in these 15 Bigger CitiesSingle-family home prices are already down 10% to 26% in 15 bigger cities, even as national price indices barely moved. Austin and Oakland are leading the reset, while builders in places like McKinney are cutting prices and piling on incentives.
Zombie Foreclosures Rise in Most States in Second QuarterZombie foreclosures are rising again, even with the national vacancy rate holding at 1.3%. ATTOM counted 8,31 abandoned homes in foreclosure in Q2, with increases across 38 states and D.C. The distress is still small, but it is getting broader.
Nearly 40% of Listings Come with Perks this Spring (April Rental Report)Nearly 40% of Zillow rental listings now come with concessions, up from roughly 1 in 3 last year and closer to 1 in 6 before the pandemic. Denver, Charlotte and Dallas are leading the perk race as new apartment supply gives renters more leverage.
US Mortgage Rate Rises to 9-Month High, Worsening Affordability AgainMortgage rates just hit a nine-month high at 6.65%, and buyers are pulling back again. Applications fell 8.5% last week, refinancing dropped, and rate lock is still keeping owners with sub-5% mortgages from listing their homes.
This is an archived newsletter. Subscribers got it a week ago. Subscribe free and it lands in your inbox every Thursday, the day it goes out.
Home prices are now falling year over year in 25 of 33 major expensive cities, and the damage is concentrated where the last cycle got most stretched.
Oakland and Austin are both down 26% from their 2022 peaks, while New York and Chicago are still printing new highs.
That split matters because distress usually starts with basis resets, then shows up later in seller concessions, loan workouts, REO, and special servicer files.
At the same time, mortgage rates snapped back to 6.75%, the highest level since July, after jumping 33 basis points in just 10 days.
That move adds roughly $167 a month to the payment on a median-priced home, just as buyers were trying to step back in.
Top stories of the weekClick any headline to read the full story.
Home Prices Fall in 25 of 33 Expensive CitiesHome prices fell year over year in 25 of 33 big expensive cities in April, with Oakland and Austin down 26% from their 2022 peaks. The split is getting wider, with New York and Chicago at new highs while former boomtowns keep giving back gains.
Mortgage Rates Surge to Highest Level Since JulyMortgage rates just hit 6.75%, the highest since July, after rising 33 basis points in 10 days. That adds about $167 a month on a median-priced home, even as pending sales rose and builders keep buying down rates.
Apartment Construction Starts Plummet To 15-Year LowApartment starts just fell to a 15-year low, with only 55,000 units breaking ground in Q1. The pipeline is down 50% from its 2023 peak, while office conversions keep climbing and Sun Belt metros are still digesting their excess supply.
HELOC Balances Hit $446BHELOC balances hit $446B, up 41% since 2021, while mortgage balances barely moved. The bigger signal is homeowners are adding leverage through second-lien debt as serious delinquencies and foreclosures stay low.
Opportunity Zone Prices Rise in 44.6% of TractsOpportunity Zone prices rose year over year in 44.6% of analyzed tracts, with nearly 31% posting double-digit gains. The wrinkle is prices inside the zones are still far lower, with only 21.1% at or above the national median.
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Mortgage distress still looks tame next to 2008, but the weak spots are getting easier to name.
Louisiana and Mississippi now stand out as insurance shocks and consumer credit stress push more borrowers into delinquency.
At the same time, the homeowner equity cushion is getting thinner.
Equity-rich homes fell to their lowest level since late 2021, while seriously underwater homes ticked higher across most states.
Louisiana, Kentucky, and Mississippi led that underwater move, putting the same Gulf-adjacent stress belt back in focus.
The signal is simple: broad equity remains intact, but the cleanest stress is showing up where delinquencies, insurance pressure, and thinner collateral already overlap.
Top stories of the weekClick any headline to read the full story.
Which housing markets have the most—and least—mortgage distress right now?Mortgage distress is still low by 2008 standards, but the pressure is showing up in specific places. Louisiana and Mississippi now stand out, with insurance shocks and consumer credit stress pushing more borrowers into delinquency.
Home Equity Rates Continue to Decline in First QuarterHomeowner equity is still strong, but the cushion is getting thinner. Equity-rich homes fell to the lowest level since late 2021, while seriously underwater homes ticked higher across most states, led by Louisiana, Kentucky, and Mississippi.
Housing Market’s Crucial “Spring Selling Season” Is in TattersSpring selling season was supposed to unlock the housing market, but demand stayed frozen. Purchase mortgage applications are still 34% below 2019 levels as 6.5% rates, high prices, and lock-in keep buyers and sellers stuck.
April home sales disappoint as higher mortgage rates weigh on buyersApril sales barely moved, even with analysts expecting a spring bounce. Existing home sales rose just 0.2%, inventory stayed tight, and the median price hit a record April high as buyers faced another jump in mortgage rates.
Housing Bubble & Bust #1 and #2 as Seen through Employment at Mortgage Lenders and Mortgage BrokersMortgage lenders are cutting staff because the demand collapse has already hit. Nonbank lender jobs are down 40% from 2021, broker jobs are down 38%, and combined mortgage employment has fallen to its lowest level since May 2012.
Higher Rates Hit Mortgage Apps, But Only ModestlyMortgage demand slipped as rates moved higher, but purchase activity is still holding above last year. Applications fell 4.4%, refis lost momentum, and record purchase loan sizes suggest higher-priced buyers are carrying more of the market.
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Homeowner equity is still strong, but the cushion is getting thinner.
Equity-rich homes fell to their lowest share since 2021, while seriously underwater loans ticked higher across most of the country.
That matters because equity gives strained owners room to sell, refinance, or hold on.
Now that room is shrinking in more markets at the same time.
Top stories of the weekClick any headline to read the full story.
Home Equity Rates Continue to Decline in First QuarterHomeowner equity is still strong, but the cushion is getting thinner. Equity-rich homes fell to their lowest share since 2021, underwater loans ticked higher, and the stress is spreading across most states as prices cool and mortgage rates bite.
New Single-Family Home Prices Drop Further amid Inventory GlutBuilders are cutting deeper to move product. New home prices fell to the lowest level since 2021, incentives are still doing extra work, and sales are holding up because builders are doing what frozen existing-home sellers have resisted.
Mortgage Rates Hit the Highest Level in a Month; First-Time Homebuyers to Drop OutApplications for a mortgage to purchase a home dropped 4% for the week and were just 5% higher than the same week one year ago. The average loan size on a purchase application increased to $467,300, the highest in the survey’s history dating back to 1990.
Zillow’s April Market Report Shows a Stalled Sales RecoveryThe monthly mortgage payment on a typical U.S. home fell 3.4% year over year to $1,829 in April, even as home values edged up 0.7% to $366,712. Homes are taking a bit longer to find a buyer, with the typical listing going pending in 17 days.
Rise of the Zombie HOAHOA fees are showing up in more listings, but the bigger issue is who controls the money. In “zombie HOAs,” developers can keep control past the handoff date, leaving residents chasing records, elections, and answers as dues keep rising.
Gap between Single-Family Rents & Multifamily Rents Widens to Record HighInflation is spreading beyond the gas pump. The Fed’s preferred PCE gauge jumped in March, core services hit a 3.7% annualized six-month pace, and the pressure is showing up in chips, software, jewelry, and the wider economy.
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America’s foreclosure crisis is accelerating, with 118,000 properties filed against in Q1 2026 and banks taking back homes 45% faster than last year.
The distress is clustering in specific cities and neighborhoods, each with its own set of problems pushing homeowners toward default.
Baltimore is one of the hardest hit, where old rowhouses, vacant properties, and 7% mortgage rates are driving owners past the breaking point.
Investors who can read distress at the neighborhood level will find the best deals.
Top stories of the weekClick any headline to read the full story.
Foreclosure Filings Jump 26% as Distress Concentrates by MarketForeclosure filings hit 118,000 in Q1, up 26% from last year, but the stress is showing up in pockets. Baltimore is one of the clearest examples, where aging rowhouses, rising costs and vacant homes are pushing more owners into distress.
Housing Supply Outruns Population GrowthHousing supply is finally outrunning population growth. The U.S. added 1.41 million homes in a year, while vacant units on the market hit 4.7 million, helped by sellers turning into accidental landlords after failing to get their price.
Home Sales Profits Fell Below 45 Percent for the First Time in Five YearsSeller profits keep thinning out. ATTOM says the typical home sale produced a 44.1% return in Q1, the lowest since 2021, while lender-owned sales ticked up and big Florida markets saw some of the sharpest margin drops.
Strong Purchase Demand Drives Solid Week For Mortgage ApplicationsMortgage rates slipped to 6.35% and buyers came back fast. Purchase applications jumped 10% in one week and 14% from last year, while refis rose 6%. Lower rates gave borrowers a reason to move, and demand showed up across the board.
Two More Imploded Real-Estate Brokerage Stocks Tie the KnotReal estate brokerages are still getting marked down by the frozen housing market. REMAX is being bought after an 85% stock collapse, while Real Brokerage is down 70%, turning another brokerage deal into a merger of wounded balance sheets.
Banks reported another surge of multifamily loan defaults in Q1 2024 while late-stage defaults continue to mount up.
U.S. Multifamily – Two Year Historical [Q1 2024]Dive into the BankProspector dashboard to find out which banks are holding the most non-performing notes now.
MultifamilyAlmost 60% of non-performing multifamily loans now sit in the nonaccrual stage. This now totals over $2.22B.
Nonperforming multifamily loans hit a new high in Q1 2024, at around double the dollar volume banks held in Q3 2022.
This is a trend we’ve been seeing since 2022. A pattern that continues to spread to more institutions, with 277 banks reporting that they held non-accrual stage multifamily mortgage loans in Q1.
More loans appear to be making it to the nonaccrual stage, with over $1.3B in 30-89 day late loans.
Multifamily REODespite banks apparently being successful in heading off defaults before the final stages, banks only reported holding $106M in multifamily REO in Q1.
However, this is more than double that on banks’ books as of the beginning of the year.
Looking AheadIncome properties are still highly desired by investors and funds. However, high inflation and high interest rates, and with many areas becoming increasingly less friendly to landlords, many of these properties don’t seem to be attracting the buyers or financial bailouts they did in recent years.
Log in now to see which banks are holding the most distressed multifamily loan notes…
U.S. Commercial – Two Year Historical [Q1 2024] Non-performing commercial real estate debt and all major categories of consumer debt appear to be up substantially on a year-over-year basis, continuing a two-year streak of culminating distress.
CRE mortgage debt performance has continued to deteriorate since 2022, with the dollar value of non-performing loans hitting a new record yet again this past quarter.
Even farmland loans, which appeared to be the one outlier that bucked the overall trend now appear to be falling victim to the wider economic trend as well
At the end of Q1 2024, 531 banks reported that they held commercial REOs, up again from the previous quarter.
Moving into Q2 2024 non-performing CRE loans held by banks included:
U.S. Commercial – REO [Q1 2024] * $1.6B in 30-89 day late owner occupied loans * $18.2B in nonaccrual stage non-owner occupied CRE loans (up by over 20%) * $3B in 30-89 day late non-owner occupied loans * $3.9B in nonaccrual stage owner occupied CRE loans
Find out which banks have the most non-performing commercial loans inside BankProspector.
Construction DebtNon-performing construction loan volume also hit a new record high, and is at its highest in at least two years.
U.S. Commercial – Construction 90+ Nonaccrual [Q1 2024] The largest percentage of this debt is still in commercial development loans. Most of this debt is now in the nonaccrual stage, now a pool of over $2.3B in loans which is an over 20% spike from last quarter. And that volume was already up substantially from this time last year (almost double).
This is followed by newly defaulting loans in the 30-89 day late stage, a pool of almost $1.4B in loans.
Banks are still holding just under half a billion dollars in construction REO. Though, with 375 banks now reporting holding these non-performing assets, the distressed is spreading across more institutions.
Other Debt U.S. Commercial – Farmland 30-89 Days Late [Q1 2024] AgriculturalFarmland debt had continued to outperform all other debt classes over the past two years. Now it seems to be falling prey to wider economic trends, with non-performing debt in this sector back to its highs of two years ago.
The largest part of this pool is around $640M in nonaccrual debt, followed by $560M in newly late loans (up $200M over the previous quarter), and just $60.5M in REO.
Business DebtBusiness debt performance continues to deteriorate, also hitting a two year record.
More than $16B in non-performing C&I loans are in the nonaccrual stage, up $3B over the previous three months. Which was up $1B from Q3 2023.
Newly late loans total around $7B. $2.9B sits in the 90 day plus category, showing more and more of this debt is ending up in uncollectible status.
Consumer Debt: Auto Loans & Credit CardsBoth auto loan and credit card debt have continued their two-year streak of worsening performance on a year-over-year basis, though down slightly from their Q4 peaks.
Around over $17B in credit card debts have recently fallen into default. Another $18B is over 90+ days late and around $15B in auto loan debt is now classified as non-performing.
Looking AheadAlthough we may have seen auto loan and credit card debt come down slightly from last quarter’s highs, even these pools are at new highs on an annual basis.
While the residential mortgage market seems steady, distress across commercial categories could easily spill over into the housing market. Especially with consumers being stretched to the breaking point.
Ongoing inflation, higher interest rates, a new tech revolution impacting jobs, and economic policy seem set to drive more borrowers to the brink of bankruptcy.
Yet, high asset valuations also currently offer investors great opportunities to profit from distressed debt.
The most obvious wild card that is likely to influence the direction of debt performance over the next year is the upcoming presidential election.
Log in now to see which banks are holding the most distressed notes.
U.S. Banks Residential – Two Year HistoricalOverall residential loan performance appears to have remained steady. Yet, in spite of some moderate decline in the dollar volume of non-performing loans, banks still hold tens of billions of dollars in defaulting debt, with much of it making it all the way to the nonaccrual stage.
Let’s dive into the latest bank data from Q1 to see exactly what is going on…
Banks Hold Over $45B First Position Non-Performing Residential MortgagesU.S. Residential – 1st Position Non-Performing [Q1 2024]US banks reported over $16B in first mortgages on 1-4 family properties which are in the 30-89 day late stage which is down slightly from the final three months of Q4.
However, many of those who are falling into default are not finding help or able to get out of it.
Already ahead of those in the pipeline are around $16.6B first position nonaccrual loans on 1-4 family residences as well as almost $13B in 90 day plus late loans, which have not yet been deemed nonaccrual.
Residential REOs667 banks reported holding residential REO at the end of the first quarter this year, down by about 20 from the previous quarter.
At $742M, this is slightly lower than in the previous quarter, and still a small percentage of the total volume of distressed residential loans being reported.
High housing prices have likely helped minimize the value of loans in this bucket.
Non-Performing Residential LoansThe largest percentage non-performing residential first position mortgage loans is now in the newly late category.
As of Q1 the distribution of non-performing first mortgage liens being reported includes:
- $16.2B in 30-89 day late loans
- $13B in 90 day plus late and still accruing loans
- $16.6B in non-accrual loans
Discover the 3,000 plus banks holding these non-performing loans inside BankProspector now.
Junior Liens
At the end of the first quarter of 2024 there were over $4.5B in nonaccrual stage revolving lines of credit, up again from the previous quarter, and more than double the dollar value than last year.
Additionally, there were around $1.5B in newly delinquent HELOCs behind those as well as close to $168M in 90+ day late home equity lines of credit.
Defaults on revolving credit lines (HELOCs) continue to be far higher than on fixed second mortgage liens.
Dive into the BankProspector dashboard to find out which banks are reporting the most distressed residential junior lien loans and HELOCS.
Looking AheadBank data from the first quarter shows the residential loan market steady, with minor improvements.
More loans seem to be ending up in the later stages of default. Though, with two thirds of middle class Americans reporting that they are in financial hardship in a recent poll, it shouldn’t be surprising if new defaults spike again later this year. About 46% of those surveyed say they do not even have $500 saved for emergencies.
At the same time, high housing prices and appetite for real estate investments continue to make this a strong and profitable sector.
Log in now to see which banks are currently holding the most distressed loans…
Banks reported another surge of multifamily loan defaults in Q4 2023. Not only did newly late loan volume double, but another $300M in already late loans were moved to the non-accrual stage at the end of the year as well.
U.S. Multifamily – Two Year Historical [Q4 2023]Dive into the BankProspector dashboard to find out which banks are holding the most non-performing notes now.
MultifamilyYear end reports from US banks showed a dramatic rise in non-performing multifamily loans as we rolled into 2024, a trend we’ve been seeing since Q3 2022.
It’s a pattern that seems to be spreading across more institutions, with 259 banks reporting that they held non-accrual stage multifamily mortgage loans in Q4.
More loans appear to be going the distance to the non-accrual stage, with several hundred million more added, after soaring by almost $4B in the third quarter.
Multifamily REOAlthough banks do not seem to be successful in heading off defaults before this stage, with only $43M in multifamily REO, the demand for these non-performing real estate assets still appears to be there. Or other investors have been successful in acquiring these delinquent loans, and turning them around.
Looking AheadMultifamily debt and income properties are still highly desired by sophisticated investors and funds. Perhaps even more so today given the outlook for other areas of the economy and other asset classes.
Still, tenants are under increasing financial distress, with inflation set to soar again in 2024. This along with maturing multifamily loans in a high rate environment is likely to create more defaults.
Log in now to see which banks are holding the most distressed multifamily loan notes…
U.S. Commercial – Two Year Historical [Q4 2023] Commercial loans set another new record for non-performing volumes in Q4 2023. Yet, again, marking another two-year high in delinquency and distress.
CRE mortgage debt, as well as consumer debt has seen distress escalating in an epically dramatic way this year.
The two exceptions this quarter appeared to be construction loans, and once again, farmland loans, which have continued to outperform other classes of mortgage debt.
At the end of Q4 2023, 517 banks reported that they held commercial REOs, a rate that had been declining all year.
U.S. Commercial – Non Owner Occupied 90+ [Q4 2023] Moving into Q1 2024 non-performing loans held by banks included:
- $1.6B in 30-89 day late owner occupied loans
- $16.4B in nonaccrual stage non-owner occupied CRE loans
- $2.8B in 30-89 day late non-owner occupied loans
- $700M in 90+ day late non-owner occupied loans (A 175% volume increase from the previous quarter)
Find out which banks have the most non-performing commercial loans inside BankProspector.
Construction DebtNon-performing construction loan volume remains near its recent highs.
U.S. Commercial – Construction 90+ Nonaccrual [Q4 2023] The largest percentage of this debt remains among single-family and twinhome development loans, with most defaults now in the nonaccrual stage. At $3.3B, this is up substantially from the previous 3 quarters, and has increased in volume by 90% since Q1.
This is followed by newly defaulting loans in the 30-89 day late stage; a pool of over $1.2B in loans, back down to similar levels seen in Q2.
Banks are still holding just under half a billion dollars in construction REO, with 359 banks now reporting holding these nonperforming assets.
It is worth noting that more developers appear to be selling off whole projects, which may help pay off loans. Though indicates a pessimistic outlook of the new homes sales market.
Other DebtAgriculturalFarmland debt has continued to outperform all other debt classes over the past two years, which may have been further aided by the recent and ongoing boom in the cannabis industry.
The largest part of this pool is around $650M in non-accrual debt, followed by $340M in newly late loans, and just $59M in REO.
Business DebtBusiness debt performance has deteriorated again, now close to its two year record high for delinquency and defaults.
More than $13B in nonperfoming C&I loans are in the nonaccrual stage, which is up $1B over the previous three months. Newly late loans total around $8B, up by $1.3B. And, $2.8B sits in the 90 day plus category.
Consumer Debt: Auto Loans & Credit CardsU.S. Credit Card – Two Year Historical [Q4 2023]Both auto loan and credit card debt have continued their two-year streak of worsening performance, hitting dramatic new highs of distress.
The question remains just how much these debt pools can balloon before they impact the wider economy.
Ongoing hyperinflation, high taxation, rising interest rates, and tens of millions of jobs being wiped out by AI are still not likely to help create any change here over the next couple of quarters.
Around over $20.5B in credit card debts have recently fallen into default. Another $20B is over 90+ days late. Over $17B in auto loan debt is now classified as nonperforming.
Looking AheadWhile we are seeing some moderation in construction debt performance, and farmland loans continue to do well, overall commercial debt performance continues to deteriorate, with dramatic volumes of defaults among credit cards and auto loans.
Few mortgage defaults seem to be ending up sitting on lenders’ books as REO, suggesting an appetite for well-priced deals, with plenty of opportunity for conversions and repurposing property in booming industries.
The data hints at a widening disparity, with masses in financial trouble, and some big winners that seem to be snowballing their gains.
Log in now to see which banks are holding the most distressed notes.
U.S. Banks Residential – Two Year HistoricalThe residential mortgage loan sector seems to be following its typical seasonal pattern, with another uptick in non-performing loans in Q4.
An additional $2.5 billion in newly late residential loans were reported at the end of the year, along with a slight increase in 90+ day late loans.
Let’s dive into the latest bank data from Q4 to see exactly what is going on…
Banks Hold Over $47B First Position Non-Performing Residential MortgagesU.S. Residential – 1st Position 30-89 Days [Q4 2023]Banks saw an increase of more than $3B more in non-performing first position residential loans in the last three months of the year.
US banks reported over $17B in first mortgages on 1-4 family properties which are in the 30-89 day late stage, up by around $2.5B from the previous quarter, and up around $7.5B from Q1. This suggests that more homeowners may be plummeting into financial distress…even before their year-end shopping sprees show up on their credit card statements.
Already ahead of those are around $16.5B first position non accrual loans on 1-4 family residences, as well as over $13B in 90 day plus late loans, which have not been classified as non accrual yet.
Residential REOs678 banks reported that they held residential REO at the end of Q4 2023, up slightly from Q3, and almost double than in Q1.
At $752M, this is still a very small percentage of the total volume of distressed residential loans being held by banks right now.
This could easily accelerate this year as households finally run out of credit and savings while grappling with ongoing extreme inflation and a further deteriorating job market.
Non-Performing Residential LoansThe largest percentage non-performing residential mortgage loans is now in the newly late category.
As of Q4 the breakdown of non-performing first mortgage liens being reported includes:
- $17.5B in 30-89 day late loans
- $13.1B in 90 day plus late and still accruing loans
- $16.5B in non-accrual loans
Discover the 3,000 plus banks holding these non-performing loans inside BankProspector now.
Junior Liens
At the end of Q4 2023 there were over $4.4B in nonaccrual stage revolving lines of credit. Additionally, there were around $1.65B in newly delinquent HELOCs behind those as well as close to $200M in 90+ day late credit lines.
Defaults on revolving credit lines (HELOCs) continue to be higher than on fixed second mortgages.
Dive into the BankProspector dashboard to find out which banks are reporting the most distressed residential junior lien loans and HELOCS.
Looking AheadBank data from the fourth quarter shows the residential loan market in about the same shape as as the previous two quarters. Yet, with a fresh surge in newly delinquent loans.
Landlords and homeowners face ongoing financial challenges impacting their ability to pay; most notably, inflation and unemployment.
The opportunities are growing for investors as increases in residential loans enter the non-performing pipeline.
Log in now to see which banks are currently holding the most distressed loans…
US Banks Multifamily Two Year Historical – Q3 2023While banks seem to be reporting few new defaults on multifamily loans in Q3, we’ve seen another substantial increase in the volume non-performing multifamily loan mortgage loans moving into the nonaccrual stage.
Dive into the BankProspector dashboard to find out which banks are holding the most non-performing notes now.
MultifamilyUS Banks Multifamily 90-Day-Late Two Year Historical – Q3 2023Fewer new multifamily delinquencies may be happening. Yet, nonaccrual, 90+ days late, and multifamily REO pools all seem to be growing.
This trend seems to be spreading across more institutions, with 258 banks reporting that they held nonaccrual stage multifamily mortgage loans in Q3, a trend we’ve seen growing over the past two quarters.
90+ late loans nearly quadrupled in the past three months, to almost $200M while nonaccrual stage loans increased by almost $4B in the third quarter.
Multifamily REOAfter a huge increase in Q2, almost tripling from Q1, multifamily REO value almost halved in Q3.
This could be a sign that although banks do not seem to be successful in heading off defaults before this stage, the demand is still there for liquidating these non-performing real estate assets as REOs.
Looking AheadMultifamily debt and income properties are still highly desired by sophisticated investors and funds, perhaps even more so today given the outlook for other areas of the economy and other asset classes.
Yet, tenants are under increasing financial distress, and many of the best properties may have already been acquired.
Investors may look earlier on in this pipeline of distressed multifamily loans to spot the best properties. Then find banks they can work with to create win-win-win solutions for lenders, borrowers, and their partners.
Log in now to see which banks are holding the most distressed multifamily loan notes…
U.S. Commercial Two Year Historical – Q3 2023 Commercial debt saw non-performing loan volume soar to new two-year highs in Q3.
CRE debt, including construction loans, as well as consumer debt has seen distress escalating in dramatic fashion this year.
Farmland loans seem to be the one exception which have continued to outperform other classes of mortgage debt.
At the end of Q3 2023, 525 banks reported that they held commercial REOs, fewer than the previous two quarters.
Moving into Q4 2023 non-performing loans held by banks included:
- $1.4B in 30-89 day late owner occupied loans
- $15B in nonaccrual stage non-owner occupied CRE loans (up almost 30%)
- $2.5B in 30-89 day late non-owner occupied loans
- $3.4B in nonaccrual stage owner occupied CRE loans
The largest pool of non-performing loans is in nonaccrual stage non-owner occupied loans which rose around 30% in Q3 after a 25% jump between Q1 and Q2.
Find out which banks have the most non-performing commercial loans inside BankProspector.
Construction DebtUS Banks Commercial Construction Development Two Year Historical – Q3 2023Construction loan debt performance has deteriorated dramatically as well.
The largest percentage of this debt remains among commercial development loans with most defaults now in the nonaccrual stage. At almost $2B, this is a 20% increase from Q2 and up more than 30% compared to the same quarter last year.
This is followed by newly defaulting loans in the 30-89 day late stage, a pool of over $1.6B in loans. This is up from just $1.2B in Q2.
Banks are still holding just under half a billion dollars in construction REO, with 369 banks now reporting holding these non-performing assets. This suggests even more consolidation with fewer institutions holding this non-performing debt.
Other DebtAgriculturalFarmland debt has continued to outperform all others over the past two years. Although performance is still near a two-year best, there was a small uptick in distress in Q3.
The largest part of this pool is around $673M in non-accrual debt followed by $321M in newly late loans, and just $55M in REO.
Business DebtBusiness debt performance improved slightly from Q2.
More than $12B in nonperfoming C&I loans are in the nonaccrual stage. Newly late loans total around $6.7B. $2.6B sits in the 90 day plus category.
US Banks Commercial Credit Card Two Year Historical – Q3 2023Consumer Debt: Auto Loans & Credit CardsBoth auto loan and credit card debt have continued their two-year climb to worsening performance. Both appear to have hit new highs of distress in Q3 2023.
No amount of bullish predictions in the media appear able to trump the real fundamentals in the economy that businesses and entrepreneurs are facing.
Ongoing hyperinflation, high taxation, rising interest rates, and tens of millions of jobs being wiped out by AI are still not likely to help create any change here over the next couple of quarters.
Around $12.6B in auto loans have recently fallen into default, up by around $1B from the previous quarter. Over $32B in credit card debt is now classified as nonperforming, a spike of around $5B from the previous quarter.
Looking AheadCommercial debt performance continues to deteriorate.
Almost every sector is showing worsening performance, with some categories of default seeing dollar volume more than double this year.
The big questions are whether lenders and note holders will stop the damage earlier this time, or not as well as how investors can cherry-pick the great deals from these pools.
What seems to stand out most is that while lenders hold little in the way of REOs, they do not appear to be curing performance issues before they fall into the nonaccrual stage. This could indicate substantial opportunity for investors to acquire these debt investments at a discount and do a better job at working with borrowers to create more value and cash flow.
Log in now to see which banks are holding the most distressed notes.
U.S. Banks Residential – Two Year Historical While the overall pool of non-performing residential mortgage loans stayed relatively flat from Q2, banks are dealing with more than $15B in 30-89 day late loans from Q3.
In spite of deteriorating debt performance in the multifamily, commercial, and credit card spaces, residential loans appear to be faring better. Although there remain tens of billions of dollars in opportunities for investors.
Let’s dive into the latest bank data from Q2 to see exactly what is going on…
Banks Hold Over $44B in First Position Non-Performing Residential MortgagesAs in Q2, banks reported over $15B in first mortgages on 1-4 family properties which are in the 30-89 day late stage. That’s up by around $1B from the previous quarter, and up $5B from Q1, suggesting that more homeowners are trickling into financial distress.
US Banks Residential First Lien 30-89 – Two Year HistoricalAlready ahead of those are around $16.5B first position nonaccrual loans on 1-4 family residences as well as almost $13B in 90 day plus late loans, which have not been classified as nonaccrual yet.
Residential REOs656 banks reported that they held residential REO at the end of the third quarter of this year, up slightly from Q2.
At $747M, this is still a very small percentage of the total volume of distressed residential loans being held by banks right now.
This could accelerate as AI continues to eat more jobs, while fund manager Ken Griffin predicts high inflation could rage for decades, and more households wrestle with food insecurity due to sky-high grocery prices.
Non-Performing Residential LoansThe largest percentage of non-performing residential mortgage loans remains in the nonaccrual stage, with newly late loans right behind that.
As of Q3 the breakdown of non-performing first mortgage liens being reported includes:
- $15B in 30-89 day late loans
- $13B in 90 day plus late and still accruing loans
- $16.5B in nonaccrual loans
Discover the 3,000 plus banks holding these non-performing loans inside BankProspector now.
Junior LiensAt the end of Q3 2023 there were over $4.4B in nonaccrual stage revolving lines of credit. Additionally, there were around $1.5B in delinquent HELOCs behind those. The majority of which are newly defaulting lines of credit.
Defaults on revolving credit lines (HELOCs) continue to be many times higher than on fixed second mortgages.
Dive into the BankProspector dashboard to find out which banks are reporting the most distressed residential junior lien loans and HELOCS.
Looking AheadBank data from the third quarter shows the residential loan market in about the same shape as Q2. While appearing healthier than other debt sectors, comparing the historical data shows we are experiencing a shift towards more serious defaults.
How this plays out will greatly depend on whether banks are able and willing to work with their borrowers to cure and stave off more serious defaults, a dynamic that seems unlikely to have a happy ending for many.
Even more impactful is the ongoing blitz of financial challenges impacting homeowners and home buyers.
Deteriorating consumer credit data suggest that more distress is coming.
This is a fantastic opportunity for investors to once again step in to seize on valuable opportunities, while saving many borrowers, banks, and the economy from the worst.
Log in now to see which banks are currently holding the most distressed notes…
While there were fewer new defaults on multifamily loans in Q2 compared to the previous quarter, banks reported a substantial increase in the volume of
Every commercial debt sector appears to have deteriorated this quarter, with the exception of farmland loans, which have continued to outperform other classes of mortgage
Distress in residential mortgages saw slight improvement over the past three months, with small decreases in REO inventory and most non-performing debt categories. It’s possible
U.S. Multifamily Two Year Historical – Q1 2023Banks are holding a substantial amount of non-performing multifamily loan mortgage loans in 2023, following a significant surge in distress as we rolled into the new year.
Dive into the BankProspector dashboard to find out which banks are holding the most non-performing notes now.
MultifamilySizable demand for multifamily assets over the past few years appears to have kept this space solid overall, especially with fast rising rents.
U.S. Multifamily 30-89 Day Late Two Year Historical – Q1 2023However, hyperinflation, rocketing interest rates, and more constrained credit and capital markets may now be catching up the multifamily sector as well.
Multifamily loans performance erased all of its gains by the end of 2022. With a sizable amount of late and nonaccrual stage loans in the works we may see more institutional and mid sized investors holding out for even better deals, and cherry picking their favorites.
There are also over $1.1B in 30 day plus late loans, the highest figure in over 2 years and more than double what it was 2 quarters ago.
Multifamily REOMultifamily REOs have stayed steady since the final quarter of last year, now a pool of just over $27M.
This is the least multifamily REO we’ve seen banks holding in two years. However, the massive pool in late and defaulting loans along with difficulty in securing financing, and higher mortgage rates could mean a significant increase here. Or at least a steady pass through from default to selling off REOs.
Of course, bank failures and the mass shuffling of assets between institutions is also a major factor. It is essential to follow where they are flowing to and to identify who is willing to sell off the paper assets they’ve picked up at bargain basement prices.
Looking Ahead
Multifamily debt and income properties are still highly desirable, perhaps even more so today given the outlook for other areas of the economy and other asset classes.
However, the data does seem to suggest that distress is present. For a variety of reasons, far more borrowers in this space could fall into default. That could spike further if many are unable to refinance loans at maturity, as well as if continued migration trends cause high vacancy rates in once prime financial and business hubs.
Now’s the time to watch this sector. This market is heavily dependent on economic conditions; as a growing number of tenants struggle to make ends meet amid relentless inflation, rising unemployment, and mounting credit card debt, many will undoubtedly fall behind on rent.
If multifamily owners with newly late loans can’t get caught up this quarter, we can expect to see a new wave of nonaccruals over the next several months.
Log in now to see which banks are holding the most distressed multifamily loan notes…
Distress in the commercial real estate loan sector continues to climb, topping out at $16.5B in Q1 2023. This is up from $13.8B in the previous quarter and $12B in Q3 2022.
U.S. Commercial Two Year Historical – Q1 2023Late-stage non-owner-occupied commercial mortgages are piling up, heavily contributing to the growing mountain of commercial debt.
Q1 data suggests trouble in CRE loan performance, and many other types of business debt. This comes as no surprise, as many former business and financial hubs are reportedly suffering an exodus, and layoffs grow.
Commercial REO figures haven’t budged from the previous quarter, though as late-stage non-performing loans stack up, this number is expected to increase over the next several months.
Let’s dive into the data…
Huge Spike in Non-Owner-Occupied CRE LoansU.S. Commercial – CRE Non Owner-Occ 90+ Two Year Historical Q1 2023Moving into Q2 2023 non-performing loans held by banks included:
- $1.4B in 30-89 day late owner occupied loans
- $8.4B in nonaccrual stage non-owner occupied CRE loans (up nearly 30% from the previous quarter)
- $2.9B in 30-89 day late non-owner occupied loans
- $3.2B in nonaccrual stage owner occupied CRE loans
The largest pool of non-performing loans is in nonaccrual stage non-owner occupied loans.
Find out which banks have the most non-performing commercial loans inside BankProspector.
Construction DebtConstruction loan defaults are the second-highest they’ve been in the past 2 years.
The main change in the past quarter appears to be a 20% increase in newly distressed 1-4F construction loans, which seems to align with the rising interest rates and project cancellations in Q4 2022.
Banks are still sitting on just under half a billion dollars in construction REO, a small increase from the previous quarter.
U.S. Commercial – Farmland REO and 90+ Two Year Historical Q1 2023Other DebtAgriculturalFarmland debt had a small uptick in distress last quarter, after 2 years of improvements.
The big increase in distress here appears to be led by a doubling of those falling into the 90 day plus late category and upticks in REO volume and newly 30-89 day late loans.
The largest part of this pool is around $651M in non-accrual debt followed by $395M in newly late loans, and $79M in REO.
Business DebtBanks are reporting a slight improvement in business debt performance, with $22B in total non-performing debt, down from $23.7B in the previous quarter.
Just over $1B in non-performing C&I loans appear to have rolled over into the nonaccrual stage, with the overall distressed totals looking a lot like the first 2 quarters of 2022.
U.S. Commercial – Credit Cards – Two Year Historical Q1 2023Consumer Debt: Auto Loans & Credit CardsNon-performing auto loan debt saw some improvement from the previous quarter, though still totaled out at the second-highest level in 2 years.
Credit card debt distress keeps climbing each quarter, now nearly double what it was in Q1 2021. It appears that 30-89 day stage debt decreased slightly, while nonaccruals continue to mount.
It may be possible that tax refunds helped get some early-stage defaults back on track this quarter.
Looking Ahead
Commercial mortgage loan performance is expected to continue to go downhill. And with a rapidly declining demand for existing, aging CRE properties, banks may not have much hope in moving assets they acquire post-foreclosure.
Non-performing commercial note deals may be ripe for the picking in the coming months, as banks face lengthy, costly repossession processes to recoup on mounting nonaccrual stage debt.
Log in now to see which banks are holding the most distressed notes.
U.S. Banks Residential – Two Year HistoricalDistressed residential mortgage loan performance saw minimal improvement or decline in Q1 2023, with figures nearly identical to the previous quarter’s data.
Small declines in almost all stages of distress leave this pool split almost evenly between the main categories of newly late, 90 day plus late loans, and nonaccrual mortgage loans.
Junior liens continue to show signs of mounting distress, with a slight uptick in distressed HELOC loans tumbling into the 90+ nonaccrual stage.
Let’s dive into the latest bank data to see exactly what is going on…
Banks Hold Around $48B First Position Non-Performing Residential MortgagesThere are currently just over $14.6B in first mortgages on 1-4 family properties which are in the 30-89 day late stage; this is slightly less than the previous quarter’s $15.8B.
Already ahead of those are around $17.2B first position non accrual loans on 1-4 family residences as well as nearly $15B in 90 day plus late loans, which have not been classified as non accrual yet.
Residential REOsBanks reported that they held a combined $840M in residential REO at the end of the first quarter of this year, up from $830M in Q4 2022.
This is still a small portion of the total volume of distressed residential debt being held by banks but an important data point to watch. At the point that non-performing assets are not being absorbed by the market, banks can find themselves in more trouble.
Ongoing high inflation, soaring interest rates, a drop in home sales activity, and declining home prices, along with rising unemployment, all seem likely to drive more home loan defaults and foreclosures this year.
Non-Performing Residential LoansThe largest percentage of non-performing residential mortgage loans are non-accrual stage.
As of Q1 the breakdown of non-performing first mortgage liens being reported includes:
- $14.6B in 30-89 day late loans
- $14.9B in 90 day plus late and still accruing loans
- $17.2B in non-accrual loans
Discover the 3,000 plus banks holding these non-performing loans inside BankProspector now.
Junior LiensHELOC 90 Day – Two Year HistoricalAt the end of Q4 2022 there were over $5B in total nonaccrual stage junior liens and revolving lines of credit. Q1 2023 saw minimal improvement, with figures still totaling around $5B.
Defaults on revolving credit lines (HELOCs) continue to creep up, though fixed second mortgage liens saw a small drop in distress.
Dive into the BankProspector dashboard to find out which banks are reporting the most distressed residential junior lien loans and HELOCS.
Looking Ahead
Bank data from Q1 2023 shows the distressed residential loan market in a gridlock, with minimal change from the previous quarter.
It may come as no surprise to some monitoring the broader economic scope. As banks and borrowers face evolving lending and market conditions, the wide barrage of financial challenges impacting homeowners and home buyers certainly isn’t over yet.
If there are not major shifts in monetary policy, employment, and the overall economy, it is likely more distress will come. For now, there are still very few REOs. That could change if house prices continue to decline, and buyers remain on the sidelines.
Some have predicted that the worst of the housing downturn is over, while more investors may be waiting on the sidelines for better priced deals as market conditions decline.
Log in now to see which banks are currently holding the most distressed residential notes…
U.S. Banks Multifamily Historical Q4 2022Multifamily loan performance reversed course and saw a massive new surge in distress as we moved into 2023.
Rising from just $546M in new 30-89 day loans in Q3 2022, the fourth quarter saw that number roar to almost $900M while nonaccrual stage loans also grew.
Dive into the BankProspector dashboard to find out which banks are holding the most non-performing notes now.
MultifamilyMassive demand for multifamily assets over the past few years appeared to have kept this space solid. There was no lack of appetite or capital for investing in MF.
However, latent distress from COVID lockdowns, massive rounds of layoffs, and hyper inflation may now be catching up with landlords and showing up in loan performance.
Multifamily loans performance now appears to have erased the past year of improvement, falling back to similar distress levels seen in Q4 2021.
Fewer banks may be holding this distressed paper today, with less than 260 banks reporting that they are holding a combined non-accrual stage multifamily mortgage loans.
There are also over $100M in 90 day plus late loans still in the accrual stage, which are held by just 34 banks.
Multifamily REOOne area of minor improvement is multifamily REO, falling to just over $27M. Or around 1% of all non-performing multifamily loans on bank books.
This is the least multifamily REO we’ve seen banks holding in two years. Though the massive spike in late and defaulting loans, along with difficulty in securing financing, plus higher mortgage rates could mean a significant increase here.
That’s if real estate investors and funds are not able to keep on picking up these assets at their previous pace.
Looking AheadMultifamily debt and income properties are still highly desirable. Perhaps even more so today given the outlook for other areas of the economy and other asset classes.
However, the data does seem to suggest that distress is piling up, and ultimately causing far more borrowers in this space to fall into default. That could spike further if many are unable to refinance loans at maturity as well as if continued migration trends cause high vacancy rates in once prime financial and business hubs.
This should be balanced with the fact that some of this may be seasonal along with the urgent need for investors to add more of these types of assets to their portfolios.
Log in now to see which banks are holding the most distressed multifamily loan notes…
U.S. Commercial Two Year Historical- Q4 2022Non-performing commercial mortgage loans appear to have reversed course, with increasing levels of distress. This reversal of the trend we’ve seen for the past two years also mimics what was reported in the multifamily and residential sector in Q4 2021.
Farmland loans appear to be the one exception to these negative trends in the real estate debt space.
Most notably among commercial loans in the fourth quarter were increases in newly late non-owner occupied loans, as well as non accrual stage non-owner occupied loans.
As of the end of Q4 2022, 571 banks reported that they held commercial REOs, representing a small decline in commercial REO value and the number of banks with them on their books.
Even the largest corporations have been consolidating space, with Twitter notably being hit with a lawsuit for failing to even pay rent on its HQ. The world’s largest fund, Blackrock was recently in the headlines for blocking investor withdrawals from one of its property funds, suggesting that liquidity has become a problem for even the biggest and most global institutions. It’s worth noting that a Blackrock failure would be many times larger than FTX and Lehman Brothers.
Moving into Q1 2023 non-performing loans held by banks included:
- $1.5B in 30-89 day late owner occupied loans
- $6B in nonaccrual stage non-owner occupied CRE loans
- $2.9B in 30-89 day late non-owner occupied loans (almost double the previous quarter)
- $3.1B in nonaccrual stage owner occupied CRE loans
Note there are around $4.5B in newly defaulting loans in the 30-89 day late range.
Find out which banks have the most non-performing commercial loans inside BankProspector.
Construction DebtU.S. Commercial: Construction Q4 2022Construction loan debt performance appears to have stayed flat on a total volume basis.
The main change in the past quarter appears to have been more late loans falling into the nonaccrual stage.
This follows a significant spike in defaults in Q2 2022, during which the market erased all improvements from the previous year.
Banks are still sitting on just under half a billion dollars in construction REO with 420 banks now reporting holding these nonperforming assets.
The largest percentage of this debt is in commercial development and land acquisition loans, which are now in the nonaccrual stage. This seems to suggest that borrowers that fell into default throughout 2022 were unable to catch up on their loans or cure them.
Extreme inflation, never ending crises, the end of the traditional office, recessionary indicators, and diving home prices may be at play here.
Other DebtAgriculturalFarmland debt seems to be the clear best performer in Q4 data.
Continuing its positive run in getting healthier for the past two years, farmland is the only sector that hasn’t fallen negative this quarter.
The largest part of this pool is around $700M in non-accrual debt followed by $292M in newly late loans, and just $64M in REO.
Business / C&I DebtBusiness debt performance is still in worse shape than in Q2 2022, though shows marginal improvement from Q3 2022.
More than $1B non-performing C&I loans appear to have rolled over into the 90 day plus late stage with almost $10B in the nonaccrual stage.
Behind that is another almost $9B in 30-89 day late loans.
With countless challenges facing businesses of all sizes today, it shouldn’t be surprising if we see more distress coming in this sector as well as fewer new business loans being originated.
Consumer Debt: Auto Loans & Credit Cards U.S. Commercial: Consumer Auto Loans Q4 2022 Both auto loan and credit card debt continue to see steep trajectories in failing performance. This has continued to balloon since early 2021.
Borrowers have fallen late on around $2B more in credit card debt in the last three months of 2022, pushing total distressed credit card and auto loan debt in Q4 to the highest levels in two years.
Over $12B in auto loans were 30-89 days late in Q4 2022 as well.
Consumers normally don’t bounce back on track in January after the holidays. It may be possible that some will be able to get caught up with their annual tax refund money.
Looking AheadU.S. Commercial: Consumer Credit Cards Q4 2022Commercial mortgage loan performance once again reversed course, following trends in multifamily and residential mortgage debt.
Auto loan and credit card debt has continued to deteriorate in performance over the past two years, with even more falling behind on their payments in the past three months. It’s a steep upward curve that doesn’t seem to have a positive ending for consumers.
The real star performer from a lender’s perspective remains agricultural and farmland debt.
Log in now to see which banks are holding the most distressed notes.
U.S. Banks Residential – Two Year HistoricalFollowing two years of improving performance residential mortgage loans appear to have reversed course in Q4 2022, with more newly defaulting loans.
Banks are holding over $40B in distressed residential paper. Last quarter showed some notable upticks in certain non-performing categories, most significantly in late first position loans, followed by nonaccrual stage HELOCs, and REOs.
Much of this is likely being driven by crashing house values, the evaporation of home buyers in the market, and other types of financial distress catching up with borrowers.
There are more than 3x as many late loans and in later stages of defaults as are being classified as REOs.
Let’s dive into the latest bank data from Q4 to see exactly what is going on…
Almost $16B First Position Residential Mortgages Fall LateThere are currently just under $16B in first mortgages on 1-4 family properties which are in the 30-89 day late stage. That’s up by about $2.5B from the previous quarter.
Already ahead of those are first position non accrual loans on 1-4 family residences. As well as more than $15B in 90 day plus late loans, which have not been classified as non accrual yet.
Residential REOs693 banks reported that they held a combined $829M in residential REO at the end of the fourth quarter of this year, continuing the trend in rising REOs over the previous two quarters.
This is still a tiny portion of the total volume of distressed residential loans being held by banks though it is an important data point to watch. Once these non-performing assets are not being absorbed by the market, banks can eventually find themselves in more trouble.
Ongoing high inflation, soaring interest rates, a drop off in home sales activity, and declining home prices appear to be finally impacting loan performance. Defaults are also rising on other types of consumer debt which could well roll over into this space.
Non-Performing Residential LoansThe largest percentage of non-performing residential mortgage loans continue to be in the nonaccrual stage. Though, there are almost as much 90 day late, and newly delinquent loans behind that.
U.S. Banks Res. Non-Performing First Mortgage LiensAs of Q4 the breakdown of non-performing first mortgage liens being reported includes:
- $15.8B in 30-89 day late loans
- $15.4B in 90 day plus late and still accruing loans
- $17.6B in non-accrual loans
Discover the 3,000 plus banks holding these non-performing loans inside BankProspector now.
Junior LiensAt the end of Q4 2022, there were over $5B in nonaccrual stage revolving lines of credit. There was also $1.3B in newly defaulting 30-89 day late HELOCs behind those.
Defaults on revolving credit lines (HELOCs) continue to be significantly higher than on fixed second mortgage liens.
Dive into the BankProspector dashboard to find out which banks are reporting the most distressed residential junior lien loans and HELOCS.
Looking AheadThe data from Q4 2022 shows the residential loan market reversing course (and two years of improving debt performance).
A wide barrage of financial challenges impacting homeowners and home buyers certainly isn’t helping borrowers.
If nothing changes, it is likely more distress will come. Although there are really very few REOs, that could change if house prices continue to decline and buyers remain on the sidelines.
However, Goldman Sachs at least says that the deepest declines in house prices are behind us, and we should hit the bottom by Summer 2023. They are predicting a total average drop in house values of about 6%.
Of course, many investors with a good pulse on the market may not necessarily buy into their predictions.
Log in now to see which banks are currently holding the most distressed loan notes…
What is Creative Real Estate Investing?
Traditional vs. Creative Real Estate Investment
7 Creative Real Estate Investing Strategies
Creative Financing for Real Estate Investing
Creative Investing FAQs
What is Creative Real Estate Investing?Creative real estate investing refers to the various methods people profit from property purchases and investments without going the traditional route.
Instead of getting a standard mortgage to buy and then sell a home or commercial property to make money, creative investors pursue unconventional ways to find real estate, fund purchases, and turn profits.
Traditional vs. Creative Real Estate InvestmentTraditional InvestingWhen a real estate investor goes the traditional route, they typically follow the standard property purchasing process, which involves:
- Getting standard mortgage financing through a conventional lender
- Working with a real estate agent to find investment properties within budget
- Going through the bidding and subsequent closing processes with the existing property owner
- Holding and establishing a rental property with cash flow or making updates and building property value to sell for a profit
Creative InvestingA successful creative investor seeks out ways to improvise every step of the traditional investment property buying process.
These alternative investing strategies could involve:
- Finding properties with seller financing, lease option, or other flexible purchase options that don’t require a standard bank loan
- Working independently to find real estate deals that aren’t on the market to minimize competition and maximize profit potential
- Finding deals for other real estate investors who don’t have the means or time to source new properties
- Buying mortgage loans instead of properties to curb market corrections and avoid rental overhead and property manager responsibilities
7 Creative Real Estate Investment StrategiesReal estate investors can gain a ton of ground and boost their competitive edge when they work outside “the box.” And in this case, “the box” is the cookie-cutter, finance-bid-buy-sell method that many first-time real estate investors follow.
Downside? There’s not a lot of room to excel with the standard process. It’s not necessarily the best way to build a real estate investment business.
Sure, if you come across the right deal in the right market with the right financing, you might land a winner from time to time. Might.
But if you want consistent, predictable passive income from real estate investing, creativity is the key. The good news is the sky’s the limit here, and it’s up to you to carve out a strategy that works for you.
Seasoned, successful real estate investors achieve their goals and financial freedom by developing a creative investment strategy that they can repeat again and again without the constraints of traditional financing and market shifts.
Read on for a list of some of the best creative real estate investment methods and how they can provide you with the edge you need to make progress in this high-stakes, potentially high-profit landscape.
- Buy and HoldThe buy-and-hold strategy is a long game. If you’re looking for fast returns on a real estate investment, this is NOT the option for you.
But if you have the time and resources to hold on to an investment property for years and you’re open to renting to tenants and keeping up with property maintenance, the buy-and-hold option could work for you.
Returns Timeline: 5-Year Minimum to Sell, Ongoing Rental Income Potential
Buy-and-Hold Considerations:
- Property prices don’t have to be rock-bottom to benefit from this creative strategy – investors can hold until the property value is high enough to turn a profit.
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Buy-and-hold properties need a plan. Investors should expect regular maintenance and repair costs, property tax overhead, and expenses and risks associated with income property and renting to tenants.
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Note InvestingSome successful real estate investors excel by finding and buying non-performing mortgage notes. This distressed debt is purchased directly from a bank or lender and tends to be an investment strategy that’s lower risk than traditional real estate investing.
Non-performing notes tend to be the best way to make money in mortgage note investing, though a few variables like how and where you find notes to buy will determine your earning potential.
Finding and buying mortgage notes is one of the most lucrative, profitable ways to make money using creative investing methods. If you can establish a solid system to source, fund, and buy them, you can go far FAST in this industry.
Watch our webinar to learn about investing in notes, where we cover successful investor case studies, proven processes and strategies, and provide some valuable industry insights.
Returns Timeline: Months or Years – Depends on note status and investor goals
Note Investing Considerations:
- The most valuable (and often most profitable) aspect of note-buying is finding note deals. Even if you don’t have the money to buy notes right now, if you can develop a way to find them, you’ll have investors calling you (it’s real, it happens!). Talk about a creative investment funding strategy. A lot of note investors start with zero or limited capital and grow their funding this way.
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Note investing enables investors to hold rights to a property without having to maintain it. The debtor is responsible for all repairs, property taxes, and upkeep, and the note holder collects the mortgage payments. If a debtor defaults (or the note is already non-performing), the note holder has the right to foreclose on the property tied to the note.
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Distressed Property and REOBuying REO as investment property is a good way to get the most for your money. Real Estate Owned (REO) or bank-owned property has been repossessed by the lender.
Since most banks aren’t in the property management business and don’t have good home-selling resources, they often offload REO at lower-than-market prices to get them off their books. Typically, they work with real estate agents to list REO properties, who usually list them on the local MLS or offer to interested clients.
So what’s the best way to get creative with REO investing? Scoop up these properties before they hit the MLS. Real estate investors who get REO deals direct from banks can often nab properties at below-market prices.
**Pro Tip:** By working directly with the bank, investors can also negotiate owner financing (since the owner is a bank) as part of the purchase deal. The lender wants the property off its books, you need funding. Win-win, all in-house.
Returns Timeline: Months-Years, Depends on property condition and investor goals
REO Investing Considerations* Properties that haven’t gone through the foreclosure-REO process yet but are still distressed are often sold as “short sales” to sell the property for what’s owed on the mortgage loan, not for what it’s potentially worth. Short sales, pre-foreclosures, foreclosures, and REO are all considered “distressed” properties, and investors can often buy them at a discount. * Lenders don’t usually advertise pre-foreclosures or bank-owned real estate. You’ll have to find distressed or bank-owned properties through online sources like foreclosure.com or your local MLS. Watch for terms like “bank-owned,” “REO,” “foreclosure,” and “short sale” in the property descriptions. Or, you can use software like BankProspector to find regional and local lenders with nonaccrual loans and REO on their books. * Banks aren’t the only places to find REO property for sale. Various government institutions provide financing for residential and commercial real estate, and at times, need to foreclose on them. Government foreclosures are listed in a few places; investors purchase with the help of a government-approved agent, and seller financing is often an option.
- Bird DoggingBird dogging in real estate refers to the act (art, really) of finding and delivering deals to investors. Finding real estate investment deals is arguably the most important part of the process; without a property or mortgage note, there’s no profit potential.
If you learn how to bird dog, you can develop a network of investors looking for specific properties or notes. It’s probably the easiest way to make money in real estate without owning property and lots of people build up investment cash using this creative strategy.
Returns Timeline: Days-Years, depends on deal flow and investor appetite
Bird Dogging Considerations* Bird dogging requires diligence, comprehensive industry and market knowledge, and a solid network of buyer and sellers. * Connecting buyers and sellers with real estate deals requires exceptional selling skills. This means assessing each party’s needs, negotiating, and making sure the process runs as smoothly (and profitably) as possible.
5. Fix and FlipFix and flip real estate investing involves purchasing a property that needs repair, renovating it, and then quickly selling it for a profit.
This type of investing can be profitable, but it’s also high risk. To be successful in fix and flip investing, it is important to carefully assess a property’s potential before purchasing it. This includes considering the location, the condition of the property, renovation and repair needs, and estimated After Repair Value (ARV) price.
Returns Timeline: Months-Years depending on market and repair needs
Fix and Flip Considerations* Fix and flip buyers need to be familiar with the local real estate market conditions and variables that could affect rapid changes to it. * Purchasing pre-foreclosure, auction, or REO property is a great way to get the best price for a fix and flip investment; however, extensive due diligence research is a must due to the additional liabilities and unexpected title and property conditions associated with real estate in distress. * It may be difficult to fund a fix and flip property and renovation costs with a traditional bank loan, so creative financing options might be necessary to make it work. * Fix and flips are not necessarily hands-off investments. There’s no passive income here, unless you hire a contractor to manage the renovation.
**Pro Tip:** Accredited investors can also tap into some high-yield returns as hard money lenders for flip projects through Fund that Flip. Learn more about how the platform works here.
6. Flip NotesFlipping notes involves buying mortgage notes at deep discounts and selling them to other investors for a profit.
The key to successful note flipping is finding notes that are undervalued and have the potential for a high return on investment. We’ve said it before and we’ll say it again: The ability to find deals is the most valuable part of this business. If you master this, you’ll have investors seeking out your skills and you can build a network of repeat buyers pretty rapidly.
Returns Timeline: Days-Years depending on investor appetite and specific note variables
Note-Flipping Considerations* Note investors have to move quickly to secure purchases before someone else does. The best way to get ahead in flipping notes is to establish relationships with bank decision-makers before they have notes to sell, so they know who to call when they do. We go over how to get in touch with lenders and find banks selling notes in our webinar. * Some lenders will make better deals if you buy notes in pools or groups for one price. This can be a good way to maximize purchase value and allow you to boost profits by selling each note individually.
7. Real Estate Investment Trust (REITs)Real Estate Investment Trusts (REITs) are a popular investment option because they offer investors the opportunity to own a diversified portfolio of real estate assets without having to directly purchase and manage individual properties.
REITs own and operate income properties such as apartments and other multi-family dwellings, office buildings, and retail stores and centers. They are required to distribute a minimum of 90% of their taxable income to shareholders as dividends, which makes them a good source of regular income for investors.
REITs can be purchased through a brokerage account, and they are traded on major stock exchanges just like regular stocks. This makes them easily accessible to individual investors.
Returns Timeline: Months
REIT Investing Considerations* Investing in REITs gives investors access to a diverse range of real estate assets, including properties in different locations and asset classes. * It is important to carefully research and evaluate REITs before investing, as they can be subject to the same risks as other stocks, such as changes in economic conditions and interest rates. * REITs may not offer the same potential for appreciation as directly owning physical real estate and often have high fees and expenses, which can eat into returns.
What is creative financing for real estate?When you’re a non-traditional real estate investor, you’ll probably have to seek out alternative funding. There are quite a few ways to raise capital for real estate and note investing out there and it’s common to tap into different sources depending on the type of investment you’re making.
5 Ways to Get Money for Real Estate Investing1. Private money lending: When an investor borrows money from a private individual or group to finance a real estate investment. Private money lending can provide a more flexible and personalized financing option than traditional forms of lending. 2. Hard money lending: A type of short-term financing that is often used by real estate investors. Private investors or companies provide the funding for hard money loans, which are usually based on the value of the property being purchased instead of the borrower’s creditworthiness. 3. Crowdfunding: A method of raising capital by compounding small investments from numerous people, typically through an online platform. Real estate investors can use crowdfunding to finance a project by offering investors a share of the property’s potential profits in exchange for their investment. 4. Seller financing: When the seller of a property provides financing to the buyer, either by offering a loan or by accepting a down payment and letting the buyer make monthly payments to pay off the balance. This can be a good option for buyers who may not qualify for traditional lending. A lot of banks selling REO will work with investors on financing options; they get to move the property off their books, plus they get to initiate a new loan. 5. Joint ventures: This is when two or more individuals or companies come together to invest in a real estate project. Joint ventures can provide a way for investors to pool their resources and expertise to finance a larger or more complex project.
Creative Real Estate Investing FAQsCan you make money in real estate without buying property?Yes, finding deals is the most lucrative, valuable part of real estate investing. If you know how to find deals and deliver them to the right investors, you can grow fast in this industry.
How can realtors benefit from creative real estate investing strategies?Realtors can benefit from creative real estate investment strategies in various ways, including:
- Increased commissions: Creative investing strategies often involve the purchase and renovation of properties, which can lead to higher commissions for realtors.
- Expanded client base: Realtors who are knowledgeable about creative investing strategies and able to get off-market note and REO deals direct from lenders may be able to attract a wider range of clients, including investors looking for unconventional opportunities.
- Diversified income streams: Realtors who engage in creative investing may be able to generate multiple streams of income through the acquisition and management of multifamily rental properties, mortgage note deals, and bird-dogging.
- Personal financial growth: Realtors who successfully implement creative investing strategies may be able to achieve financial growth and stability, regardless of market fluctuations and economic conditions.
- Lender relationships: Realtors who want to diversify and expand market availability also benefit from having on-going business relationships with lender decision-makers who can reach out to them when they have REOs and notes to sell.
Want to expand your network and track banks with distressed assets? Subscribe to BankProspector and get access to real-time data and 71,604 lender contacts now.
Overall multifamily loan performance continued to improve in Q3.
Although this follows a 50% spike in 90+ day late multifamily mortgage loans at the end of Q2 2022, total distressed loans have fallen every quarter for the past year.
Dive into the BankProspector dashboard to find out which banks hold most of these non-performing notes.
Multifamily LoansU.S. Multifamily – Two Year HistoricalThe incredible demand for multifamily assets over the past couple of years appears to have kept this space solid. In fact, more and more investors seem to be stepping up and into the multifamily space.
Even though interest rates are high, Airbnb has been struggling and the economy has been a roller coaster, demand for multifamily income properties is certainly helping to absorb any distress on bank balance sheets.
Multifamily loans now appear to be healthier than ever, with the lowest amount of non-performing loans and REOs we’ve seen in at least two years.
Just 260 banks report that they currently hold a combined $792M in non-accrual stage multifamily loans.
Following that is just over $600M in newly defaulting 30 to 90 day plus late loans, which are still making their way through the process.
Multifamily REOThe volume of multifamily REOs on bank books have also continued to shrink, now down to around just over $29M. That’s less than half the volume seen in Q3 of 2020.
Investors and funds continue to favor loading up on MF income properties to recession-proof their portfolios and boost income, especially in more affordable regions which makes it unlikely we’ll see a huge surge in defaults in the short term. Though anything can happen.
Looking AheadMultifamily income properties and debt still seem to be some of the most in-demand assets. There are few REOs available, with even fewer defaults coming behind those.
Demand for these assets and the high prices many funds are still paying for them is giving any landlords in distress an exit.
Of course, more seasoned investors report that they are being ever more selective about the assets they buy and the prices that they are willing to pay for them. Though there do seem to be some value-added opportunities for those with the capital and financing to take on big projects.
However, another year of similar rate hikes or a new global recession could bring some new distress to landlords who have overpaid for properties in high-cost markets.
Log in now to see which banks are holding the most distressed multifamily loan notes.
Total non-performing commercial mortgage loans appear to have again hit a new low point, now down to the least dollar volume of distress in at least the last two years.
Still, banks reported holding around $10B in non-accrual stage CRE loans at the end of Q3 2022.
U.S. Commercial Current – Q3 2022Commercial REOAt the end of Q3 2022, 617 banks reported that they were holding commercial REOs, which is a further decline from Q2 this year and the second half of last year.
Commercial Real Estate LoansPerhaps with the exception of multifamily, which we’ve separated into its own report, all CRE sectors seem to have had their challenges over the past couple of years.
Even Credit Suisse and Deutsche Bank have reportedly recently sold off ultra prime properties, including the Savoy in Zurich and Deutsche Bank’s new headquarters in London.
The improvements in this data could suggest that some reports stating that we’ve now exited a recession are accurate. Though almost 100% of CEOs in the US and Europe have reported that they are preparing for a recession over the next 12-18 months as well.
Moving into Q3 2022, non-performing loans held by banks included:
- $1.3B in 30-89 day late owner occupied loans
- $5.8B in nonaccrual stage non-owner occupied CRE loans
- $1.5B in 30-89 day late non-owner occupied loans
- $3.2B in nonaccrual stage owner occupied CRE loans
All of these categories, except newly defaulting owner occupied loans, which saw a slight uptick from the previous quarter, have seen declines in volume over the past three months.
Note there are around $2.8B in newly defaulting loans in the 30-89 day late range.
Find out which banks have the most non-performing commercial loans inside BankProspector.
Construction DebtU.S. Commercial: Construction Q3 2022Distress among construction debt seems to have subsided, following a significant spike in Q2, during which the market erased all improvements from the previous year.
We are now at a new two year low for distressed loan volume.
Banks are still sitting on just under half a billion dollars in construction REO, with 445 banks reporting holding these properties.
The largest portion of this debt is among commercial development and land acquisition loans, which are 30-89 days late – a pool which is now over $1.3B.
Extreme inflation, supply chain issues, never ending crises, slowing price growth, and the potential for over supply of new construction may be at play here.
Other DebtAgriculturalFarmland loan performance seems to be mimicking the continued improvements in health as the rest of the real estate debt categories this quarter, now featuring the least distress since Q3 2020.
The largest part of this pool is $800M in non-accrual debt, followed by $260M in newly late loans and just $71M in REO.
Business / C&I DebtBusiness debt performance has continued to deteriorate over the past year, with a new spike in distress in Q3.
Newly defaulting 30-89 day late debt surged by over 10% in the past three months to almost $12B.
There is another $13B of debt in this category that is even further along in default, suggesting that while mortgage debt performance has remained healthier than many expected, there are still issues lurking in the shadows.
Consumer Debt: Auto Loans & Credit Cards U.S. Commercial: Consumer Auto Loans Q3 2022 Both auto loan and credit card debt have seen continued surges in distress and default, continuing to build up since early 2021.
Over $10B in new 30-89 day late loans piled up in Q3.
Similar trends can be seen in credit card performance which has continued to deteriorate over the past year, making almost two straight years of compounding distress.
It’s worth noting that the majority of this non-performing debt is among newly 30-89 day late lines of credit, with over $10B in debt in this category.
Looking AheadCommercial mortgage loan performance once again seems to be surprisingly strong, making it appear that the US property market as a whole is in far better health than expected.
However, business, auto loan, and credit card debt have continued to deteriorate in performance over the past two years, with even more falling behind on their payments in the past three months.
This has not yet impacted mortgage debt markets though it could just be a matter of time.
Log in now to see which banks are holding the most distressed notes.
U.S. Banks Residential – Two Year HistoricalOverall residential mortgage loans appear to have continually improved in performance over the past two years.
Still, banks are holding tens of billions of dollars in distressed residential paper, with some small upticks in certain non-performing categories. Some of which may certainly be driven by crashing house values, and the evaporation of home buyers in the market.
Of special note are the almost $5B in non-performing HELOCs that banks have now classified as non-accrual stage loans.
That pool is more than 5x as large as the current pool of REOs on banks books.
Let’s dive into the latest bank data from Q3 to see exactly what is going on…
$18B First Position Residential Mortgages Fall Into Non-Accrual StageThere are currently just under $18B in first mortgages on 1-4 family properties which have been classified “non-accrual” by lenders. This figure is down by around $3B from Q2 2022, and the same from Q1.
There are also over $15B in 90 day plus late loans, which have not yet been moved to the non-accrual stage.
Following this is around $13.5B in newly delinquent residential first position mortgages in the 30 to 89 days late stage; a slight increase over the previous quarter.
Residential REOsApproximately 698 banks have reported that they were holding $818M in residential REO at the end of the third quarter of this year. This is another increase from the previous quarter, reversing the previous trend.
Still, this is just a small portion of the total volume of distressed residential loans being reported for this quarter.
It still does not appear that inflation, soaring interest rates, or the drop off in home sales activity has yet created any giant tsunami of defaults in this space, though there are many factors which could increase distress in the months ahead.
Non-Performing Residential LoansU.S. Banks Residential – Q3 2022The bulk of non-performing residential mortgage loans continue to sit in the nonaccrual stage with almost as many 90 day late and newly defaulting loans coming behind that.
As of Q3 the breakdown of non-performing first liens being reported includes:
- $13.5B in 30-89 day late loans
- $15B in 90 day plus late and still accruing loans
- $18B in non-accrual loans
Uncover the 3,000 plus banks holding these non-performing loans inside BankProspector now.
Junior LiensAt the end of Q3 2022, there were close to $5B in nonaccrual revolving lines of credit. There was also an increase in newly defaulting 30-89 day late HELOCs behind those.
Defaults on revolving credit lines remain higher than those on fixed second mortgage liens.
Dive into the BankProspector dashboard to find out which banks are reporting the most distressed residential junior lien loans and HELOCS.
Looking AheadOverall, the data from the third quarter suggests that the residential loan market may be getting healthier, with the least non-performing loans and REO we’ve seen in two years.
That may change as house prices and sales slow. Fannie Mae says that home buyer and seller confidence has fallen to a new record low, with only 16% of consumers believing it is a good time to buy a home.
Sellers are also getting a wake up call with over 40% saying it is a bad time to sell a home. Yet, with Bloomberg reporting house prices falling the fastest ever, many more may question the sense in continuing to pay the mortgages on their fast depreciating homes. Fannie Mae believes the distress in the housing market may trigger a new recession and weigh down the entire economy.
Log in now to see which banks are currently holding the most distressed loan notes…
The National Credit Union Administration (NCUA) made some significant changes in 2022 to how credit unions complete the industry’s quarterly call report, and the BankProspector software team has released an update featuring the new reporting format. These categories and codes can help streamline data analysis and provide BankProspector users with additional lender insights.
Here’s a detailed breakdown of how these updates are now displayed, organized, and tracked in BankProspector:
Jump to:
Dashboard UpdatesYour Target List REO Totals – Credit Unions
Your Targets’ Default History
Credit Union Overview Updates
Unsecured Credit Cards
Payday Alternative
Student Loans (Non Guaranteed)
Vehicles
1st Liens Real Estate (Previously 1st Mortgage RE)
Junior Lien Loans (Previously Junior RE)
All Other Loans
Commercial RE
Multifamily (New Category)
Business Loans
Farm & Agricultural
Construction
Loans Held For Sale
Dashboard UpdatesYour Target List REO Totals – Credit Unionssection ChangesYour Target List REO Totals View
| Previously Reported as 3 Sections: | Now Reported as 4 Sections: | | Real Estate | Consumer Real Estate | | Automobiles | Consumer Vehicle | | Other | Consumer Other | | Commercial |
**Update Notes**► Data was previously reported as 3 sections, now split into 4 sections.► The CU reports no longer share the Number of REO in each of these categories.
Your Targets’ Default HistoryLabel Changes
| Previously Reported Labels: | Now Reported as: | | Junior RE | Junior Liens | | 1st Mortgage RE | 1st Liens Real Estate |
New Category* Multifamily (previously reported with Commercial)
Non-Reported* Loans Held for Sale + Current will show “No Data” pie chart + Historical will be included as long as last 8 quarters contain this data
**Update Notes**► Historical charts will continue to group 60-179 days together for simplicity.
Credit Union Overview UpdatesUnsecured Credit CardsCurrent Delinquent Data Table
| Previously Reported as: | Now Reporting as: | | 30-59 Days | 30-59 Days (no change) | | 60-179 days | 60 – 89 Days (new) | | —– | 90 – 179 Days (new) | | 180 – 359 Days | 180 – 359 Days (no change) | | 360+ Days | 360+ Days (no change) |
Previous ViewUpdated View
**Update Notes**► No major reporting changes in this category.
Payday Alternative Current Delinquent Data Table
| Previously Reported as: | Now Reporting as: | | 30-59 Days | 30-59 Days (no change) | | 60-179 days | 60 – 89 Days (new) | | —– | 90 – 179 Days (new) | | 180 – 359 Days | 180 – 359 Days (no change) | | 360+ Days | 360+ Days (no change) |
**Update Notes**► No major reporting changes in this category.
Student Loans (Non-Guaranteed) Current Delinquent Data Table
| Previously Reported as: | Now Reporting as: | | 30-59 Days | 30-59 Days (no change) | | 60-179 days | 60 – 89 Days (new) | | —– | 90 – 179 Days (new) | | 180 – 359 Days | 180 – 359 Days (no change) | | 360+ Days | 360+ Days (no change) |
**Update Notes**► No major reporting changes in this category.
Vehicles Current Delinquent Data Table
| Previously Reported as: | Now Reporting as: | | 30-59 Days | 30-59 Days (no change) | | 60-179 days | 60 – 89 Days (new) | | —– | 90 – 179 Days (new) | | 180 – 359 Days | 180 – 359 Days (no change) | | 360+ Days | 360+ Days (no change) |
Updated Charts For Q1 2022 and future report data, current and historical charts are split to represent each subasset as well as delinquent table above to make data easier to view. Q4 2021 and all previous historical data will display in pre-Q1 2022 formats.
Vehicle Subassets* New Vehicles * Old Vehicles
**Update Notes**► No major reporting changes in this category.
1st Liens Real Estate (Previously 1st Mortgage RE) Current Delinquent Data Table
| Previously Reported as: | Now Reporting as: | | 30-59 Days | 30-59 Days (no change) | | 60-179 days | 60 – 89 Days (new) | | —– | 90 – 179 Days (new) | | 180 – 359 Days | 180 – 359 Days (no change) | | 360+ Days | 360+ Days (no change) |
1st Lien (Previously 1st Mortgage) Subassets Updated Charts For Q1 2022 and future report data, current and historical charts are split to represent each subasset as well as delinquent table above to make data easier to view. Q4 2021 and all previous historical data will display in pre-Q1 2022 formats.
1st Liens Real Estate Subassets* 1st Lien Loans * 1st Lien Loans || Rate Types and Terms + Broken down by rate type and loan term - Fixed Rate * > 15 years * 15 years or less - Balloon / Hybrid * > 5 years * 5 years or less - Adjustable Rate * 15 years or less
Update Notes► No major reporting changes in this category.
Junior Lien Loans (Previously Junior RE)Current Delinquent Data Table
| Previously Reported as: | Now Reporting as: | | 30-59 Days | 30-59 Days (no change) | | 60-179 days | 60 – 89 Days (new) | | —– | 90 – 179 Days (new) | | 180 – 359 Days | 180 – 359 Days (no change) | | 360+ Days | 360+ Days (no change) |
Update Notes► No major reporting changes in this category.
All Other LoansLabel Changes
| Previously Reported Label: | Now Reported as: | | REO – Other | REO – Consumer Other |
section Changes
| Previously Reported as 1 Section: | Now Reported as 3 Sections: | | All Other Loans | All Other Non-Real Estate Loans / LOC | | All Other Unsecured Loans / LOC | | All Other (Non-Commercial) Real Estate Loans / LOC |
Current Delinquent Data Table
| Previously Reported as: | Now Reporting as: | | 30-59 Days | 30-59 Days (no change) | | 60-179 days | 60 – 89 Days (new) | | —– | 90 – 179 Days (new) | | 180 – 359 Days | 180 – 359 Days (no change) | | 360+ Days | 360+ Days (no change) |
Updated Charts For Q1 2022 and future report data, current and historical charts are split to represent each subasset as well as delinquent table above to make data easier to view. Q4 2021 and all previous historical data will display in pre-Q1 2022 formats.
Update Notes► Label change: "REO - Other" is now "REO - Consumer Other"► Section breakdown: "All Other Loans" is now 3 sections
Commercial RELabel Changes
| Previously Reported as: | Now Reported as: | | Member Commercial RE | Secured by Owner Occupied Property Loans | | Nonmember Commercial RE | Secured by Non-Owner Occupied Property Loans |
Current Delinquent Data Table
| Previously Reported as: | Now Reporting as: | | 30-59 Days | 30-59 Days (no change) | | 60-179 days | 60 – 89 Days (new) | | —– | 90 – 179 Days (new) | | 180 – 359 Days | 180 – 359 Days (no change) | | 360+ Days | 360+ Days (no change) |
Updated ChartsFor Q1 2022 and future report data, current and historical charts are split to represent each subasset as well as delinquent table above to make data easier to view. Q4 2021 and all previous historical data will display in pre-Q1 2022 formats.
Commercial RE Subassets* Commercial and Industrial * Unsecured Commercial Loans * Unsecured Revolving LOC Loans
Update Notes► Multifamily is now a separate category, no longer grouped with Commercial
Multifamily (New Category) Current Delinquent Data Table
| Previously Reported as: | Now Reporting as: | | 30-59 Days | 30-59 Days (no change) | | 60-179 days | 60 – 89 Days (new) | | —– | 90 – 179 Days (new) | | 180 – 359 Days | 180 – 359 Days (no change) | | 360+ Days | 360+ Days (no change) |
Update Notes► Multifamily is now a separate category, no longer grouped with Commercial
Business Loans Section Changes
| Previously Reported as 2 Sections: | Now Reported as 3 Sections: | | Member Commercial Loans Not Secured | Commercial and Industrial Loans | | Nonmember Commercial Loans Not Secured | Unsecured Commercial Loans | | Unsecured Revolving LOC Loans |
Current Delinquent Data Table
| Previously Reported as: | Now Reporting as: | | 30-59 Days | 30-59 Days (no change) | | 60-179 days | 60 – 89 Days (new) | | —– | 90 – 179 Days (new) | | 180 – 359 Days | 180 – 359 Days (no change) | | 360+ Days | 360+ Days (no change) |
Updated ChartsFor Q1 2022 and future report data, current and historical charts are split to represent each subasset as well as delinquent table above to make data easier to view. Q4 2021 and all previous historical data will display in pre-Q1 2022 formats.
Business Loan Subassets* Commercial and Industrial Loans * Unsecured Commercial Loans * Unsecured Revolving LOC Loans
Update Notes► Expanded subasset categories
Farm & AgriculturalSection Changes
| Previously Reported as 1 Section: | Now Reported as 2 Sections: | | Farm & Agricultural | Agricultural Loans | | Farmland Loans |
Current Delinquent Data Table
| Previously Reported as: | Now Reporting as: | | 30-59 Days | 30-59 Days (no change) | | 60-179 days | 60 – 89 Days (new) | | —– | 90 – 179 Days (new) | | 180 – 359 Days | 180 – 359 Days (no change) | | 360+ Days | 360+ Days (no change) |
Updated ChartsFor Q1 2022 and future report data, current and historical charts are split to represent each subasset as well as delinquent table above to make data easier to view. Q4 2021 and all previous historical data will display in pre-Q1 2022 formats.
Farm & Agricultural Subassets* Agricultural Loans * Farmland Loans
Update Notes► Expanded subasset categories
ConstructionSection Changes
| Previously Reported as 2 Sections: | Now Reported as 1 Section: | | Commercial Construction & Development | Commercial Construction & Development | | Residential Construction | None – no longer reporting Residential Construction category |
Current Delinquent Data Table
| Previously Reported as: | Now Reporting as: | | 30-59 Days | 30-59 Days (no change) | | 60-179 days | 60 – 89 Days (new) | | —– | 90 – 179 Days (new) | | 180 – 359 Days | 180 – 359 Days (no change) | | 360+ Days | 360+ Days (no change) |
Update Notes► No longer reporting Residential Construction
Loans Held for SaleNo longer reported
Charts – HistoricalWe’ll still show historical data for this asset type:
- Shown in Historical Charts
- Quarter Drop Downs Prior to Q1 2022 will be populated
Loans Held for Sale Historical ViewLoans Held for Sale Current View
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