The rate of bank-reported multifamily credit stress has risen to a post-Global Financial Crisis high, and losses are accelerating, according to a Cred iQ report.
Overall multifamily delinquency reached 1.37% in the third quarter of 2025, a dramatic escalation from the 0.23% to 0.39% delinquency rate seen in the five years leading up to 2022, when the Federal Reserve began its aggressive interest rate hike.
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Banks had an $8.9B total delinquent multifamily loan balance as of the third quarter. Loans 90 days or more past due represent $7.1B of the balance, or 1.09% of the 1.37%.
“The concern is the accumulation at the severe end of the spectrum, where borrowers have exhausted short-term remedies and lenders face resolution decisions,” the report states.
Early-stage delinquencies, loans 30 to 89 days past due, made up 0.28% of loans in the third quarter, suggesting new stress is active but not overwhelming. Cred iQ reports data from community, commercial and savings banks.
Banks reported losses of 0.14%, or $911M, in the third quarter, contrasting with the effectively zero or nominal losses banks realized from 2017 to 2021.
During the GFC, banks reported a quarterly peak of 1.24% losses in late 2010, and delinquencies exceeded 5.7% at the cycle’s worst.
Losses today are compressing on a faster timeline than during the GFC, when they took about four years to fully materialize. Higher floating-rate exposure, rapid cap-rate expansion and value declines in specific markets and vintages are accelerating the loss cycle, per Credit iQ.
About 6.6% of multifamily CMBS loans were delinquent in December, a decline from 7.12% in October but an increase from 4.58% a year earlier, according to Trepp.
Last year, Trepp reported that $23B of CMBS debt, led by the office sector, was stuck in limbo as lenders used the extend-and-pretend approach amid falling property values and an unstable market that offered few refinancing options.
Now that banks face $7.1B of serious multifamily delinquencies, resolution strategies, including workouts, modifications and note sales, will define credit outcomes over the next year or two, Cred iQ reports.
Distressed multifamily inventory creates opportunity for investors, but the highest risk comes with properties with overleveraged debt from 2021 to 2022, when interest rates were near zero.
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