Multifamily CMBS distress continued to build in September, with the delinquency rate reaching 8.04% and the special servicing rate rising to 8.54%, Trepp data show. The two measures are moving on different paths: delinquency has climbed steadily over the past year, while special servicing remains below its level six months ago. That divergence matters because the measures capture different stages of trouble. Delinquency records loans that have missed payments, while special servicing can reflect a transfer for closer attention or potential intervention; the two rates don’t have to rise in lockstep.
The numbers point to mounting strain in securitized apartment debt, but they don’t describe every multifamily borrower or property. A marketwide rate can conceal sharp differences between loans, property performance, and financing channels. Here’s the thing: the direction of the trend is clear, but the headline figures alone don’t explain how much of the deterioration is concentrated in a limited group of loans.
Delinquency rises as new loans fall behind
The multifamily CMBS delinquency rate increased 35 basis points in September, as a group of loans across several states entered 30-day delinquent status. The rate stood at 7.15% six months earlier and 6.59% a year earlier. The comparisons show that September’s increase extends a longer climb rather than marking an isolated monthly change. A move into 30-day delinquency is an early sign of payment trouble, though it doesn’t by itself establish how a loan will ultimately be resolved.
Pressure also spread across the broader CMBS market. Overall commercial mortgage-backed securities delinquency rose 17 basis points to 8.02%. Trepp attributed much of the increase to large loans tied to a Los Angeles studio and office portfolio, a two-tower Houston office complex, a Santa Monica beachfront hotel, a Denver office property and a Silicon Valley office property. Their balances ranged from $208.9 million to $1.1 billion. This concentration is a reminder that large individual loans can move a broad market measure, even as the multifamily rate follows its own pattern. And yet, the property types involved show that the month’s broader increase wasn’t limited to apartment debt.
Servicing rates tell a more mixed story
Multifamily special servicing rose 17 basis points in September to 8.54%. That’s lower than the 8.75% recorded six months ago, but above the 8.2% rate from a year earlier. The month’s rise therefore sits between two different comparisons: servicing distress has increased year over year, while remaining below its recent six-month high. That distinction tempers any claim that every measure is deteriorating at the same pace.
Across commercial real estate, the special servicing rate increased seven basis points to 11.49%, its highest mark since February 2013, according to Trepp. Special servicing can signal that a loan needs attention before a final outcome is known. It doesn’t mean every transferred loan will end in foreclosure, and the rate shouldn’t be read as a count of completed losses. Still, a marketwide high of this kind puts the multifamily movement in a broader setting: lenders and servicers are dealing with pressure across multiple property sectors.
The multifamily figures sit within a larger pool of securitized debt. In August, $11.6 billion of $635.82 billion in securitized multifamily loans was delinquent. Private-label securities carried a 7.69% delinquency rate across $75.48 billion of multifamily debt. Freddie Mac’s $518.99 billion portfolio had a 0.8% rate, while commercial real estate collateralized loan obligations recorded 3.88% across $41.35 billion. These differences are substantial, but they also reflect distinct financing channels and loan pools, so they shouldn’t be treated as a direct comparison of identical borrowers. The figures do show why a single multifamily delinquency rate can obscure more than it reveals about where distress is concentrated.
Refinancing pressure weighs on borrowers
Justin Ashcraft, president of Northern Ridge Capital, said defaults are worsening and have reached their highest level since late 2020. He also pointed to expectations of another Federal Reserve rate increase this year, saying borrowers shouldn’t expect near-term relief. His comments describe the pressure facing borrowers as he sees it; the Trepp figures provide the market data, but don’t establish that interest rates alone explain the increase in delinquency.
For owners approaching refinancing, the gap between original underwriting and current pricing is a central problem. Ashcraft said take-out cap rates that were realistic when loans were originated are now “hopelessly out of reach.” At the same time, rent expectations aren’t translating into enough property cash flow to meet debt-service coverage standards set by lenders and investors. In practical terms, a borrower can face a financing shortfall even if rents have held up: the property’s income still has to support the debt under the terms available at refinancing.
That mismatch can narrow a borrower’s options. If a new loan won’t cover the existing balance on acceptable terms, an owner may need more capital, a restructuring, or a sale, depending on the loan and property. Those are general possibilities in refinancing stress, not outcomes established by the September data. (And this is the part most people overlook.) A delinquency rate captures missed payments, while refinancing pressure can build before a loan becomes delinquent.
A financing gap. That’s the risk in plain terms.
Ashcraft expects more foreclosures and said they could weigh on multifamily values. His firm is concentrating on auction financing, anticipating that buyers with capital available may be best positioned to act as distressed properties come to market. That view reflects his firm’s focus and expectations; it doesn’t establish how many properties will be sold or how prices will respond. If you’re working in this space, the distinction between current payment distress and future refinancing pressure is useful: each can affect a property through a different route.
What the figures may signal next
The September data point to a widening divide between securitized multifamily debt types, with performance varying sharply by financing channel. They also offer mixed signals within multifamily itself: delinquency has climbed steadily, while special servicing remains below its level six months earlier. Neither measure alone settles whether conditions will worsen from here. Their value is in showing where pressure is appearing and how differently it can register across loan pools.
The next useful read will be whether delinquency keeps rising and whether the servicing rate follows, particularly as borrowers confront refinancing. A persistent split between the measures would suggest that payment problems and servicing interventions are developing at different speeds. That said, monthly changes can be affected by which loans enter the data, so the trend deserves more weight than any one reading. The numbers here are underwhelming for borrowers facing a maturity, and they give little basis for assuming near-term relief.
