Collateral Observations · Q3 2026
Agency multifamily delinquencies and the refinancing gap
Value is intact. Debt service is not. The rate move, not the delinquency number, is what changed this quarter.
Key points
- The agency number moved fast, not far. Freddie Mac's multifamily delinquency rate reached 0.64% in August, up from 0.42% in February. Most of that move happened in the last two months.
- Fannie is going the other way. Fannie Mae's rate fell to 0.57% in August, down from a 0.78% peak in March. Two agencies, opposite directions, same market. That points at book composition, not a systemic break.
- The rate move is the larger event. The 10-year Treasury closed at 5.24% on September 28, up 29 basis points in eighteen days and 106 basis points from the 3.97% low set in February.
- Sizing is moving faster than credit. On the retail illustration below, the financing gap widened $288,916 in eighteen days. On the 2021-vintage multifamily illustration, coverage at the maturing balance falls to 0.99x.
- This is a debt service problem, not a value problem. Both illustrations size at roughly 69% to 72% loan to value. Neither property is underwater. Neither can carry its existing debt at today's rates.
What the agency data actually says
Both figures come from the agencies' own August 2026 monthly summaries, not from secondary reporting. Freddie Mac measures the unpaid principal balance of loans two monthly payments or more past due or in foreclosure. Fannie Mae measures loans 60 days or more past due, also by unpaid balance. The two are close enough to compare.
Multifamily delinquency rate by unpaid principal balance. Source: Freddie Mac Monthly Volume Summary and Fannie Mae Monthly Summary, August 2026.
| Month | Freddie Mac | Fannie Mae |
|---|---|---|
| August 2025 | 0.48% | 0.68% |
| December 2025 | 0.44% | 0.74% |
| February 2026 | 0.42% | 0.74% |
| March 2026 | 0.43% | 0.78% |
| May 2026 | 0.47% | 0.58% |
| June 2026 | 0.51% | 0.60% |
| July 2026 | 0.60% | 0.62% |
| August 2026 | 0.64% | 0.57% |
Freddie rose 22 basis points in six months, and 13 of those came in July and August alone. Fannie fell 21 basis points from its March peak. The two series crossed in August.
Three cautions before anyone repeats the headline
- The level is still very low. 0.64% is a two-decade high for Freddie multifamily, but multifamily barely defaulted in the last cycle. Clearing a low bar is not distress.
- The 2011 comparison is unverified. Press coverage this week cites Freddie's figure against an August 2011 reading of 0.35%. That number could not be verified at the primary source. Freddie's published archive does not reach back that far.
- The agencies remain the cleanest book. Per the Mortgage Bankers Association for the second quarter of 2026, CMBS multifamily delinquency ran 6.53% and banks and thrifts 1.20%, against 0.51% for Freddie and 0.60% for Fannie. Definitions differ across lender types and are not strictly comparable.
The rate move
| Date | 5-year | 10-year | 10-year change |
|---|---|---|---|
| December 31, 2025 | 3.73% | 4.18% | base |
| February 27, 2026 (2026 low) | 3.51% | 3.97% | -21 bp |
| August 28, 2026 | 4.48% | 4.73% | +55 bp |
| September 10, 2026 | 4.75% | 4.95% | +77 bp |
| September 28, 2026 | 5.06% | 5.24% | +106 bp |
Source: U.S. Treasury daily par yield curve.
What it does to a loan
Two illustrations follow. Inputs are stated so a reader can substitute his own. Neither is an appraisal, a value opinion, or a credit recommendation on any specific asset.
Illustration 1: multi-tenant retail, maturing $12,000,000 request
Net operating income $1,000,000. Appraised value $16,700,000. Sized at the lesser of 1.25x coverage, 65% loan to value, and a 9.00% debt yield, on a 30-year amortization at the 10-year Treasury plus 200 basis points.
| September 10 | September 28 | |
|---|---|---|
| All-in rate | 6.95% | 7.24% |
| Supportable loan | $10,071,286 | $9,782,370 |
| Financing gap | $1,928,714 | $2,217,630 |
| Gap as % of request | 16.1% | 18.5% |
| Binding constraint | Coverage | Coverage |
| Coverage at full request | 1.05x | 1.02x |
| Break-even rate for 1.25x | 5.30% | 5.30% |
The gap widened $288,916 in eighteen days. Nothing about the property changed.
Illustration 2: 2021-vintage multifamily loan reaching maturity
Acquired 2021 at a 4.00% cap on $850,000 of net operating income, a $21,250,000 value, financed at 65% and 3.25% on a 30-year amortization. Income has since grown 15% to $977,500. At a 5.50% cap the property is worth $17,772,727, down 16.4%. The maturing balance is $12,335,496. Refinance sized at 1.25x coverage, 80% loan to value, and an 8.00% debt yield, at the 10-year plus 175 basis points.
| September 10 | September 28 | |
|---|---|---|
| All-in rate | 6.70% | 6.99% |
| Supportable loan | $10,099,007 | $9,804,939 |
| Financing gap | $2,236,489 | $2,530,557 |
| Gap as % of balance | 18.1% | 20.5% |
| Coverage at maturing balance | 1.02x | 0.99x |
| Loan to value at balance | 69.4% | 69.4% |
| Debt yield at balance | 7.92% | 7.92% |
| Break-even rate for 1.25x | 4.86% | 4.86% |
Coverage at the maturing balance is now below 1.00x. The property does not earn its debt service at the rate required to refinance it, while loan to value sits at 69.4%.
That is the shape of this cycle. Value is intact. Debt service is not.
Where the retail illustration goes from here
| 10-year Treasury | Supportable loan | Gap on $12,000,000 |
|---|---|---|
| 4.95% | $10,071,286 | $1,928,714 (16.1%) |
| 5.24% (September 28) | $9,782,370 | $2,217,630 (18.5%) |
| 5.50% | $9,534,508 | $2,465,492 (20.5%) |
| 5.75% | $9,305,629 | $2,694,371 (22.5%) |
| 6.00% | $9,085,566 | $2,914,434 (24.3%) |
What this suggests for a maturing book
- Screen by coverage at the maturing balance, not by loan to value. Loan to value looks fine on both illustrations. Coverage does not. A book screened on value alone will miss this entirely.
- Rank maturities by the gap between the current all-in rate and the borrower's break-even coverage rate. On these illustrations that spread is 194 and 213 basis points. That number tells you how much has to come from equity, amortization, or a rate reversal.
- Extension is getting more expensive, not less. Every month the takeout rate rises, the required paydown grows. The rate ladder above prices that.
- Order appraisals on the 2020 and 2021 vintages before they mature, not after. The valuation question on those files is not whether value fell. It is whether income has grown enough to carry a loan at 7%.
Sources and limitations. Freddie Mac Monthly Volume Summary and Fannie Mae Monthly Summary, both August 2026, retrieved from the agencies directly on September 28, 2026. U.S. Treasury daily par yield curve, same date. Mortgage Bankers Association second quarter 2026 figures, as reported in trade press. The comparison of Freddie's current rate to a 2011 reading could not be verified at the primary source and is not relied on here.
The loan illustrations are hypothetical and use stated inputs. They are not appraisals, value opinions, or credit recommendations, and no specific property or borrower is described. Terms, spreads, and underwriting standards vary by lender, market, sponsor, and property type.