Multifamily apartment loans underwritten in 2021 face significant distress due to rising interest rates. Borrowers frequently structured these loans with floating-rate debt when borrowing costs remained near zero.
Central bank rate hikes increased debt service payments beyond the capacity of existing rental income. This distress remains concentrated in 2021-2022 vintages that relied on aggressive rent growth and valuation assumptions.
Arbor Realty Trust reports a significant increase in non-performing loans. Lenders are actively modifying loan terms to prevent further defaults as broader delinquency rates rise.