Constructions loans for single and multi family projects in the United States are incorrectly included in commercial real estate delinquency reports, according to the Mortgage Bankers Association's most recent Commercial/Multifamily Research DataNote.

According to the report, combining commercial real estate loans with construction projects destined for family dwellings greatly inflates the delinquency rates reported for commercial and multi-family real estate loans.

The report states that the FDIC's Quarterly Banking Profile (QBP) report, which releases data on the performance of loans at FDIC-insured banks, includes commercial and multi-family mortgages with construction loans into one category and releases a combined delinquency rate.

"Once construction and development loans are excluded, commercial and multifamily mortgages have delinquency levels that are close to historic lows," wrote MBA in its report.

The report noted that this makes the commercial and multi-family mortgage markets appear weaker than they are.

"At the end of the first quarter of 2008, the 30+day delinquency rate for commercial / multifamily mortgages was 1.81 percent, up 0.6 percentage points from a year earlier," the report said. "In stark contrast, the 30+day delinquency rate for construction loans ended the first quarter at 7.18 percent, up 6.0 percentage points from a year earlier. By blending the two, the Federal Reserve reported a combined delinquency rate of 3.72 percent, up 1.2 percentage points from a year earlier."

By Steve Stecyk and edited by Stephen Huebl