New Market Tax Credits: Low Loan Loss Rate Highlights Stability and Solid Risk Management for Investors
NMTC loans have sustained significantly lower write offs or defaults over the past 10 years than comparable, conventional real estate loans. NAC senior managing director, Joe Falkson, recently compared two historical data sets tracking conventional mortgages maintained by Moody’s and Standard & Poor’s with a similar NMTC tracking data set. The result: the NMTC 10 year loan loss rate was one-quarter to one-third the size of the conventional mortgages’ loss rate for the comparable historical period. The full census of the NMTC 10-year loan loss history reported a 0.9% loan loss rate—a fraction of the 2.8% and 3.4% cumulative loan loss rates reported respectively by Moody’s and Standard & Poor’s collateralized mortgage-backed securities (CMBS) tracking studies. This result may be attributable in part to the enhanced due diligence and program oversight required by the US Department of the Treasury of CDEs entrusted with the management of Federal New Markets Tax Credits. The attached document presents the full study.