Second Quarter Commercial/Multifamily Mortgage Debt Increased $52.3 Billion

CONTACT
Rob Van Raaphorst
rvanraaphorst@mba.org
(202) 557- 2799

WASHINGTON, D.C. (September 27, 2018) - The level of commercial/multifamily mortgage debt outstanding increased by $52.3 billion in the second quarter of 2018, as all four major investor groups increased their holdings. That is a 1.6 percent increase over the first quarter of 2018.

Total commercial/multifamily debt outstanding rose to $3.27 trillion at the end of the second quarter. Multifamily mortgage debt outstanding rose to $1.3 trillion, an increase of $20.0 billion, or 1.6 percent, from the first quarter of 2018.

"The balance of mortgage debt on commercial and multifamily properties grew faster during the first half of 2018 than during any other first half since 2007," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research. "The four major investor groups all increased their holdings, and multifamily mortgage debt outstanding topped $1.3 trillion for the first time. Strong property fundamentals and values, coupled with still-low mortgage rates and strong loan performance, are all supporting the market."

The four major investor groups are: bank and thrift; federal agency and government sponsored enterprise (GSE) portfolios and mortgage backed securities (MBS); life insurance companies; and commercial mortgage backed securities (CMBS), collateralized debt obligation (CDO) and other asset backed securities (ABS) issues.

The analysis summarizes the holdings of loans or, if the loans are securitized, the form of the security. For example, many life insurance companies invest both in whole loans for which they hold the mortgage note (and which appear in this data under Life Insurance Companies) and in CMBS, CDOs and other ABS for which the security issuers and trustees hold the note (and which appear here under CMBS, CDO and other ABS issues).

Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $1.3 trillion, or 40 percent of the total.

Agency and GSE portfolios and MBS are the second largest holders of commercial/multifamily mortgages, holding $631 billion, or 19 percent of the total. Life insurance companies hold $486 billion, or 15 percent of the total, and CMBS, CDO and other ABS issues hold $452 billion, or 14 percent of the total. Many life insurance companies, banks and the GSEs purchase and hold CMBS, CDO and other ABS issues. These loans appear in the "CMBS, CDO and other ABS" category.

MULTIFAMILY MORTGAGE DEBT OUTSTANDING

Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share, with $631 billion, or 49 percent of the total multifamily debt outstanding. They are followed by banks and thrifts with $419 billion, or 32 percent of the total. State and local government hold $89 billion, or 7 percent of the total; life insurance companies hold $76 billion, or 6 percent of the total; CMBS, CDO and other ABS issues hold $41 billion, or 3 percent of the total, and nonfarm noncorporate business holds $17 billion, or one percent of the total.

CHANGES IN COMMERCIAL/MULTIFAMILY MORTGAGE DEBT OUTSTANDING

In the second quarter of 2018, banks and thrifts saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt - an increase of $23.9 billion, or 1.9 percent. Agency and GSE portfolios and MBS increased their holdings by $14.5 billion, or 2.4 percent, life insurance companies increased their holdings by $10.6 billion, or 2.2 percent, and CMBS, CDO and other ABS issues increased their holdings by $5.7 billion, or 1.3 percent.

In percentage terms, agency and GSE portfolios and MBS saw the largest increase in their holdings of commercial/multifamily mortgages, an increase of 2.4 percent. State and local government retirement funds saw their holdings decrease 72.2 percent.

CHANGES IN MULTIFAMILY MORTGAGE DEBT OUTSTANDING

The $20.0 billion increase in multifamily mortgage debt outstanding between the first and second quarters of 2018 represents a 1.6 percent increase. In dollar terms, agency and GSE portfolios and MBS saw the largest increase in their holdings of multifamily mortgage debt, an increase of $14.5 billion, or 2.4 percent. Commercial banks increased their holdings of multifamily mortgage debt by $7.9 billion, or 1.9 percent. Life insurance companies increased by $1.7 billion, or 2.2 percent. State and local government saw the largest decline in their holdings of multifamily mortgage debt, by $1.7 billion, or down 1.9 percent.

In percentage terms, agency and GSE portfolios and MBS recorded the largest increase in holdings of multifamily mortgages, at 2.4 percent. State and local government retirement funds saw the biggest decrease at 72.2 percent.

MBA's analysis is based on data from the Federal Reserve Board's Financial Accounts of the United States, the Federal Deposit Insurance Corporation's Quarterly Banking Profile and data from Wells Fargo Securities. You can download the report by clicking on this link.