Commercial/Multifamily Mortgage Debt Continued Rise in the Second Quarter of 2020

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Adam DeSanctis
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WASHINGTON, D.C. (September 28, 2020) - The level of commercial/multifamily mortgage debt outstanding rose by $43.6 billion (1.2 percent) in the second quarter of 2020, according to the Mortgage Bankers Association's (MBA) latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report.

Total commercial/multifamily debt outstanding rose to $3.76 trillion at the end of the second quarter. Multifamily mortgage debt alone increased $32.2 billion (2.0 percent) to $1.6 trillion from the first quarter of 2020.

"Despite a drop off in new commercial and multifamily mortgage originations in the second quarter, the total amount of mortgage debt outstanding continued to rise," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research. "The pandemic is having different impacts on various property types and capital sources. Loans backed by multifamily properties accounted for almost three-quarters of the total growth, and Fannie Mae, Freddie Mac, and FHA accounted for nearly three-quarters of that amount."

The four largest investor groups are: banks and thrifts; 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.

Commercial banks continue to hold the largest share (39 percent) of commercial/multifamily mortgages at $1.5 trillion. Agency and GSE portfolios and MBS are the second largest holders of commercial/multifamily mortgages (21 percent) at $775 billion. Life insurance companies hold $574 billion (15 percent), and CMBS, CDO and other ABS issues hold $518 billion (14 percent). Many life insurance companies, banks and the GSEs purchase and hold CMBS, CDO and other ABS issues. These loans appear in the report in the "CMBS, CDO and other ABS" category.

MBA's 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).

MULTIFAMILY MORTGAGE DEBT OUTSTANDING

Looking solely at multifamily mortgages in the second quarter of 2020, agency and GSE portfolios and MBS hold the largest share of total multifamily debt outstanding at $775 billion (48 percent) , followed by banks and thrifts with $474 billion (30 percent), life insurance companies with $167 billion (10 percent), state and local government with $93 billion (6 percent), and CMBS, CDO and other ABS issues holding $53 billion (3 percent). Nonfarm non-corporate businesses hold $21 billion (1 percent).

CHANGES IN COMMERCIAL/MULTIFAMILY MORTGAGE DEBT OUTSTANDING

In the second quarter, agency and GSE portfolios and MBS saw the largest gains in dollar terms in their holdings of commercial/multifamily mortgage debt - an increase of $22.9 billion (3.1 percent). Commercial banks increased their holdings by $14.6 billion (1.0 percent), life insurance companies increased their holdings by $2.1 billion (0.4 percent), and CMBS, CDO, and other ABS issues increased their holdings by $1.7 billion (0.3 percent).

In percentage terms, agency and GSE portfolios and MBS saw the largest increase - 3.1 percent - in their holdings of commercial/multifamily mortgages. Conversely, REITs saw their holdings decrease 3.0 percent.

CHANGES IN MULTIFAMILY MORTGAGE DEBT OUTSTANDING

The $32.2 billion increase in multifamily mortgage debt outstanding from the first quarter of 2020 represents a 2.0 percent increase. In dollar terms, agency and GSE portfolios and MBS saw the largest gain - $22.9 billion (3.1 percent) - in their holdings of multifamily mortgage debt. Life insurance companies increased their holdings by $2.5 billion (1.5 percent), and state and local government increased by $1.4 billion (1.5 percent). REITs saw the largest decline in their holdings of multifamily mortgage debt, down $602 million (11.8 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. More information on this data series is contained in Appendix A.

MBA's complete Commercial/Multifamily Mortgage Debt Outstanding report can be downloaded here: www.mba.org/documents/research/2Q20MortgageDebtOutstanding.pdf.