MBA Report: 2Q Commercial/Multifamily Mortgage Debt Up $52.3 Billion

MBA NewsLink Staff

September 27, 2018

Commercial/multifamily mortgage debt outstanding increased by $52.3 billion in the second quarter as all four major investor groups increased their holdings, the Mortgage Bankers Association reported this morning.

The increase represented 1.6 percent growth from the first quarter.

MBA reported 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.

"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 MBA Vice President of Commercial Real Estate Research Jamie Woodwell. "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 portfolios and mortgage-backed securities; life insurance companies; and commercial mortgage backed securities, collateralized debt obligation and other asset backed securities 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 followed, holding $631 billion, or 19 percent. Life insurance companies hold $486 billion, or 15 percent; and CMBS, CDO and other ABS issues hold $452 billion, or 14 percent. 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 total multifamily debt outstanding, followed by banks and thrifts with $419 billion, or 32 percent. State and local government hold $89 billion, or 7 percent; life insurance companies hold $76 billion, or 6 percent; CMBS, CDO and other ABS issues hold $41 billion, or 3 percent, and nonfarm non-corporate business holds $17 billion, or 1 percent.

Changes in Commercial/Multifamily Mortgage Debt Outstanding
Banks and thrifts saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt in the second quarter, 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 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, $14.5 billion, or 2.4 percent. Commercial banks increased 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 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.

The complete Commercial/Multifamily Mortgage Debt Outstanding report can be downloaded at www.mba.org/documents/research/2Q18MortgageDebtOutstanding.pdf. MBA's analysis is based on data from the Federal Reserve Board's Financial Accounts of the United States, the Federal Deposit Insurance Corp.'s Quarterly Banking Profile and data from Wells Fargo Securities. More information on this data series is contained in Appendix A.

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