MBA: Commercial/Multifamily Mortgage Debt Reaches New High

MBA Staff

December 13, 2018


Commercial/multifamily mortgage debt outstanding rose 1.4 percent to new record-high $45.4 billion in the third quarter, the Mortgage Bankers Association reported today.

Total commercial/multifamily debt outstanding rose to $3.32 trillion in the third quarter, surpassing the previous high of $3.27 trillion set in this year's second quarter, MBA said. Multifamily mortgage debt increased by $26.1 billion or 2 percent to $1.3 trillion.

"Favorable commercial real estate fundamentals and strong lender demand pulled commercial and multifamily mortgage debt outstanding to a new high," said MBA Vice President of Commercial Real Estate Research Jamie Woodwell. "Multifamily mortgage debt continues to lead the pack, accounting for more than half of the total increase, and Fannie Mae, Freddie Mac and FHA remain the key drivers of multifamily mortgage growth."

Woodwell said all four of the major lender groups added to the balance of loans they hold. The four major investor groups include 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.

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).

MBA said commercial banks continue to hold the largest share (40 percent) of commercial/multifamily mortgages at $1.3 trillion. Agency and GSE portfolios and MBS are the second-largest holders of commercial/multifamily mortgages (20 percent) at $648 billion. Life insurance companies hold $497 billion (15 percent), and CMBS, CDO and other ABS issues hold $458 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.

Multifamily Mortgage Debt Outstanding
Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share of total multifamily debt outstanding at $648 billion (49 percent), followed by banks and thrifts with $426 billion (32 percent), state and local governments with $88 billion (7 percent), life insurance companies with $78 billion (6 percent), and CMBS, CDO and other ABS issues holding $43 billion (3 percent). Nonfarm noncorporate businesses hold $18 billion (1 percent).

Changes in Commercial/Multifamily Mortgage Debt Outstanding
Agency and GSE portfolios and MBS saw the largest gains (in dollar terms) in their holdings of commercial/multifamily mortgage debt in the third quarter, a $16.7 billion increase, or 2.6 percent. Life insurance companies increased their holdings by $11.3 billion (2.3 percent), agency and GSE portfolios and MBS increased their holdings by $10.5 billion (0.8 percent) and CMBS, CDO and other ABS issues increased their holdings by $5.1 billion (1.1 percent).

In percentage terms, real estate investment trusts saw the largest increase, 4.0 percent, in their holdings of commercial/multifamily mortgages. Conversely, state and local government retirement funds saw their holdings decrease 43.9 percent.

Changes in Multifamily Mortgage Debt Outstanding
The $26.1 billion increase in multifamily mortgage debt outstanding between the second and third quarters represents a 2.0 percent increase. In dollar terms, agency and GSE portfolios and MBS saw the largest gain, $16.7 billion (2.6 percent).

Commercial banks increased their holdings by $7.1 billion (1.7 percent); and CMBS, CDO and other ABS issues increased by $2.6 billion (6.4 percent). State and local government saw the largest decline in their holdings of multifamily mortgage debt, down $2.0 billion (2.3 percent).

In percentage terms, REITs recorded the largest increase in holdings of multifamily mortgages at 12.7 percent and state and local government retirement funds saw the biggest decrease at 43.8 percent.

MBA's complete Commercial/Multifamily Mortgage Debt Outstanding report can be downloaded at www.mba.org/documents/research/3Q18MortgageDebtOutstanding.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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