MBA: 2018 Commercial/Multifamily Mortgage Debt Climbs 6.8%

MBA NewsLink Staff

March 14, 2019

The Mortgage Bankers Association this morning reported commercial/multifamily mortgage debt outstanding at the end of 2018 rose by nearly 7 percent to $3.39 trillion.

The MBA Commercial/Multifamily Mortgage Debt Outstanding report said the 7 percent increase was $216 million higher than at the end of 2017.

On a quarterly basis, the report found total mortgage debt outstanding in the final three months of 2018 rose by 2.1 percent ($68.5 billion) from the third quarter, with all four major investor groups increasing their holdings. Multifamily mortgage debt grew by $32.2 billion (2.4 percent) to $1.36 trillion over the same period.

"Last year recorded the largest annual increase in commercial and multifamily mortgage debt outstanding since the Great Recession, and the largest increase in multifamily mortgage debt on record," said MBA Vice President of Research & Economics Jamie Woodwell. "Growth in multifamily mortgage debt made up almost half the total increase in debt outstanding, and Fannie Mae, Freddie Mac and FHA collectively accounted for two-thirds of the multifamily growth. The GSEs, life insurance companies, the CMBS market and banks all increased their holdings of commercial and multifamily mortgage debt during the year."

The four major investor groups broken down in the MBA report are: bank and thrift; commercial mortgage backed securities; collateralized debt obligation and other asset backed securities issues; federal agency and government-sponsored enterprise portfolios and mortgage backed securities; and life insurance companies.

Commercial banks continue to hold the largest share (39 percent) of commercial/multifamily mortgages at $1.3 trillion. Agency and GSE portfolios and MBS are the second largest holders of commercial/multifamily mortgages, at $675 billion (20 percent of the total). Life insurance companies hold $509 billion (15 percent), and CMBS, CDO and other ABS issues hold $466 billion (14 percent).

Multifamily Mortgage Debt Outstanding
Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share of total debt outstanding at $675 billion (50 percent), followed by commercial banks with $430 billion (32 percent), state and local governments with $90 billion (7 percent) life insurance companies with $80 billion (6 percent) and CMBS, CDO and other ABS issues with $43 billion (3 percent). Nonfarm non-corporate businesses hold $18 billion (1 percent)).

Changes in Commercial/Multifamily Mortgage Debt Outstanding
In the fourth quarter, agency and GSE portfolios and MBS saw the largest rise in dollar terms in their holdings of commercial/multifamily mortgage debt, an increase of $26.8 billion (4.1 percent). Commercial banks increased their holdings by $21.0 billion (1.6 percent), life insurance companies increased their holdings by $12.4 billion (2.5 percent) and state and local governments saw the largest decrease at $1.2 billion (1.1 percent).

In percentage terms, state and local government retirement funds saw the largest increase--4.2 percent--in their holdings of commercial/multifamily mortgages, and nonfinancial corporate businesses saw their holdings decrease the most, at 1.7 percent.

Changes in Multifamily Mortgage Debt Outstanding
The $32.2 billion rise in multifamily mortgage debt outstanding between the third and fourth quarters represented a 2.4 percent increase. In dollar terms, agency and GSE portfolios and MBS saw the largest increase (4.1 percent) in their holdings of multifamily mortgage debt. Commercial banks increased their holdings of multifamily mortgage debt by $4.5 billion (1.1 percent). Life insurance companies increased holdings by 2.6 percent to $2.0 billion. Local governments saw the largest decline in their holdings of multifamily mortgage debt, by $1.0 billion, or down 1.1 percent.

In percentage terms, real estate investment trusts recorded the largest increase in holdings of multifamily mortgages (6.1 percent), and private pension funds saw the biggest decrease (5.6 percent).

Changes in Commercial/Multifamily Mortgage Debt Outstanding During 2018
Through 2018, commercial banks saw the largest gain (6 percent) in dollar terms in their holdings of commercial/multifamily mortgage debt, an increase of $71 billion. State and local government decreased their holdings of commercial/multifamily mortgages by $1.1 billion (1 percent).

In percentage terms, other insurance companies saw the largest increase (12 percent) in their holdings of commercial/multifamily mortgages, while state and local government retirement funds saw the largest decrease (14 percent).

Changes in Multifamily Mortgage Debt Outstanding During 2018
The $102.3 billion rise in multifamily mortgage debt outstanding during 2018 represents an 8.1 percent increase. In dollar terms, agency and GSE portfolios and MBS saw the largest increase in their holdings of multifamily mortgage debt at 11 percent ($68.8 billion). State and local government saw the largest decrease in their holdings down $875 million (1 percent).

In percentage terms, REITs recorded the largest increase in their holdings of multifamily mortgages, 20 percent, while state and local government retirement saw the largest decrease, 14 percent.

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).

The report'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.

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