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U.S. Commercial, Multifamily Mortgage Debt Reaches $3.5 Trillion

According to the Mortgage Bankers Association’s latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report, the level of commercial/multifamily mortgage debt outstanding in the U.S. rose by $45.4 billion (1.3 percent) in the first quarter of 2019.

Total commercial/multifamily debt outstanding climbed to $3.46 trillion at the end of the first three months of the year. Multifamily mortgage debt alone increased $17.9 billion (1.3 percent) to $1.4 trillion from the fourth quarter of 2018.

“Mortgage debt backed by commercial and multifamily income-producing properties continues to grow at a strong pace, with three of the four major capital sources – banks, life companies, and the GSEs and FHA – growing their holdings by more than one percent during the first quarter of 2019,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “REITs, finance companies and nonfinancial corporate businesses also showed strong appetites last quarter, with each growing their holdings by more than $1 billion. The depth and breadth of growth among investors signals the interest in the sector.”

Commercial banks continue to hold the largest share (39 percent) of commercial/multifamily mortgages at $1.4 trillion. Agency and GSE portfolios and MBS are the second largest holders of commercial/multifamily mortgages (20 percent) at $687 billion. Life insurance companies hold $532 billion (15 percent), and CMBS, CDO and other ABS issues hold $466 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.

The four major investor groups analyzed in MBA’s report 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).

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 $687 billion (50 percent), followed by banks and thrifts with $436 billion (32 percent), state and local governments with $84 billion (6 percent), life insurance companies with $84 billion (6 percent), and CMBS, CDO and other ABS issues holding $43 billion (3 percent). Nonfarm non-corporate businesses hold $16 billion (1 percent).

CHANGES IN COMMERCIAL/MULTIFAMILY MORTGAGE DEBT OUTSTANDING

In the first quarter, commercial banks saw the largest gains in dollar terms in their holdings of commercial/multifamily mortgage debt – an increase of $14.8 billion, (1.1 percent). Agency and GSE portfolios and MBS increased their holdings by $12.3 billion (1.8 percent), agency and life insurance companies increased their holdings by $11.2 billion (2.2 percent), and finance companies increased their holdings by $3.7 billion (13.5 percent).

In percentage terms, finance companies saw the largest increase – 13.5 percent – in their holdings of commercial/multifamily mortgages. Conversely, state and local government retirement funds saw their holdings decrease 9.2 percent.

CHANGES IN MULTIFAMILY MORTGAGE DEBT OUTSTANDING

The $17.9 billion increase in multifamily mortgage debt outstanding from the fourth quarter of 2018 to this year’s first quarter represents a 1.3 percent increase. In dollar terms, agency and GSE portfolios and MBS saw the largest gain – $12.3 billion (1.8 percent) – in their holdings of multifamily mortgage debt. Commercial banks increased their holdings by $5.4 billion (1.3 percent), and life insurance companies increased by $1.8 billion (2.2 percent). State and local government saw the largest decline in their holdings of multifamily mortgage debt, down $1.3 billion (1.5 percent).

In percentage terms, REITs recorded the largest increase in holdings of multifamily mortgages, 7.9 percent, and state and local government retirement funds saw the biggest decrease at 9.2 percent.

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