U.S. Commercial, Multifamily Mortgage Debt Remained Flat in Q4

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According to the Mortgage Bankers Association (MBA), the level of commercial/multifamily mortgage debt outstanding was essentially unchanged in the fourth quarter of 2011, as three of the four major investor groups increased their holdings.

On a year-over-year basis, the amount of mortgage debt outstanding at the end of 2011 was $14 billion lower than at the end of 2010, a decline of 0.6 percent.

The $2.359 trillion in commercial/multifamily mortgage debt outstanding was $3 billion lower than the third quarter 2011 figure. Multifamily mortgage debt outstanding rose to $808 billion, an increase of $4 billion or 0.5 percent from the third quarter.

"The amount of mortgage debt on commercial and multifamily properties remained essentially flat in the fourth quarter," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research.  "Fannie Mae, Freddie Mac, FHA, life insurance companies and banks and thrifts all increased their holdings of commercial and multifamily mortgages.  Continued declines in CMBS balances - resulting from few new originations during the quarter and a continued run-off and run-down of outstanding CMBS loans - more than erased these other increases."

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 commercial mortgage-backed securities (CMBS), collateralized debt obligations (CDOs) and other asset backed securities (ABS) for which the security issuers and trustees hold the note (and which appear here under CMBS, CDO and other ABS issues).

MBA recently improved its reporting of commercial and multifamily mortgage debt outstanding.  The new reporting excludes two categories of bank loans that had formerly been included - loans for acquisition, development and construction and loans collateralized by owner-occupied commercial properties.  By excluding these loan types, the analysis here more accurately reflects the balance of loans supported by office buildings, retail centers, apartment buildings and other income-producing properties that rely on rents and leases to make their payments.

Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $794 billion, or 34 percent of the total.

CMBS, CDO and other ABS issues are the second largest holders of commercial/multifamily mortgages, holding $589 billion, or 25 percent of the total. Agency and GSE portfolios and MBS hold $342 billion, or 15 percent of the total, and life insurance companies hold $313 billion, or 13 percent of the total. 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 categories.

MULTIFAMILY MORTGAGE DEBT OUTSTANDING

Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share, with $342 billion or 42 percent of the total multifamily debt outstanding.  They are followed by banks and thrifts with $218 billion, or 27 percent of the total.  CMBS, CDO and other ABS issues hold $91 billion, or 11 percent of the total; state and local governments hold $70 billion, or 9 percent of the total; life insurance companies hold $50 billion, or 6 percent of the total; and the federal government holds $14 billion, or 2 percent of the total.

CHANGES IN COMMERCIAL/MULTIFAMILY MORTGAGE DEBT OUTSTANDING

In the fourth quarter of 2011, agency and GSE portfolios and MBS saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt - an increase of $4.3 billion or 1.3 percent.  Life insurance companies increased their holdings of commercial/multifamily mortgages by $3.8 billion or 1.2 percent.  CMBS, CDO and other ABS issues saw the largest decrease of $11 billion or 1.8 percent.

In percentage terms, private pension funds recorded the largest increase in holdings of commercial/multifamily mortgages, at 5.9 percent.  The household sector saw the biggest decrease, at 9.2 percent.

CHANGES IN MULTIFAMILY MORTGAGE DEBT OUTSTANDING

The $4.0 billion increase in multifamily mortgage debt outstanding between the third quarter and fourth quarter of 2011 represents a 0.5 percent increase.  In dollar terms, agency and GSE portfolios and MBS saw the largest increase in their holdings of multifamily mortgage debt, an increase of $4.3 billion, or 1.3 percent.  Commercial banks increased their holdings of multifamily mortgage debt by $1.6 billion, or 0.7 percent.  Life insurance companies increased by $599 million, or 1.2 percent.  CMBS, CDO, and other ABS issues saw the biggest decrease in their holdings of multifamily mortgage debt, by $2.5 billion or 2.6 percent.

In percentage terms, private pension funds recorded the largest increase in holdings of multifamily mortgages, at 4.3 percent.  Nonfinancial corporate business saw the biggest decrease, at 4.3 percent.

CHANGES IN COMMERCIAL/MULTIFAMILY MORTGAGE DEBT OUTSTANDING DURING 2011

Between December 2010 and December 2011, CMBS, CDO and other ABS issues saw the largest decrease in dollar terms in their holdings of commercial/multifamily mortgage debt - a decrease of $28 billion, or 4.5 percent. Banks and thrifts decreased their holdings of commercial/multifamily mortgages by $6 billion or 0.8 percent. Agency and GSE portfolios and MBS experienced a net increase of $18 billion or 6 percent.

In percentage terms, the household sector saw the biggest decrease in their holdings of commercial/multifamily mortgages, a drop of 26 percent. Other insurance companies saw the biggest increase of 14 percent.

CHANGES IN MULTIFAMILY MORTGAGE DEBT OUTSTANDING DURING 2011

The $16 billion increase in multifamily mortgage debt outstanding during 2011 represents a 2 percent increase. In dollar terms, agency and GSE portfolios and MBS saw the largest increase in their holdings of multifamily mortgage debt - an increase of $18 billion or 6 percent. Banks and thrifts saw an increase of $6 billion in their holdings or 3 percent. Life insurance companies saw an increase of $2 billion in their holdings or 5 percent.

In percentage terms, agency and GSE portfolios and MBS recorded the biggest increase in their holdings of multifamily mortgages, 6 percent, while finance companies saw the biggest decrease, 19 percent.