Commercial, Multifamily Mortgage Debt in U.S. Tops $3 Trillion

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According to the Mortgage Bankers Association, the total commercial/multifamily debt outstanding in the U.S. rose to $3.01 trillion at the end of the first quarter of 2017, the first time it has broken the $3 trillion mark.  Multifamily mortgage debt outstanding rose to $1.17 trillion, an increase of $23.4 billion, or 2.0 percent, from the fourth of quarter of 2016.

"The amount of commercial and multifamily mortgage debt outstanding continued to grow during the first quarter," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research.  "Almost two-thirds of the growth came from increases in multifamily mortgage debt outstanding, and 80 percent of that growth came from portfolios and MBS held or guaranteed by federal government agencies and the GSEs."

Woodwell continued: "In addition, recent releases from the Federal Reserve show that during the second quarter of 2017, bank multifamily portfolios stopped growing and remain relatively flat, while their holdings of other commercial property loans have continued to grow."

The level of commercial/multifamily mortgage debt outstanding rose by $37.6 billion in the first quarter of 2017, a 1.3% increase over the fourth quarter of 2016, with three of the four major investor groups increasing their holdings.

The four major investor groups are: bank and thrift; commercial mortgage backed securities (CMBS), collateralized debt obligation (CDO) and other asset backed securities (ABS) issues; federal agency and government sponsored enterprise (GSE) portfolios and mortgage backed securities (MBS), and life insurance companies.

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 in CMBS, CDOs and other ABS for which the security issuers and trustees hold the note.

Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $1.2 trillion, or 41 percent of the total.

Agency and GSE portfolios and MBS are the second largest holders of commercial/multifamily mortgages, holding $540 billion, or 18 percent of the total.  CMBS, CDO and other ABS issues hold $438 billion, or 15 percent of the total, and life insurance companies hold $436 billion, or 15 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" category.

MULTIFAMILY MORTGAGE DEBT OUTSTANDING

Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share, with $540 billion, or 46 percent of the total multifamily debt outstanding.  They are followed by banks and thrifts with $390 billion, or 33 percent of the total.  State and local government hold $92 billion, or 8 percent of the total; life insurance companies hold $69 billion, or 6 percent of the total; CMBS, CDO and other ABS issues hold $44 billion, or 4 percent of the total, and nonfarm noncorporate business holds $13 billion, or one percent of the total.

CHANGES IN COMMERCIAL/MULTIFAMILY MORTGAGE DEBT OUTSTANDING

In the first quarter of 2017, banks and thrifts saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt - an increase of $24.6 billion, or 2.1 percent.  Agency and GSE portfolios and MBS increased their holdings by $18.9 billion, or 3.6 percent, and life insurance companies increased their holdings by $10.3 billion, or 2.4 percent.  CMBS, CDO and other ABS issues saw the largest decrease at $21.3 billion, or down 4.6 percent.

In percentage terms, REITs saw the largest increase in their holdings of commercial/multifamily mortgages, an increase of 8.5 percent.  Other insurance companies saw their holdings decrease 4.8 percent.
 
CHANGES IN MULTIFAMILY MORTGAGE DEBT OUTSTANDING

The $23.4 billion increase in multifamily mortgage debt outstanding between the first quarter of 2017 and fourth quarter of 2016 represents a 2.0 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 $18.9 billion, or 3.6 percent.  Commercial banks increased their holdings of multifamily mortgage debt by $7.5 billion, or 2.0 percent.  Life insurance companies increased by $1.6 billion, or 2.4 percent.  CMBS, CDO and other ABS issues saw the largest decline in their holdings of multifamily mortgage debt, by $4.1 billion, or down 8.6 percent.

In percentage terms, GSE portfolios and MBS recorded the largest increase in holdings of multifamily mortgages, at 3.6 percent.  CMBS, CDO and other ABS issues saw the biggest decrease at 8.6 percent.