U.S. Commercial, Multifamily Mortgage Debt Hits $2.9 Trillion in Mid 2016

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According to the Mortgage Bankers Association's latest Commercial/Multifamily Mortgage Debt Outstanding Report released this week, the level of commercial and multifamily mortgage debt outstanding increased by $39.9 billion in the second quarter of 2016, as three of the four major investor groups increased their holdings.

Total commercial/multifamily debt outstanding rose 1.4 percent over the first quarter of 2016 to $2.90 trillion at the end of the second quarter.  Multifamily mortgage debt outstanding rose to $1.09 trillion, an increase of $27.6 billion, or 2.6 percent, from the first quarter of 2016.

"The amount of commercial and multifamily mortgage debt outstanding grew to a new record during the second quarter, despite a record drop in the balance of CMBS loans outstanding," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research.  "The CMBS market is seeing far more loans paying-off and paying down than new loans being originated.  At the same time, banks, Fannie Mae, Freddie Mac, life companies and others continue to increase their holdings of commercial and multifamily mortgages."

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.

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).

Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $1.1 trillion, or 39 percent of the total.

Agency and GSE portfolios and MBS are the second largest holders of commercial/multifamily mortgages, holding $486 billion, or 17 percent of the total.  CMBS, CDO and other ABS issues hold $484 billion, or 17 percent of the total, and life insurance companies hold $407 billion, or 14 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 $486 billion, or 44 percent of the total multifamily debt outstanding.  They are followed by banks and thrifts with $365 billion, or 33 percent of the total.  State and local government hold $90 billion, or 8 percent of the total; life insurance companies hold $64 billion, or 6 percent of the total; CMBS, CDO and other ABS issues hold $55 billion, or 5 percent of the total, and nonfarm noncorporate business holds $14 billion, or one percent of the total.

CHANGES IN COMMERCIAL/MULTIFAMILY MORTGAGE DEBT OUTSTANDING

In the second quarter of 2016, banks and thrifts saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt - an increase of $36.1 billion, or 3.3 percent.  Agency and GSE portfolios and MBS increased their holdings by $13.8 billion, or 2.9 percent, and life insurance companies increased their holdings by $8.9 billion, or 2.2 percent.  CMBS, CDO and other ABS issues saw the largest decrease at $20.9 billion, or down 4.1 percent.

In percentage terms, household sector saw the largest increase in their holdings of commercial/multifamily mortgages, an increase of 3.4 percent.  Finance companies saw their holdings decrease 6.8 percent.

CHANGES IN MULTIFAMILY MORTGAGE DEBT OUTSTANDING

The $27.6 billion increase in multifamily mortgage debt outstanding between the first and second quarters of 2016 represents a 2.6 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 $13.8 billion, or 2.9 percent. 

Commercial banks increased their holdings of multifamily mortgage debt by $13.1 billion, or 3.7 percent.  Life insurance companies increased by $1.6 billion, or 2.6 percent.  CMBS, CDO and other ABS issues saw the largest decline in their holdings of multifamily mortgage debt, by $1.7 billion, or down 3.1 percent.

In percentage terms, bank and thrifts recorded the largest increase in holdings of multifamily mortgages, at 3.7 percent.  REITs saw the biggest decrease at 12.3 percent.