U.S. Commercial, Multifamily Mortgage Debt Posts Largest Increase Since Great Recession

The Mortgage Bankers Association is reporting this week that the level of commercial and multifamily mortgage debt outstanding in the U.S. increased by $44.3 billion in the first quarter of 2018 as all four major investor groups increased their holdings.  That is a 1.4 percent increase over the fourth quarter of 2017. 

Total commercial/multifamily debt outstanding rose to $3.21 trillion at the end of the first quarter.  Multifamily mortgage debt outstanding rose to $1.3 trillion, an increase of $19.3 billion, or 1.5 percent, from the fourth of quarter of 2017.

"During the first three months of 2018, commercial and multifamily mortgage debt outstanding increased more than during any other Q1 since before the Great Recession," said Jamie Woodwell, MBA Vice President of Commercial Real Estate Research. "Interestingly, Q1 holdings grew more slowly this year than last among the three largest investor groups: banks, life insurance companies, and the GSEs. This year's increase was driven by the CMBS market, which added $6 billion of mortgages to its balances. This is a sharp contrast to the $21 billion decline over the same period in 2017.

"For the first time since 2007, CMBS has seen three straight quarters of increase," Woodwell continued.

The four major investor groups 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).

Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $1.3 trillion, or 40 percent of the total.

Agency and GSE portfolios and MBS are the second largest holders of commercial/multifamily mortgages, holding $617 billion, or 19 percent of the total.  Life insurance companies hold $471 billion, or 15 percent of the total, and CMBS, CDO and other ABS issues hold $446 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 $617 billion, or 48 percent of the total multifamily debt outstanding.  They are followed by banks and thrifts with $411 billion, or 32 percent of the total.  State and local government hold $96 billion, or 8 percent of the total; life insurance companies hold $74 billion, or 6 percent of the total; CMBS, CDO and other ABS issues hold $41 billion, or 3 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 first quarter of 2018, banks and thrifts saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt - an increase of $14.7 billion, or 1.2 percent.  Agency and GSE portfolios and MBS increased their holdings by $10.8 billion, or 1.8 percent, life insurance companies increased their holdings by $9.2 billion, or 2.0 percent, and CMBS, CDO and other ABS issues increased their holdings by $5.6 billion, or 1.3 percent.

In percentage terms, other insurance companies saw the largest increase in their holdings of commercial/multifamily mortgages, an increase of 4.9 percent.  State and local government retirement funds saw their holdings decrease 1.7 percent.

CHANGES IN MULTIFAMILY MORTGAGE DEBT OUTSTANDING

The $19.3 billion increase in multifamily mortgage debt outstanding between the fourth quarter of 2017 and first quarter of 2018 represents a 1.5 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 $10.8 billion, or 1.8 percent.  Commercial banks increased their holdings of multifamily mortgage debt by $7.1 billion, or 1.8 percent.  Life insurance companies increased by $1.4 billion, or 2.0 percent.  CMBS saw the largest decline in their holdings of multifamily mortgage debt, by $1.7 billion, or down 4.0 percent.

In percentage terms, finance companies recorded the largest increase in holdings of multifamily mortgages, at 5.0 percent.  Private pension funds saw the biggest decrease at 4.8 percent.