WASHINGTON, D.C. (December 19, 2019) – The level of commercial/multifamily mortgage debt outstanding rose by $75.7 billion (2.2 percent) in the third quarter of 2019, according to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report.
Total commercial/multifamily debt outstanding rose to $3.59 trillion at the end of the third quarter. Multifamily mortgage debt alone increased $40.6 billion (2.8 percent) to $1.5 trillion from the second quarter.
“Strong property markets, low interest rates and low mortgage delinquencies continue to draw more capital to commercial and multifamily mortgages,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “Every major capital source increased their holdings of commercial real estate debt during the third quarter, led by Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA). The growth of investor-driven lenders is also evident, with mortgage REITs on pace to soon become the fifth largest source of capital for commercial and multifamily mortgages.”
The four major investor groups are: banks and thrifts; 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.
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 $728 billion. Life insurance companies hold $552 billion (15 percent), and CMBS, CDO and other ABS issues hold $481 billion (13 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.
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, in which they hold the mortgage note (and which appear in this data under Life Insurance Companies), and in CMBS, CDOs and other ABS, in 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 $728 billion (48 percent), followed by banks and thrifts with $452 billion (30 percent), life insurance companies with $147 billion (10 percent), state and local government with $90 billion (6 percent), and CMBS, CDO and other ABS issues holding $44 billion (3 percent). Nonfarm non-corporate businesses hold $17 billion (1 percent).
CHANGES IN COMMERCIAL/MULTIFAMILY MORTGAGE DEBT OUTSTANDING
In the third quarter, agency and GSE portfolios and MBS saw the largest gains in dollar terms in their holdings of commercial/multifamily mortgage debt – an increase of $24.9 billion (3.5 percent). Commercial banks increased their holdings by $21.2 billion (1.5 percent), life insurance companies increased their holdings by $12.9 billion (2.4 percent), and CMBS, CDO and other ABS issues increased their holdings by $9.6 billion (2.0 percent).
In percentage terms, state and local government retirement funds saw the largest increase – 4.4 percent – in their holdings of commercial/multifamily mortgages. Conversely, state and local governments saw their holdings decrease 0.7 percent.
CHANGES IN MULTIFAMILY MORTGAGE DEBT OUTSTANDING
The $40.6 billion increase in multifamily mortgage debt outstanding from the second quarter represents a 2.8 percent gain. In dollar terms, agency and GSE portfolios and MBS saw the largest growth – $24.9 billion (3.5 percent) – in their holdings of multifamily mortgage debt. Commercial banks increased their holdings by $7.0 billion (1.6 percent), and life insurance companies increased by $3.4 billion (2.4 percent). State and local government saw the largest decline in their holdings of multifamily mortgage debt, down $605 million (0.7 percent).
In percentage terms, the federal government recorded the largest increase in holdings of multifamily mortgages, 36.9 percent, and private pension funds saw the biggest decrease, at 6.7 percent.
MBA’s analysis is based on data from the Federal Reserve Board’s Financial Accounts of the United States, the Federal Deposit Insurance Corporation’s (FDIC) Quarterly Banking Profile, and data from Wells Fargo Securities. More information on this data series is contained in Appendix A. MBA’s third quarter of 2019 Commercial/Multifamily Mortgage Debt Outstanding report can be downloaded here.