MBA: 3Q Commercial/Multifamily Mortgage Debt Rises to $3.11 Trillion; CMBS Debt Outstanding Reverses Years-Long Decline

Commercial/multifamily mortgage debt outstanding increased by $45.4 billion, or 1.5 percent, to $3.11 trillion in the third quarter as all four major investor groups increased their holdings over the second quarter, the Mortgage Bankers Association reported.

The MBA Third Quarter Commercial/Multifamily Mortgage Debt Outstanding Report noted the balance of commercial mortgage-backed securities, which has declined on a quarterly basis with only a few exceptions since 2008, saw its largest increase in outstanding debt since 2007. MBA Vice President of Commercial Real Estate Research Jamie Woodwell called the increase “a significant turning point” for the CMBS market.

“With the so-called ‘wall of maturities’ behind us, and a vibrant market for new originations, we are once again seeing more new loans being originated for CMBS than we are seeing in old loans paying off and paying down,” Woodwell said. “The result is the largest increase in outstanding CMBS mortgages since the end of 2007.”

The report said multifamily mortgage debt outstanding rose to $1.2 trillion, an increase of $24.9 billion, or 2.1 percent, from the second of quarter.

Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $1.3 trillion, or 40 percent of the total, followed by Agency and GSE portfolios and MBS with $573 billion, or 18 percent. Life insurance companies hold $454 billion, or 15 percent; and CMBS, CDO and other ABS issues hold $431 billion, or 14 percent. (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.)

The four major investor groups are: bank and thrift; CMBS; collateralized debt obligation and other asset backed securities issues; federal agency and government sponsored enterprise portfolios and mortgage backed securities; 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 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).

Multifamily Mortgage Debt Outstanding

Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share, with $573 billion, or 47 percent, followed by banks and thrifts with $400 billion, or 33 percent. State and local government hold $93 billion, or 8 percent; life insurance companies hold $71 billion, or 6 percent; CMBS, CDO and other ABS issuers hold $42 billion, or 4 percent, and nonfarm non-corporate business holds $14 billion, or one percent.

Changes in Commercial/Multifamily Mortgage Debt Outstanding

In the third quarter, agency and GSE portfolios and MBS saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt, an increase of $19.8 billion, or 3.6 percent. Banks and thrifts increased their holdings by $9.0 billion, or 0.7 percent; life insurance companies increased their holdings by $6.0 billion, or 1.3 percent; and CMBS, CDO and other ABS issues increased their holdings by $3.6 billion, or 0.8 percent. 

In percentage terms, other insurance companies saw the largest increase in their holdings of commercial/multifamily mortgages, an increase of 5.6 percent. Finance companies saw their holdings decrease by 0.9 percent.

Changes in Multifamily Mortgage Debt Outstanding

The $24.9 billion increase in multifamily mortgage debt outstanding between the second and third quarters represents a 2.1 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 $19.8 billion, or 3.6 percent. Commercial banks increased their holdings of multifamily mortgage debt by $1.7 billion, or 0.4 percent. State and local government increased by $1.6 billion, or 1.8 percent. Federal government saw the largest decline in their holdings of multifamily mortgage debt, by $378 million, or 3.0 percent.

In percentage terms, agency and GSE portfolios and MBS recorded the largest increase in holdings of multifamily mortgages, at 3.6 percent. Private pension funds saw the biggest decrease at 4.4 percent.

The MBA Commercial/Multifamily Mortgage Debt Outstanding report can be downloaded here. MBA’s analysis is based on data from the Federal Reserve Board’s Financial Accounts of the United States, the Federal Deposit Insurance Corp.’s Quarterly Banking Profile and data from Wells Fargo Securities. More information on this data series is contained in Appendix A.

You can download the full report at http://www.mba.org/documents/research/3Q17MortgageDebtOutstanding.pdf.