Commercial/Multifamily Mortgage Debt Outstanding Posts Largest Q1 Increase Since Before Great Recession
Commercial/multifamily mortgage debt outstanding increased by $44.3 billion in the first quarter as all four major investor groups increased their holdings, the Mortgage Bankers Association reported this morning.
The MBA 1Q Commercial/Multifamily Mortgage Debt Outstanding report said the total represented a 1.4 percent increase over the fourth quarter. 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 quarter.
“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 MBA Vice President of Commercial Real Estate Research Jamie Woodwell. “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.”
The report said commercial banks continue to hold the largest share of commercial/multifamily mortgages, $1.3 trillion, or 40 percent, followed by agency portfolios, GSE portfolios and mortgage-backed securities, holding $617 billion, or 19 percent. Life insurance companies hold $471 billion (15 percent); CMBS, CDO and other ABS issues hold $446 billion (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; federal agency and government-sponsored enterprise portfolios and mortgage-backed securities; life insurance companies; and commercial mortgage-backed securities, collateralized debt obligation and other asset backed securities 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).
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, followed by banks and thrifts with $411 billion (32 percent), state and local government with $96 billion (8 percent), life insurance companies with $74 billion (6 percent), CMBS, CDO and other ABS issues with $41 billion (3 percent) and nonfarm non-corporate business with $14 billion (1 percent.
Changes in Commercial/Multifamily Mortgage Debt Outstanding
Banks and thrifts saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt in the first quarter, an increase of $14.7 billion, or 1.2 percent. Agency and GSE portfolios and MBS increased their holdings by $10.8 billion (1.8 percent), life insurance companies increased their holdings by $9.2 billion (2.0 percent) and CMBS, CDO and other ABS issues increased their holdings by $5.6 billion (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
MBA said the $19.3 billion increase in multifamily mortgage debt outstanding between the fourth quarter and first quarter 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 (1.8 percent). Commercial banks increased their holdings of multifamily mortgage debt by $7.1 billion (1.8 percent). Life insurance companies increased by $1.4 billion (2.0 percent). CMBS saw the largest decline in holdings of multifamily mortgage debt, by $1.7 billion (-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.
The complete Commercial/Multifamily Mortgage Debt Outstanding report can be downloaded at http://www.mba.org/documents/research/1Q18MortgageDebtOutstanding.pdf.
The MBA 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.
