MBA Chart of the Week: Year-to-Date Net Change in Bank Holdings of Multifamily, Commercial Property Loans

The Federal Deposit Insurance Corp. will soon release its Quarterly Banking Profile showing how the balance sheets of banks changed over the course of the second quarter.   

Those data are likely to show a continuation in the strong growth in banks’ holdings of multifamily and commercial mortgages, with increases of each running at or near record paces. But even more recent data from the Federal Reserve Board in this week’s chart indicates that we may already be on to the next chapter of the story.  

Through the second quarter, banks’ holdings of multifamily mortgages had grown by $18 billion, roughly on pace with last year’s record rate. The $55 billion first-half increase in banks’ holdings of mortgages secured by other commercial property types was roughly 50 percent faster than the 2015 pace. But that may be old news.   

Over the past three weeks–starting the week of July 20 and continuing at least through August 10–commercial banks have been reducing their aggregate holdings of multifamily mortgages. The three-week, $1.3 billion decline is a small fraction of their overall holdings, but the reversal from growing to shrinking portfolios is noteworthy.  

As we noted in our March Datanote (https://www.mba.org/2016-press-releases/march/mba-releases-research-datanote-on-sources-of-commercial-and-multifamily-mortgage-financing), this year’s regulatory pressures have the potential to affect the availability of commercial and multifamily mortgage financing. The current decline in bank multifamily lending may be a key early indicator of that starting to happen.  

To view the Chart of the Week, click https://www.mba.org/news-research-and-resources/forecasts-data-and-reports/forecasts-and-commentary/chart-of-the-week.  

(Jamie Woodwell is vice president of commercial/multifamily research and economics with the Mortgage Bankers Association. He can be reached at jwoodwell@mba.org.)