MBA: Commercial/Multifamily Mortgage Debt Grows by Largest Annual Amount Since 2006
The Mortgage Bankers Association reported commercial/multifamily mortgage debt outstanding at the end of 2019 rose by $248 billion (7.3 percent) from a year ago.
The MBA 4th Quarter Commercial/Multifamily Mortgage Debt Outstanding report found total mortgage debt outstanding in the final three months of 2019 rose by 2.1 percent ($75.0 billion) compared to the third quarter, with all four major investor groups increasing their holdings. Multifamily mortgage debt grew by $30.4 billion (2.0 percent) to $1.53 trillion during the fourth quarter, and by $116.7 billion (8.2 percent) for the entire year.
“In 2019, the amount of mortgage debt backed by commercial and multifamily properties grew by the largest annual amount since before the Global Financial Crisis,” said Jamie Woodwell, MBA Vice President of Commercial Real Estate Research. “Every major capital source increased their holdings, and some by double digits. Continuing the recent trend, the growth in multifamily mortgage debt outpaced that of other property types.”
Looking ahead, Woodwell noted, “a key question will be how the coronavirus and related economic shocks will affect the market’s momentum in 2020. At this point it is still too early to tell.”
The four major investor groups are: banks and thrifts; commercial mortgage-backed securities; 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 MBA analysis summarizes 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).
The report said commercial banks continue to hold the largest share (39 percent) of commercial/multifamily mortgages at $1.4 trillion, followed by Agency and GSE portfolios and MBS at $744 billion (20 percent). Life insurance companies hold $561 billion (15 percent), while CMBS, CDO and other ABS issues hold $504 billion (14 percent).
Multifamily Mortgage Debt Outstanding
Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share of total debt outstanding at $744 billion (49 percent), followed by commercial banks with $459 billion (30 percent), life insurance companies with $149 billion (10 percent), state and local governments with $88 billion (6 percent) and CMBS, CDO and other ABS issues with $48 billion (3 percent).
Changes in Commercial/Multifamily Mortgage Debt Outstanding
In the fourth quarter, CMBS, CDO and other ABS issues saw the largest rise in dollar terms in their holdings of commercial/multifamily mortgage debt, to $23.1 billion (4.8 percent). Commercial banks increased their holdings by $21.5 billion (1.5 percent), agency and GSE portfolios and MBS increased their holdings by $16.1 billion (2.2 percent), while finance companies saw the largest decrease at $117 million (0.4 percent).
In percentage terms, CMBS, CDO and other ABS issues saw the largest increase(4.8 percent), while state and local government retirement funds saw their holdings decrease the most, at 1.0 percent.
Changes in Multifamily Mortgage Debt Outstanding
The $30.5 billion rise in multifamily mortgage debt outstanding between the third and fourth quarters represented a 2.0 percent increase. In dollar terms, agency and GSE portfolios and MBS saw the largest increase, at $16.1 billion (2.2 percent, followed by commercial banks increased their holdings of multifamily mortgage debt by $6.7 billion (1.5 percent). CMBS, CDO and other ABS issues increased holdings by 9.5 percent to $4.1 billion. Private pension funds saw the largest decline (7.2 percent) in their holdings, by $65 million.
In percentage terms, real estate investment trusts recorded the largest increase in holdings of multifamily mortgages (23.9 percent), while private pension funds saw the biggest decrease (7.2 percent).
Changes in Commercial/Multifamily Mortgage Debt Outstanding During 2019
Between December 2018 and December 2019, commercial banks saw the largest gain (6.1 percent) in dollar terms in their holdings of commercial/multifamily mortgage debt – an increase of $82 billion. State and local government decreased their holdings of commercial/multifamily mortgages by $1.5 billion (1.4 percent).
In percentage terms, finance companies saw the largest increase (14.9 percent) in their holdings of commercial/multifamily mortgages, while state and local government retirement funds saw the largest decrease (3.3 percent).
Changes in Multifamily Mortgage Debt Outstanding During 2019
The $116.7 billion rise in multifamily mortgage debt outstanding during 2019 represents an 8.2 percent increase. In dollar terms, agency and GSE portfolios and MBS saw the largest increase in their holdings of multifamily mortgage debt at 10 percent ($69.2 billion). State and local government saw the largest decrease in their holdings down $1.3 billion (1.4 percent).
In percentage terms, REITs recorded the largest increase in their holdings of multifamily mortgages, 52 percent, while private pension funds saw the largest decrease, 24 percent.
The report’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.
MBA’s complete Commercial/Multifamily Mortgage Debt Outstanding report can be downloaded here: www.mba.org/documents/research/4Q19MortgageDebtOutstanding.pdf.