MBA releases analysis of federal reserve board flow of funds datamortgagepress.comFlow of Funds, commercial market, multifamily market
The Mortgage Bankers Association (MBA) has released its analysis
of Federal Reserve Board Flow of Funds data, showing record levels
of capital flowed to the commercial/multifamily mortgage markets in
2004. At the end of 2004, $2.29 trillion in commercial/multifamily
mortgage debt outstanding was recorded by the Federal Reserve, an
increase of $219.5 billion or 10.6 percent from the end of 2003. In
the fourth quarter alone, commercial and multifamily mortgage debt
outstanding increased by $68.6 billion, or 3.1 percent, also a new
record. At the end of 2004, multifamily mortgage debt outstanding
stood at $601 billion, an increase of $44.1 billion or 7.9 percent
over the year, and $12.1 billion or 2.1 percent in the fourth
quarter alone.
"The commercial and multifamily mortgage markets continued their
strong growth in 2004 showing record levels of
commercial/multifamily mortgage debt outstanding and record amounts
of new capital coming into the markets," said Doug Duncan, MBA's
chief economist and senior vice president. "With the tight
integration that has developed between commercial mortgage markets
and capital markets, both domestic and international, the first few
months of 2005 are showing that trend continuing."
The Federal Reserve Flow of Funds data summarizes the holding 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
the Federal Reserve data under life insurance companies) and in
commercial mortgage-backed securities (CMBS) for which the security
issuers and trustees hold the note (and which appear in the Federal
Reserve data under CMBS issuers).
Commercial banks continue to hold the largest share of
commercial/multifamily mortgages, with $982 billion, or 43 percent
of the total. Many of the commercial mortgage loans reported by
commercial banks, however, are actually "commercial and industrial"
loans to which a piece of commercial property has been pledged as
collateral, and it is the borrower's business income, not the
income derived from the property's rents and leases that drives the
underwriting, pricing and performance of the loan. Since the other
loans are income property loans, meaning that the income primarily
comes from rents, the commercial bank numbers are not
comparable.
CMBS pools are the second largest holders of
commercial/multifamily mortgages, holding $423 billion or 18
percent of the total. Life insurance companies hold $251 billion,
or 11 percent of the total, and savings institutions hold $182
billion, or eight percent of the total. Government-sponsored
enterprises (GSEs) and federally related mortgage pools, including
Fannie Mae, Freddie Mac and Ginnie Mae, hold $125 billion in
multifamily loans that support mortgage-backed securities they
issue (referred to here as federally related mortgage pools) and an
additional $57 billion "whole" loans in their own portfolios, for a
total share of eight percent. (As noted above, many life insurance
companies and some GSEs also purchase and hold a large number of
CMBS issues. These loans appear in the CMBS category referenced
above).
Looking just at multifamily mortgages, the GSEs and Ginnie Mae
hold the biggest share of multifamily mortgages, with $125 billion
in federally related mortgage pools and $57 billion in their own
portfolios30 percent of the total multifamily debt outstanding.
They are followed by commercial banks with $119 billion, or 20
percent of the total, savings institutions with $88 billion, or 15
percent of the total, and CMBS issues with $75 billion, or 13
percent of the total.
2004 marked by record-level debt
Between December 2003 and December 2004, commercial banks saw the
largest increase in dollar terms in their holdings of
commercial/multifamily mortgage debt, an increase of $114 billion
or 13 percent, which represents 52 percent of the total $220
billion increase. CMBS issuers increased their holdings of
commercial/multifamily mortgages by $61 billion or 17 percent,
representing 28 percent of the net increase in
commercial/multifamily mortgage debt outstanding. Savings
institutions experienced a net increase of $15 billion or nine
percent.
In percentage terms, CMBS issuers saw the biggest increase in
their holdings of commercial/multifamily mortgagesa jump of 17
percent, while non-farm, non-corporate businesses saw the biggest
drop (a net change of minus 16 percent).
The $44 billion increase in multifamily mortgage debt outstanding
during 2004 represents an eight percent increase. In dollar terms,
commercial banks saw the largest increase in their holdings of
multifamily mortgage debt, an increase of $14 billion or 14
percent, which represents 33 percent of the total increase. Savings
institutions saw an increase of $10 billion or 12 percent in their
holdings. CMBS issuers increased their holdings of multifamily
mortgage debt by $8 billion or 12 percent, and government-sponsored
enterprises increased their holdings by $4 billion or eight
percent. In percentage terms, commercial banks recorded the biggest
increase in their holdings of multifamily mortgages, 14 percent,
while non-farm, non-corporate businesses saw the biggest drop19
percent.
4Q debt increase sets record
In the fourth quarter, commercial banks saw the largest increase in
dollar terms in their holdings of commercial/multifamily mortgage
debt, an increase of $31 billion or three percent, which represents
45 percent of the total $69 billion increase. CMBS issuers
increased their holdings of commercial/multifamily mortgages by $22
billion or six percent, representing 32 percent of the net increase
in commercial/multifamily mortgage debt outstanding. Finance
companies experienced a net increase of $5 billion or nine
percent.
In percentage terms, finance companies saw the biggest increase
in their holdings of commercial/multifamily mortgagesa jump of nine
percent, while non-farm, non-corporate businesses saw the biggest
drop (a net change of minus six percent).
The $12.1 billion increase in multifamily mortgage debt
outstanding between the third and fourth quarters of 2004
represents a 2.1 percent increase. In dollar terms, commercial
banks saw the largest increase in their holdings of multifamily
mortgage debt, an increase of $4 billion or four percent, which
represents 36 percent of the total increase. CMBS issuers saw an
increase of $3 billion, or four percent, in their holdings. Savings
institutions increased their holdings of multifamily mortgage debt
by $2 billion or two percent, and federally related mortgage pools
increased their holdings by $1 billion or one percent. In
percentage terms, real estate investment trusts (REITs) recorded
the biggest increase in their holdings of multifamily mortgages10
percent, while non-farm, non-corporate businesses saw the biggest
dropminus seven percent.
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