Skip to main content

Selling mortgages is not rocket science--Know thy competition

Jun 05, 2005

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. For more information, visit www.mortgagebankers.org.
About the author
Published
Jun 05, 2005
The Rise Of Mortgage Influencers

Social selling, the new frontier

Apr 11, 2024
Mortgage Influencers

Three Common Mistakes

Apr 11, 2024
Trimming The Fat

Direct Wholesale Rates is a passion project aimed at cutting the retail margin

Mar 28, 2024
Get The Gig With Gig Workers

Your borrowers might be among 39% of American workforce that freelances

Mar 27, 2024
When Life Hits You Like A Truck, Make Opportunity Fit Your Needs

Think outside the box and visualize all the possible ways to achieve things

Mar 27, 2024
The Difference Between Competing And Closing

Master Non-QM/Non-Agency business purpose lending

Mar 27, 2024