Commercial/multi-family debt increasesMortgagePress.comMortgage Bankers Association, Federal Reserve Board Flow of Funds data The level of commercial/multi-family mortgage debt outstanding grew by 2.9 percent in the third quarter of 2006, reaching $2.845 trillion, according to the Mortgage Bankers Association (MBA) analysis of the Federal Reserve Board Flow of Funds data. The $2.845 trillion in commercial/multi-family mortgage debt outstanding recorded by the Federal Reserve was an increase of $79.9 billion, or 2.9 percent, from the second quarter of 2006. Multi-family mortgage debt outstanding grew to $714 billion at the end of the third quarter - an increase of $10.8 billion, or 1.5 percent, from the second quarter. "Nearly every investor group increased their stake in commercial/multi-family mortgages in the third quarter," said Jamie Woodwell, MBA's senior director of commercial/multi-family research. "As investors assess different investment options for their capital, commercial/multi-family mortgages continue to attract a great deal of interest." Commercial banks continued to hold the largest share of commercial/multi-family mortgages, with more than $1.2 trillion, or 44 percent of the total. Many of the commercial mortgage loans reported by commercial banks, however, were actually "commercial and industrial" loans, to which pieces of commercial properties had been pledged as collateral. It was the borrowers' business income - not the income derived from the properties' rents and leases - that drove the underwriting, pricing and performance of these loans. Since the other loans examined by MBA were generally income property loans, meaning that the income primarily came from rents, the commercial bank numbers are not comparable. Commercial mortgage-backed securities (CMBS), collateralized debt obligations (CDO) and other asset-backed securities (ABS) pools were the second largest holders of commercial/multi-family mortgages, holding $583 billion, or 21 percent of the total. Life insurance companies held $279 billion, or 10 percent of the total, and savings institutions hold $212 billion, or eight percent of the total. Government-sponsored enterprises (GSEs) and federally related mortgage pools, including Fannie Mae, Freddie Mac and Ginnie Mae, held $137 billion in multi-family loans that supported the mortgage-backed securities they issued (referred to here as federally related mortgage pools) and an additional $79 billion "whole" loans in their own portfolios, for a total share of eight percent of outstanding commercial/multi-family mortgages. Looking just at multi-family mortgages, the GSEs and Ginnie Mae held the largest share of multi-family mortgages, with $137 billion in federally related mortgage pools and $79 billion in their own portfolios - 30 percent of the total multi-family debt outstanding. They were followed by commercial banks with $149 billion, or 21 percent of the total; savings institutions with $103 billion, or 15 percent of the total; CMBS, CDO and other ABS issuers with $97 billion, or 14 percent of the total; state and local governments with $60 billion, or eight percent of the total; and life insurance companies with $44 billion, or six percent of the total. In the third quarter of 2006, commercial banks saw the largest increase in dollar terms in their holdings of commercial/multi-family mortgage debt - an increase of $36 billion, or three percent, which represented 45 percent of the total $79.9 billion increase. CMBS, CDO and other ABS issuers increased their holdings of commercial/multi-family mortgages by $26 billion, or five percent, representing 33 percent of the net increase in commercial/multi-family mortgage debt outstanding. In percentage terms, real estate investment trusts saw the biggest increase in their holdings of commercial/multi-family mortgages - a jump of 14 percent - while state and local government retirement funds fell one percent. The $10.8 billion increase in multi-family mortgage debt outstanding between the second and third quarters represented a 1.5 percent increase. In dollar terms, CMBS, CDO and other ABS issuers saw the largest increase in their holdings of multi-family mortgage debt - an increase of $3.1 billion, or 3.3 percent, which represented 29 percent of the total increase. Federally related mortgage pools increased their holdings of multi-family mortgage debt by $2.5 billion, or 1.6 percent. In percentage terms, CMBS, CDO and other ABS issuers recorded the biggest increase in their holdings of multi-family mortgages, 3.3 percent, while finance companies saw the biggest drop, -2.2 percent. For more information, visit www.mbaa.org.