The level of commercial/multifamily mortgage debt outstanding decreased in the second quarter, to $3.47 trillion, according to the Mortgage Bankers Association (MBA) analysis of the Federal Reserve Board Flow of Funds data. The $3.47 trillion in commercial/multifamily mortgage debt outstanding recorded by the Federal Reserve was a decrease of $9.9 billion or 0.3 percent from the first quarter 2009. Multifamily mortgage debt outstanding grew to $914 billion, an increase of $6 billion or 0.7 percent from first quarter.
"Commercial/multifamily mortgage debt outstanding fell by 0.3 percent in the second quarter, as the amount of loans paid-down and paid-off exceeded the amount of new mortgages taken out," said Jamie Woodwell, MBA's vice president of commercial real estate research. "Most major investor groups, including the CMBS market, life insurance companies and banks and thrifts, saw reductions in their holdings of commercial/multifamily mortgages, while Fannie Mae and Freddie Mac increased their holdings of multifamily mortgages."
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 (included under Life Insurance Companies in this data) and in CMBS, collateralized debt obligations (CDOs) and other asset backed securities (ABS) for which the security issuers and trustees hold the note.
Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $1.55 trillion, or 45 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. An MBA Research PolicyNote found that among the top 10 commercial real estate bank lenders, 48 percent of their aggregate balance of commercial (non-multifamily) real estate loans were related to owner-occupied properties. (Note: It is the borrower's business income, not the income derived from the property's rents and leases, which drive the underwriting, pricing and performance of these loans.)
Since the other loans reported here are generally income property loans, meaning that the income primarily comes from rents, the commercial bank numbers are not comparable.
CMBS, CDO and other ABS issuers are the second largest holders of commercial/multifamily mortgages, holding $714 billion, or 21 percent of the total. Life insurance companies hold $313 billion, or 9 percent of the total, and savings institutions hold $195 billion, or 6 percent of the total. The GSEs, agency-backed mortgage pools and GSE-backed mortgage pools, including Fannie Mae, Freddie Mac and Ginnie Mae, hold $195 billion in multifamily loans that support the mortgage-backed securities they issued and an additional $157 billion in "whole" loans in their own portfolios. This represents a total share of 10 percent of outstanding commercial/multifamily mortgages. As noted above, many life insurance companies, banks and the GSEs purchase and hold a large number of CMBS, CDO and other ABS issues. These loans appear in the CMBS, CDO and other ABS category previously referenced.
Looking just at multifamily mortgages, the GSEs and Ginnie Mae hold the largest share of multifamily mortgages, with $195 billion in federally related mortgage pools and $157 billion in their own portfolios or 38 percent of the total multifamily debt outstanding. They are followed by commercial banks with $217 billion, or 24 percent of the total. CMBS, CDO and other ABS issuers hold $112 billion, or 12 percent of the total; state and local governments with $71 billion, or 8 percent of the total; savings institutions with $66 billion, or 7 percent of the total; and life insurance companies with $51 billion, or 6 percent of the total.
In the second quarter of 2009, CMBS, CDO, and other ABS issues saw the largest decrease in dollar terms in their holdings of commercial/multifamily mortgage debt - a decrease of $12 billion or 2 percent. Commercial banks decreased their holdings of commercial/multifamily mortgages by $3 billion or 0.2 percent. Life insurance companies decreased their holdings of commercial/multifamily mortgages by $3 billion or 0.8 percent. Nonfinancial corporate business decreased their holdings of commercial/multifamily mortgages by $2 billion or 27 percent.
In percentage terms, nonfinancial corporate business saw the largest decrease in their holdings of commercial/multifamily mortgages, a drop of -27 percent. REITS saw their holdings decrease by -4.5 percent.
The $6 billion increase in multifamily mortgage debt outstanding between the first quarter and second quarter 2009 represents a 0.7 percent increase. In dollar terms, GSEs saw the largest increase in their holdings of multifamily mortgage debt, an increase of $3 billion or 2 percent. Agency- and GSE-backed mortgage pools increased their holdings of multifamily mortgage debt by $3 billion or 2 percent. State and local government increased by $2 billion or 3 percent. CMBS, CDO and other ABS issues saw a drop in their holdings of multifamily mortgage debt by $1 billion or 1 percent.
In percentage terms, state and local government recorded the biggest increase in their holdings of multifamily mortgages at 3 percent. Nonfinancial corporate business saw the biggest drop of 27 percent.
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