Commercial and Multifamily Mortgage Debt Outstanding Rises for First Time Since Q3 of 2009

The level of commercial/multifamily mortgage debt outstanding increased by 0.1 percent in the second quarter of 2011, the first quarterly increase since the third quarter of 2009, according to the Mortgage Bankers Association (MBA). The $2.4 trillion in commercial/multifamily mortgage debt outstanding was $3.5 billion higher than the first quarter 2011 figure. Multifamily mortgage debt outstanding rose to $802 billion, an increase of $3.9 billion or 0.5 percent from the first quarter. "For the first time in a year-and-a-half, new commercial and multifamily mortgage originations outpaced the paying off and paying down of existing loans," said Jamie Woodwell, MBA's VP of commercial real estate research. "Increases in the balance of mortgages held and insured by life insurance companies, Fannie Mae, Freddie Mac and FHA outpaced declines among banks and thrifts and CMBS issues." The analysis summarizes the 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 commercial mortgage-backed securities (CMBS), collateralized debt obligations (CDOs) and other asset-backed securities (ABS) for which the security issues and trustees hold the note (and which appear here under CMBS, CDO and other ABS issues). MBA recently improved its reporting of commercial and multifamily mortgage debt outstanding. The new reporting excludes two categories of loans that had formerly been included—loans for acquisition, development and construction and loans collateralized by owner-occupied commercial properties. By excluding these loan types, the analysis here more accurately reflects the balance of loans supported by office buildings, retail centers, apartment buildings and other income-producing properties that rely on rents and leases to make their payments. Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $792 billion, or 33 percent of the total. CMBS, CDO and other ABS issues are the second largest holders of commercial/multifamily mortgages, holding $617 billion, or 26 percent of the total. Agency and government-sponsored enterprise (GSE) portfolios and MBS hold $332 billion, or 14 percent of the total, and life insurance companies hold $304 billion, or 13 percent of the total. Many life insurance companies, banks and the GSEs purchase and hold CMBS, CDO and other ABS issues. These loans appear in the CMBS, CDO and other ABS categories. Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share, with $332 billion or 41 percent of the total multifamily debt outstanding. They are followed by banks and thrifts with $216 billion, or 27 percent of the total. CMBS, CDO and other ABS issues hold $96 billion, or 12 percent of the total; state and local governments hold $73 billion, or nine percent of the total; life insurance companies hold $48 billion, or six percent of the total; and the federal government holds $14 billion (two percent of the total). In the second quarter of 2011, life insurance companies saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt—an increase of $4 billion or 1.5 percent. Agency and GSE portfolios and MBS increased their holdings of commercial/multifamily mortgages by $4 billion or one percent. Commercial banks, CMBS, CDO and other ABS issues, finance companies, the household sector and nonfinancial corporate business all decreased their holdings.  In percentage terms, REITs saw the largest increase in their holdings of commercial/multifamily mortgages, an increase of 8 percent. The household sector saw their holdings decrease seven percent. The $4 billion increase in multifamily mortgage debt outstanding between the first quarter and second quarter of 2011 represents a 0.5 percent increase. In dollar terms, agency and GSE portfolios and MBS saw the largest increase in their holdings of multifamily mortgage debt, an increase of $4 billion, or one percent. Commercial banks increased their holdings of multifamily mortgage debt by $1 billion, or 0.6 percent. Life insurance companies increased by $701 million, or 1.5 percent. CMBS, CDO, and other ABS issues saw the biggest decrease in their holdings of multifamily mortgage debt, by $1.6 billion, or 1.6 percent. In percentage terms, life insurance companies recorded the largest increase in holdings of multifamily mortgages, at 1.5 percent. Non-financial corporate business saw the biggest decrease, at 59 percent.