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MBA releases Q4 2006 commercial/multi-family mortgage debt study

National Mortgage Professional
Mar 24, 2014

MBA releases Q4 2006 commercial/multi-family mortgage debt studyMortgagePress.comCommercial multi-family mortgage debt

At the end of 2006, $2.95 trillion in commercial/multi-family mortgage debt outstanding was recorded by the Federal Reserve an increase of $333 billion, or 12.7 percent, from the end of 2005. In the fourth quarter alone, commercial and multi-family mortgage debt outstanding increased by $99 billion, or 3.5 percent. At the end of 2006, multi-family mortgage debt outstanding stood at $731 billion an increase of $51 billion or 7.5 percent over the year and $15 billion, or 2.1 percent, in the fourth quarter alone.

"The growth in commercial/multi-family mortgage holdings comes amid a number of signs of continued market strength," said Jamie Woodwell, the Mortgage Bankers Association's (MBA's) senior director for commercial/multi-family research. "The most recent Federal Reserve Beige Book characterized commercial real estate markets as strong, solid and firming. We also see low delinquencies and other signs of mortgage performance continuing to show strength."

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), collateralized debt obligations (CDOs) and other asset-backed securities (ABS), for which the security trustees hold the notes (and which appear here under CMBS, CDO and other ABS issues).

Commercial banks continue to hold the largest share of commercial/multi-family mortgages with almost $1.3 trillion, or 44 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. 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 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 pools are the second largest holders of commercial/multi-family mortgages holding $630 billion, or 21 percent of the total. Life insurance companies hold $284 billion, or 10 percent of the total, and savings institutions hold $203 billion, or seven percent of the total. Government sponsored-enterprises (GSEs) and agency- and GSE-backed mortgage pools including Fannie Mae, Freddie Mac and Ginnie Mae hold $140 billion in multi-family loans that support the mortgage-backed securities they issue (referred to here as agency- and GSE-backed mortgage pools) and an additional $80 billion whole loans in their own portfolios, for a total share of seven percent of outstanding commercial/multi-family mortgages. (As noted above, many life insurance companies, banks and the GSEs also purchase and hold a large number of CMBS, CDO and other ABS issues. These loans appear in the CMBS, CDO and other ABS category referenced above.)

Looking just at multi-family mortgages, the GSEs and Ginnie Mae hold the largest share of multi-family mortgages, with $140 billion in agency- and GSE-backed mortgage pools and $80 billion in their own portfolios 30 percent of the total multi-family debt outstanding. They are followed by commercial banks with $160 billion, or 22 percent of the total; CMBS, CDO and other ABS issues with $103 billion, or 14 percent of the total; savings institutions with $96 billion, or 13 percent of the total; state and local governments with $61 billion, or eight percent of the total; and life insurance companies with $45 billion, or six percent of the total.

Between December 2005 and December 2006, commercial banks saw the largest increase in dollar terms in their holdings of commercial/multi-family mortgage debt an increase of $161 billion, or 14 percent, which represents 48 percent of the total $333 billion increase. CMBS, CDO and other ABS issues increased their holdings of commercial/multi-family mortgages by $108 billion, or 21 percent representing 32 percent of the net increase in commercial/multi-family mortgage debt outstanding. Life insurance companies experienced a net increase of $17 billion, or seven percent.

In percentage terms, real estate investment trusts (REITs) saw the biggest increase in their holdings of commercial/multi-family mortgages a jump of 36 percent while private pension funds saw the biggest drop (a net change of negative four percent).

The $51 billion increase in multi-family mortgage debt outstanding during 2006 represents an eight percent increase. In dollar terms, commercial banks saw the largest increase in their holdings of multi-family mortgage debt an increase of $20 billion, or 14 percent, which represents 39 percent of the total increase. CMBS issues saw an increase of $13 billion, or 15 percent, in their holdings.

In percentage terms, REITs recorded the biggest increase in their holdings of multi-family mortgages 52 percent while private pension funds saw the biggest drop negative five percent. (Note that a large factor in the increase in commercial bank holdings and decrease in savings institution holdings is the decision by CitiBank to surrender two of its thrift charters and fold those operations into its national bank. This resulted in a move of CitiBank thrift mortgage holdings from the savings institutions category to the commercial bank category.)

In the fourth quarter of 2006, CMBS, CDO and other ABS issues saw the largest increase in dollar terms in their holdings of commercial/multi-family mortgage debt an increase of $49 billion, or eight percent, which represents 49 percent of the total $99 billion increase. Commercial banks increased their holdings of commercial/multi-family mortgages by $44 billion, or four percent representing 44 percent of the net increase in commercial/multi-family mortgage debt outstanding.

In percentage terms, CMBS, CDOs and other ABS issues saw the biggest increase in their holdings of commercial/multi-family mortgages a jump of eight percent while savings institutions saw the biggest drop (a net change of negative-four percent).

The $15 billion increase in multi-family mortgage debt outstanding between the third and fourth quarters represents a two percent increase. In dollar terms, commercial banks saw the largest increase in their holdings of multi-family mortgage debt an increase of $10 billion, or seven percent, which represents 67 percent of the total increase. CMBS, CDO and other ABS issues increased their holdings of multi-family mortgage debt by $6 billion, or seven percent.

In percentage terms, commercial banks recorded the biggest increase in their holdings of multi-family mortgages seven percent while savings institutions saw the biggest drop negative eight percent.

For more information, visit www.mbaa.org.

Published
Mar 24, 2014