Commercial/multifamily mortgage debt outstanding grew to its highest level in five years in the third quarter, increasing by $25.2 billion as all four major investor groups increased their holdings, a new report from the Mortgage Bankers Association (MBA) says.
That is a 1 percent increase over the second quarter of 2013.
Total commercial/multifamily debt outstanding stood at $2.47 trillion in the third quarter, the MBA said. Multifamily mortgage debt outstanding rose to $887 billion, an increase of $10.8 billion, or 1.2 percent, from the second quarter.
“Commercial and multifamily mortgage debt outstanding grew by the largest amount since 2008,” said Jamie Woodwell, MBA’s VP of Commercial Real Estate Research. “The third quarter also marked the largest increase in the outstanding balance of loans in commercial mortgage backed securities since 2007. There were increases in the holdings of every major investor group.”
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 issuers and trustees hold the note (and which appear here under CMBS, CDO and other ABS issues).
Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $870 billion, or 35 percent of the total.
CMBS, CDO and other ABS issues are the second largest holders of commercial/multifamily mortgages, holding $563 billion, or 23 percent of the total. Agency/GSE portfolios and MBS hold $391 billion, or 16 percent of the total, and life insurance companies hold $333 billion, or 14 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” category.
Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share, with $391 billion, or 44 percent of the total multifamily debt outstanding. They are followed by banks and thrifts with $252 billion, or 28 percent of the total. CMBS, CDO and other ABS issues hold $75 billion, or 9 percent of the total; state and local governments hold $75 billion, or 9 percent of the total; life insurance companies hold $52 billion, or 6 percent of the total; and non-farm, non-corporate business holds $15 billion, or 2 percent of the total.
In the third quarter of 2013, banks and thrifts saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt – an increase of $14.5 billion, or 1.7 percent. Life insurance companies increased their holdings by $7.1 billion, or 2.2 percent, and CMBS, CDO and other ABS issues increased their holdings by $5.9 billion, or 1.1 percent. The household sector saw the largest decrease at $2.0 billion, or 80.4 percent.
The $10.8 billion increase in multifamily mortgage debt outstanding between the second and third quarters of 2013 represents a 1.2 percent increase. In dollar terms, commercial banks saw the largest increase in their holdings of multifamily mortgage debt, an increase of $8.1 billion, or 3.3 percent. Agency and GSE portfolios and MBS increased their holdings of multifamily mortgage debt by $2.4 billion, or 0.6 percent. Life insurance companies increased by $1.1 billion, or 2.2 percent. State and local government saw the largest decline in their holdings of multifamily mortgage debt, by $1.4 billion, or 1.8 percent.
In percentage terms, private pension funds recorded the largest increase in holdings of multifamily mortgages, at 14 percent. State and local government saw the biggest decrease, at 14 percent.
MBA’s analysis is based on data from the Federal Reserve Board’s Flow of Funds Account of the United States and the Federal Deposit Insurance Corporation’s Quarterly Banking Profile.