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| Title: | Continued Increase in Q3 Commercial/Multifamily Mortgage Debt Outstanding Produces Record Numbers | | Source: | MBA | | Date: | 12/13/2007 |
Washington, DC (December 13, 2007) – The level of commercial/multifamily mortgage debt outstanding grew by 2.8 percent in the third quarter, exceeding $3.2
trillion, according to the Mortgage Bankers Association (MBA) analysis of the Federal Reserve Board Flow of Funds data.
The $3.22 trillion in commercial/multifamily mortgage debt outstanding recorded by the Federal Reserve was an increase of
$87.7 billion from the second quarter 2007. Multifamily mortgage debt outstanding grew to $813 billion, an increase of $23.5
billion or 3 percent from the second quarter.
“The third quarter included the periods immediately before and immediately after the dramatic adjustments in the capital markets,”
said Jamie Woodwell, MBA’s Senior Director of Commercial/Multifamily Research. “As a result, commercial/multifamily mortgage
debt outstanding grew to a new record – $3.2 trillion – but the quarter-over-quarter change in mortgage debt outstanding fell
from $107 billion last quarter to $87.7 billion this quarter. Even with the drop, the $87.7 billion increase in Q3 still
marked the fourth largest increase on record.”
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 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 issuers).
Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $1.35 trillion, or 42 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.
A recent 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.
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 issues are the second largest holders of commercial/multifamily mortgages, holding $760 billion, or
24 percent of the total. Life insurance companies hold $293 billion, or 9 percent of the total, and savings institutions
hold $212 billion, or 7 percent of the total. Government Sponsored Enterprises (GSEs) and Agency- and GSE- backed mortgage
pools, including Fannie Mae, Freddie Mac and Ginnie Mae, hold $146 billion in multifamily loans that support the mortgage-backed
securities they issue and an additional $126 billion "whole" loans in their own portfolios, for a total share of 8 percent
of outstanding commercial/multifamily 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.)
MULTIFAMILY MORTGAGE DEBT OUTSTANDING
Looking just at multifamily mortgages, the GSEs and Ginnie Mae hold the largest share of multifamily mortgages, with $146
billion in federally related mortgage pools and $126 billion in their own portfolios - 34 percent of the total multifamily
debt outstanding. They are followed by commercial banks with $163 billion, or 20 percent of the total; CMBS, CDO and other
ABS issuers with $123 billion, or 15 percent of the total; savings institutions with $95 billion, or 12 percent of the total;
state and local governments with $65 billion, or 8 percent of the total; and life insurance companies with $47 billion, or
6 percent of the total.
CHANGES IN COMMERCIAL/MULTIFAMILY MORTGAGE DEBT OUTSTANDING
In the third quarter of 2007, CMBS, CDO and other ABS issues saw the largest increase in dollar terms in their holdings of
commercial/multifamily mortgage debt - an increase of $50 billion, or 7 percent, which represents 57 percent of the total
$88 billion increase. Commercial banks increased their holdings of commercial/multifamily mortgages by $9 billion, or 0.7
percent - representing 10.5 percent of the net increase in commercial/multifamily mortgage debt outstanding.
In percentage terms, finance companies saw the biggest increase in their holdings of commercial/multifamily mortgages - a
jump of 7.5 percent, while state and local government retirement funds saw their holdings decrease by 2 percent.
CHANGES IN MULTIFAMILY MORTGAGE DEBT OUTSTANDING
The $23.5 billion increase in multifamily mortgage debt outstanding between the second quarter 2007 and third quarter 2007
represents a 3 percent increase. In dollar terms, CMBS, CDO and other ABS issuers saw the largest increase in their holdings
of multifamily mortgage debt - an increase of $7 billion, or 6 percent, which represents 29.4 percent of the total increase.
Government-sponsored enterprises increased their holdings of multifamily mortgage debt by $6.8 billion, or 5.7 percent. Agency-
and GSE-backed mortgage pool holdings increased by $4.6 billion, or 3.2 percent.
In percentage terms, CMBS, CDO and other ABS issues recorded the biggest increase in their holdings of multifamily mortgages,
6 percent, while REITs saw the biggest drop, -6.9 percent.
### The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry
that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the
association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand
homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and
fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety
of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies,
mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending
field. For additional information, visit MBA's Web site: www.mortgagebankers.org.
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