MBA: Investors Increase Commercial, Multifamily Mortgage Holdings

Three of the groups that most heavily invest in commercial and multifamily mortgages increased their outstanding balance of such debt in the first quarter of 2012 according to data released this morning by the Mortgage Bankers Association (MBA).  The level of all commercial/multifamily debt increased by $8.1 billion or 0.3 percent to $2.373 trillion compared to a total in the fourth quarter of 2011 of $2.365 trillion.  The multifamily portion of that debt now totals $818 billion, up $6.9 billion or 0.8 percent from the previous quarter total of $811.4 billion.

Banks and thrifts saw the largest dollar increase in commercial/multifamily holdings during the first quarter, $13.5 billion or 1.7 percent.  Agency and GSE portfolios and MBS went up by $6.8 billion or 2 percent.  The third sector, life insurance companies, increased $3.8 billion or 1.2 percent.  The largest drop was in the holdings of commercial mortgage-backed securities (CMBS), collateralized debt obligations (CDO), and other asset-backed securities (ABS) which went down $11.7 billion or 2 percent.  On a percentage basis the largest increase was 5.3 percent by other insurance companies and the largest percentage drop was in the household sector, down 11 percent.

"The amount of commercial and multifamily mortgage debt outstanding increased during the first quarter, as lenders put out more in new loans than paid-off or paid down," said Jamie Woodwell, Vice President of Commercial Real Estate Research at the Mortgage Bankers Association.  "Banks; Fannie Mae, Freddie Mac and FHA; and life insurance companies all increased their holdings of commercial and multifamily mortgages, more than offsetting declines among CMBS and other investor groups."

The $6.9 billion increase in multifamily debt was accounted for by an increase in agency and GSE portfolios of 6.8 billion or 2 percent, commercial banks raised their holdings by $2.4 billion or 1.1 percent and life insurance companies increased by $595 million or 1.2 percent.  The largest decrease was $2.5 billion or 2.7 percent by CMBS, CDO, and other ABS issues.  On a percentage basis agency, GSE portfolio and MBS increased 2 percent while finance companies had the largest percentage decrease at 2.9 percent.

While commercial banks hold the biggest share of commercial/multifamily mortgages with $808 billion or 34 percent of the total, agency and GSE portfolios and MBS are first in the percentage of multifamily mortgage debt outstanding, 43 percent or $352 billion.  Banks and thrifts hold $221 billion or 27 percent, CMBS, CDO, and other ABS issues hold $88 billion or 11 percent, and local governments have 8 percent or $69 billion.

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 CMBS, CDOs, and ABS for which the security issuers and trustees hold the note (and which appear here under the latter designation).

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.