Commercial/Multifamily Mortgage Debt Increases by Largest Amount Since 2008

The level of commercial/multifamily mortgage debt outstanding increased by $21.8 billion, or 0.9 percent, in the fourth quarter of 2012, as all four major investor groups increased their holdings, according to the Mortgage Bankers Association.

Washington, D.C.—The level of commercial/multifamily mortgage debt outstanding increased by $21.8 billion, or 0.9 percent, in the fourth quarter of 2012, as all four major investor groups increased their holdings, according to the Mortgage Bankers Association (MBA). On a year-over-year basis, the amount of mortgage debt outstanding at the end of 2012 was $29.7 billion higher than at the end of 2011, an increase of 1.2 percent.

Multifamily mortgage debt outstanding rose to $846 billion, an increase of $11.8 billion or 1.4 percent from the third quarter, and $35.7 billion or 4.4 percent from the fourth quarter of 2011.

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, $836 billion, or 35 percent of the total.

CMBS, CDO and other ABS issues are the second largest holders of commercial/multifamily mortgages, holding $561 billion, or 23 percent of the total. Agency and GSE portfolios and MBS hold $376 billion, or 16 percent of the total, and life insurance companies hold $326 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 categories.

Multifamily mortgage debt outstanding

Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share, with $376 billion or 45 percent of the total multifamily debt outstanding. They are followed by banks and thrifts with $234 billion, or 28 percent of the total. CMBS, CDO and other ABS issues hold $82 billion, or 10 percent of the total; state and local governments hold $62 billion, or 7 percent of the total; life insurance companies hold $51 billion, or 6 percent of the total; and the nonfarm non-corporate business holds $15 billion, or 2 percent of the total.

Changes in commercial/multifamily mortgage debt outstanding

In the fourth quarter of 2012, bank and thrifts saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt – an increase of $17.1 billion or 2.1 percent. Agency and GSE portfolios and MBS increased their holdings of commercial/multifamily mortgages by $7.6 billion or 2.0 percent. Finance companies saw the largest decrease of $6 billion or 11.3 percent.

In percentage terms, bank and thrifts recorded the largest increase in holdings of commercial/multifamily mortgages, at 2.1 percent. The household sector saw the biggest decrease, at 21.3 percent.

Changes in multifamily mortgage debt outstanding

The $12 billion increase in multifamily mortgage debt outstanding between the third quarter and fourth quarter of 2012 represents a 1.4 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 $7.6 billion, or 2.0 percent. Commercial banks increased their holdings of multifamily mortgage debt by $6.2 billion, or 2.7 percent. Private pension funds increased by $391 million, or 11.6 percent. State and local government saw the biggest decrease in their holdings of multifamily mortgage debt, by $1.4 billion or 2.3 percent.

In percentage terms, private pension funds recorded the largest increase in holdings of multifamily mortgages, at 11.6 percent. Finance companies saw the biggest decrease, at 7.7 percent.

Changes in commercial/multifamily mortgage debt outstanding during 2012

Between December 2011 and December 2012, commercial banks and thrifts saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt—an increase of $42 billion, or 5.3 percent. CMBS, CDO and other ABS issues decreased their holdings of commercial/multifamily mortgages by $31 billion or 5.2 percent.

In percentage terms, the other (non life) insurance companies saw the biggest increase in their holdings of commercial/multifamily mortgages, an increase of 12 percent. Household sector saw the biggest decrease of 49 percent.

Changes in multifamily mortgage debt outstanding during 2012

The $36 billion increase in multifamily mortgage debt outstanding during 2012 represents a 4 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 $30.8 billion or 9 percent. CMBS, CDO and other ABS issues saw a decrease of $9.5 billion in their holdings or 10 percent.

In percentage terms, private pension funds recorded the biggest increase in their holdings of multifamily mortgages, 32 percent, while finance companies saw the biggest decrease, 22 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. More information on the construction of this data series is contained in Appendix A in the report.

In the fourth quarter of 2010, MBA improved its reporting of commercial and multifamily mortgage debt outstanding. The new reporting excludes two categories of bank 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.

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