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Commercial Mortgage Debt in U.S. Hits $3.8 Trillion in Q3

Commercial Mortgage Debt in U.S. Hits $3.8 Trillion in Q3

Commercial News » New York City Edition | By Michael Gerrity | December 16, 2020 9:00 AM ET



The Mortgage Bankers Association's most recent Commercial/Multifamily Mortgage Debt Outstanding quarterly report shows the level of commercial/multifamily mortgage debt in the U.S. outstanding rose by $57.0 billion (1.5 percent) in the third quarter of 2020.

Total commercial/multifamily debt outstanding rose to $3.82 trillion at the end of the third quarter. Multifamily mortgage debt alone increased $31.0 billion (1.9 percent) to $1.6 trillion from the second quarter of 2020.

"The amount of mortgage debt backed by commercial and multifamily properties increased for the 33rd straight quarter," said Jamie Woodwell, MBA's Vice President for Commercial Real Estate Research. "Despite a significant fall-off in acquisition financing in the last two quarters, loan refinancings, particularly for FHA, Fannie Mae, Freddie Mac and bank balance sheets, helped lift total mortgage balances. Continued uncertainty about the pandemic's long-term impacts is likely to weigh on new financing in the coming quarters. However, positive news about vaccines reflects a light at the end of the tunnel regarding the pandemic."

The four largest investor groups are: banks and thrifts; federal agency and government sponsored enterprise (GSE) portfolios and mortgage-backed securities (MBS); life insurance companies; and commercial mortgage-backed securities (CMBS), collateralized debt obligation (CDO) and other asset backed securities (ABS) issues.

Commercial banks continue to hold the largest share (39 percent) of commercial/multifamily mortgages at $1.5 trillion. Agency and GSE portfolios and MBS are the second largest holders of commercial/multifamily mortgages (21 percent) at $798 billion. Life insurance companies hold $577 billion (15 percent), and CMBS, CDO and other ABS issues hold $529 billion (14 percent). Many life insurance companies, banks and the GSEs purchase and hold CMBS, CDO and other ABS issues. These loans appear in the report in the "CMBS, CDO and other ABS" category.

MBA's 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 other ABS for which the security issuers and trustees hold the note (and which appear here under CMBS, CDO and other ABS issues).

MULTIFAMILY MORTGAGE DEBT OUTSTANDING

Looking solely at multifamily mortgages in the third quarter of 2020, agency and GSE portfolios and MBS hold the largest share of total multifamily debt outstanding at $798 billion (48 percent), followed by banks and thrifts with $478 billion (29 percent), life insurance companies with $168 billion (10 percent), state and local government with $108 billion (7 percent), and CMBS, CDO and other ABS issues holding $52 billion (3 percent). Nonfarm non-corporate businesses hold $20 billion (1 percent).

CHANGES IN COMMERCIAL/MULTIFAMILY MORTGAGE DEBT OUTSTANDING

In the third quarter, agency and GSE portfolios and MBS saw the largest gains in dollar terms in their holdings of commercial/multifamily mortgage debt - an increase of $23.2 billion, (3.0 percent). Commercial banks increased their holdings by $12.1 billion (0.8 percent), CMBS, CDO, and other ABS issues increased their holdings by $10.6 billion (2.1 percent), and REITs increased their holdings by $4.9 billion (5.6 percent).
 
In percentage terms, REITs saw the largest increase - 5.6 percent - in their holdings of commercial/multifamily mortgages. Conversely, the federal government saw their holdings decrease 2.0 percent.

CHANGES IN MULTIFAMILY MORTGAGE DEBT OUTSTANDING

The $31.0 billion increase in multifamily mortgage debt outstanding from the second quarter of 2020 represents a 1.9 percent increase. In dollar terms, agency and GSE portfolios and MBS saw the largest gain - $23.2 billion (3.0 percent) - in their holdings of multifamily mortgage debt. Commercial banks increased their holdings by $4.4 billion (0.9 percent), and state and local government increased by $3.2 billion (3.0 percent). CMBS, CDO, and other ABS issues saw the largest decline in their holdings of multifamily mortgage debt, down $835 million (1.6 percent).



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