Total Commercial, Multifamily Mortgage Debt in U.S. Rises to $3.72 Trillion in Early 2020

According to the Mortgage Bankers Association's latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report, the level of commercial/multifamily mortgage debt outstanding rose by $61.0 billion (1.7 percent) in the first quarter of 2020.

Total commercial/multifamily debt outstanding rose to $3.72 trillion at the end of the first quarter. Multifamily mortgage debt alone increased $28.0 billion (1.8 percent) to $1.6 trillion from the fourth quarter of 2019.

"The rise in commercial and multifamily mortgage debt in the first three months of the year carried forward the strong level of activity during 2019. Rising property values, strong incomes and low interest rates supported increased borrowing and lending," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research. "With the onset of the COVID-19 pandemic, borrowing and lending has slowed, and some of the tailwinds from earlier this year have reversed."

Added Woodwell, "The coming months are likely to see greater differentiation in debt levels, both by capital source and property type, as investors and lenders assess market conditions."

The four major 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 $1.4 trillion. Agency and GSE portfolios and MBS are the second largest holders of commercial / multifamily mortgages (20 percent) at $752 billion. Life insurance companies hold $572 billion (15 percent), and CMBS, CDO and other ABS issues hold $516 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).

Looking solely at multifamily mortgages in the first quarter of 2020, agency and GSE portfolios and MBS hold the largest share of total multifamily debt outstanding at $752 billion (48 percent), followed by banks and thrifts with $469 billion (30 percent), life insurance companies with $165 billion (10 percent), state and local government with $93 billion (6 percent), and CMBS, CDO and other ABS issues holding $52 billion (3 percent). Nonfarm non-corporate businesses hold $19 billion (1 percent).

In the first quarter, commercial banks saw the largest gains in dollar terms in their holdings of commercial/multifamily mortgage debt - an increase of $24.1 billion, (1.7 percent). CMBS, CDO and other ABS issues increased their holdings by $12.2 billion (2.4 percent), life insurance companies increased their holdings by $8.3 billion (1.5 percent), and agency and GSE portfolios and MBS increased their holdings by $7.4 billion (1.0 percent).

In percentage terms, nonfinancial corporate business saw the largest increase - 13.3 percent - in their holdings of commercial/multifamily mortgages. Conversely, finance companies saw their holdings decrease 0.5 percent.

The $28.0 billion increase in multifamily mortgage debt outstanding from the fourth quarter of 2019 represents a 1.8 percent increase. In dollar terms, commercial banks saw the largest gain - $10.1 billion (2.2 percent) - in their holdings of multifamily mortgage debt. Agency and GSE portfolios and MBS increased their holdings by $7.4 billion (1.0 percent), and CMBS, CDO and other ABS issues increased by $6.9 billion (15.2 percent). Federal government saw the largest decline in their holdings of multifamily mortgage debt, down $228 million (2.0 percent).