The level of commercial/multifamily mortgage debt outstanding grew by 2.6 percent in the fourth quarter, exceeding $3.3 trillion, according to the Mortgage Bankers Association (MBA) analysis of the Federal Reserve Board Flow of Funds data.
The fourth-quarter load of commercial/multifamily mortgage debt outstanding represented an increase of $84.6 billion from third-quarter 2007. Multifamily mortgage debt outstanding grew to $831 billion, an increase of $28.2 billion, or 3.5 percent, from the third quarter, which was the largest increase on record, 88 percent of which came from increases in the holdings of the government-sponsored enterprises (GSEs) and agency-and GSE-backed mortgage pools.
"Fourth-quarter increases in the level of mortgage debt outstanding were driven by increases in the holdings of commercial banks and the government-sponsored enterprises (Fannie Mae and Freddie Mac)," Jamie Woodwell, senior director commercial/multifamily research, said in a statement. "Both groups took advantage of capital market disruptions and the lack of CMBS competition to increase their holdings of commercial and multifamily mortgages."
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, $1.39 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 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 $776.5 billion, or 24 percent of the total. Life insurance companies hold $299 billion, or 9 percent of the total, and savings institutions hold $215 billion, or 6.5 percent of the total. Government-sponsored enterprises (GSEs) and agency- and GSE-backed mortgage pools, including Fannie Mae, Freddie Mac and Ginnie Mae, hold $136 billion in multifamily loans that support the mortgage-backed securities they issue and an additional $148 billion "whole" loans in their own portfolios, for a total share of 9 percent of outstanding commercial/multifamily mortgages.
MULTIFAMILY MORTGAGE DEBT OUTSTANDING
Looking just at multifamily mortgages, the GSEs and Ginnie Mae hold the largest share of multifamily mortgages, with $136 billion in federally related mortgage pools and $148 billion in their own portfolios — 34 percent of the total multifamily debt outstanding. They are followed by commercial banks with $167 billion, or 20 percent of the total; CMBS, CDO and other ABS issuers with $124 billion, or 15 percent of the total; savings institutions with $93 billion, or 11 percent of the total; state and local governments with $67 billion, or 8 percent of the total; and life insurance companies with $48 billion, or 6 percent of the total.
CHANGES IN COMMERCIAL/MULTIFAMILY MORTGAGE DEBT OUTSTANDING
In the fourth quarter of 2007, commercial banks saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt — an increase of $38 billion, or 2.8 percent, which represents 45 percent of the total $85 billion increase. GSEs increased their holdings of commercial/multifamily mortgages by $21 billion, or 17 percent — representing 25 percent of the net increase in commercial/multifamily mortgage debt outstanding.
In percentage terms, GSEs saw the biggest increase in their holdings of commercial/multifamily mortgages — a jump of 17 percent, while state and local government retirement funds saw their holdings decrease by 0.2 percent.
CHANGES IN MULTIFAMILY MORTGAGE DEBT OUTSTANDING
The $28 billion increase in multifamily mortgage debt outstanding between third-quarter 2007 and fourth-quarter 2007 represents a 3.5 percent increase. In dollar terms, GSEs saw the largest increase in their holdings of multifamily mortgage debt — an increase of $21 billion, or 17 percent, which represents 76 percent of the total increase. Agency- and GSE-backed mortgage pools increased their holdings of multifamily mortgage debt by $3.3 billion, or 2.5 percent. Commercial banks increased by $3 billion, or 1.9 percent.
In percentage terms, GSEs recorded the biggest increase in their holdings of multifamily mortgages, 17 percent, while REITs saw the biggest drop, -7.1 percent.
CHANGES IN COMMERCIAL/MULTIFAMILY MORTGAGE DEBT OUTSTANDING DURING 2007
Between December 2006 and December 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 $148 billion, or 23.5 percent, which represents 41.5 percent of the total $356 billion increase. Commercial banks increased their holdings of commercial/multifamily mortgages by $107.5 billion or 8.4 percent — representing 30 percent of the net increase in commercial/multifamily mortgage debt outstanding. Government-sponsored enterprises experienced a net increase of $42 billion, or 40.2 percent.
In percentage terms, GSEs saw the biggest increase in their holdings of commercial/multifamily mortgages — a jump of 40 percent — while state and local government retirement funds saw the biggest drop a net change of -6 percent.
The $90 billion increase in multifamily mortgage debt outstanding during 2007 represents a 12.2 percent increase. In dollar terms, GSEs saw the largest increase in their holdings of multifamily mortgage debt — an increase of $42 billion, or 40 percent, which represents 47 percent of the total increase. CMBS issues saw an increase of $21 billion, or 21 percent, in their holdings.
In percentage terms, government-sponsored enterprises recorded the biggest increase in their holdings of multifamily mortgages, 40 percent, while state and local government retirement funds saw the biggest drop, -6 percent.
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