Commercial/MF mortgage debt outstanding surpasses $2.7 trillion.

The level of commercial/multifamily mortgage debt outstanding surpassed $2.7 trillion in the first quarter, growing 2.9 percent over the past three months, according to a Mortgage Bankers Association (MBA) analysis of Federal Reserve Board Flow of Funds data.

At the end of the first quarter of 2006, $2.7 trillion in commercial/multifamily mortgage debt outstanding was recorded by the Fed, an increase of $76.4 billion or 2.9 percent from the fourth quarter of 2005. Multifamily mortgage debt outstanding, meanwhile, stood at $690 billion at the end of the first quarter--an increase of $15 billion or 2.3 percent from the fourth quarter.

Commercial banks continued to hold the largest share of commercial/multifamily mortgages, with almost $1.2 trillion, or 43 percent of the total during the first quarter, said MBA.

CMBS pools were the second-largest holders of commercial/multifamily mortgages, holding $577 billion, or 21 percent of the total. Life insurance companies hold $269 billion, or 10 percent of the total, and savings institutions hold $202 billion, or 7 percent of the total.

Government sponsored-enterprises (GSEs) and federally related mortgage pools, including Fannie Mae, Freddie Mac and Ginnie Mae, held $132 billion in multifamily loans that support the mortgage-backed securities they issue and an additional $66 billion whole loans in their own portfolios, for a total share of 7 percent of outstanding commercial/multifamily mortgages.

"Nearly every investor group continues to expand their investments in commercial and multifamily mortgages," said Doug Duncan, MBA's chief economist and senior vice president of research and business development. "From banks to CMBS investors to life companies and the GSEs, strong loan performance, improving property markets and the continued recognition of commercial real estate as a part of a balanced portfolio are all supporting continued investor demand for commercial/multifamily mortgage debt."

Looking just at multifamily mortgages, with $132 billion in federally related mortgage pools, combined with $66 billion in their own portfolios, the GSEs and Ginnie Mae held the largest share of multifamily mortgages, at 29 percent of the total multifamily debt outstanding.

Commercial banks followed, with $145 billion, or 21 percent of the total; then savings institutions with $100 billion, or 15 percent of the total; CMBS issuers with $98 billion, or 14 percent of the total; state and local governments with $59 billion, or 9 percent of the total; and life insurance companies with $43 billion, or 6.2 percent of the total, said MBA.

In percentage terms, real estate investment trusts (REITs) saw the biggest increase in their holdings of commercial/multifamily mortgages--a jump of 8 percent--while state and local government retirement funds saw the biggest drop, a net change of -0.6 percent.

The $15.3 billion increase in multifamily mortgage debt outstanding between the fourth and first quarters represented a 2.3 percent increase.

In dollar terms, commercial banks saw the largest increase in their holdings of multifamily mortgage debt--an increase of $5 billion, or 3.8 percent, which represents 35 percent of the total increase. CMBS issuers saw an increase of $3 billion, or 3.5 percent, in their holdings. Federally related mortgage pools increased their holdings of multifamily mortgage debt by $2.6 billion, or 2 percent.

In percentage terms, REITs recorded the biggest increase in their holdings of multifamily mortgages, at 8.3 percent, while the federal government saw the biggest drop, -2 percent, said MBA.