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Growth continues for commercial/multifamily mortgage debt outstanding.

THE LEVEL OF COMMERCIAL/MULTIFAMILY mortgage debt outstanding continued to grow during the first quarter, according to an MBA analysis of Federal Reserve Board Flow of Funds data.

At the end of first-quarter 2005, $2.35 trillion in commercial/multifamily mortgage debt outstanding was recorded by the Fed, an increase of $55 billion or 2.4 percent from the end of 2004, while multifamily mortgage debt outstanding stood at $607 billion--an increase of $7.5 billion or 1.3 percent from the end of last year, notes MBA.

"Like most credit markets, the commercial and multifamily mortgage market has continued to see strong growth," says Doug Duncan, MBA's chief economist. "The strong capital flows and the resulting low-interest-rate environment are signs of the general availability of capital as well as investors' attraction to these particular markets."

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 the Federal Reserve data under "life insurance companies") and in CMBS for which the security issuers and trustees hold the note (and which appear in the Federal Reserve data under "CMBS issuers").

Commercial banks continue to hold the largest share of commercial/multifamily mortgages, with $1.01 trillion, or 43 percent of the total.

CMBS pools are the second-largest holders of commercial/multifamily mortgages, holding $444 billion or 19 percent of the total. Life insurance companies hold $254 billion, or 11 percent of the total, and savings institutions hold $184 billion, or 8 percent of the total.

Government-sponsored enterprises (GSEs) and federally related mortgage pools--including Fannie Mae, Freddie Mac and Ginnie Mae--hold $125 billion in multifamily loans that support the mortgage-backed securities (MBS) they issue, as well as an additional $56 billion "whole" loans in their own portfolios, for a total share of 8 percent.

Looking at just multifamily mortgages, the GSEs and Ginnie Mae hold the biggest share of multifamily mortgages, with $125 billion in federally related mortgage pools and $56 billion in their own portfolios--30 percent of the total multifamily debt outstanding. They are followed by commercial banks with $123 billion, or 20 percent of the total; savings institutions with $90 billion, or 15 percent of the total; and CMBS issuers with $77 billion, or 13 percent of the total, according to MBA.

In the first quarter, commercial banks saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt--an increase of $28 billion, or 3 percent, which represented 51 percent of the total $55 billion increase. CMBS issuers increased their holdings of commercial/multifamily mortgages by $21 billion or 5 percent--representing 38 percent of the net increase in commercial/multifamily mortgage debt outstanding.

In percentage terms, state and local government retirement funds saw the biggest increase in their holdings of commercial/multifamily mortgages--a jump of 14 percent.

The 7.6 percent increase in multifamily mortgage debt outstanding between the fourth quarter of 2004 and the first quarter of 2005 represented a 1.3 percent increase. In dollar terms, commercial banks saw the largest increase in their holdings of multifamily mortgage debt--an increase of $2.9 billion or 3.3 percent, in their holdings. CMBS issuers increased their holdings of multifamily mortgage debt by $2.2 billion or 3 percent, according to MBA.
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Title Annotation:Commercial
Publication:Mortgage Banking
Geographic Code:1USA
Date:Aug 1, 2005
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