The level of commercial/multifamily mortgage debt outstanding increased by $60.7 billion (1.5%) in the second quarter of 2021, according to the Mortgage Bankers Association‘s (MBA) latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report.
Total commercial/multifamily debt outstanding rose to $3.98 trillion at the end of the second quarter. Multifamily mortgage debt alone increased $23.8 billion (1.4%) to $1.7 trillion from the first quarter of 2021.
“Strong demand from all of the major capital sources led to another increase in the amount of commercial and multifamily mortgage debt outstanding,” says Jamie Woodwell, MBA’s vice president of commercial real estate research. “In line with the strength of apartment fundamentals and values, there was a solid increase in the amount of multifamily mortgage debt outstanding. Additionally, the increase in mortgage debt on other, non-multifamily commercial properties was the largest since 2007 – a sign of renewed interest in other property types.”
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 (38%) of commercial/multifamily mortgages at $1.5 trillion. Agency and GSE portfolios and MBS are the second largest holders of commercial/multifamily mortgages (22%) at $871 billion. Life insurance companies hold $596 billion (15%), and CMBS, CDO and other ABS issues hold $557 billion (14%). 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 second quarter of 2021, agency and GSE portfolios and MBS hold the largest share of total multifamily debt outstanding at $871 billion (50%), followed by banks and thrifts with $491 billion (28%), life insurance companies with $174 billion (10%), state and local government with $106 billion (6%), and CMBS, CDO and other ABS issues holding $53 billion (3%). Nonfarm non-corporate businesses hold $20 billion (1%).
In the second quarter, commercial banks saw the largest gains in dollar terms in their holdings of commercial/multifamily mortgage debt – an increase of $23.4 billion, (1.6%). CMBS, CDO, and other ABS issues increased their holdings by $16.7 billion (3.1%), agency and GSE portfolios and MBS increased their holdings by $10.2 billion (1.2%), and life insurance companies increased their holdings by $8.7 billion (1.5%).
In percentage terms, other insurance companies saw the largest increase – 5% – in their holdings of commercial/multifamily mortgages. Conversely, private pension funds saw their holdings decrease 5.7%.
The $23.8 billion increase in multifamily mortgage debt outstanding from the first quarter of 2021 represents a 1.4% increase. In dollar terms, agency and GSE portfolios and MBS saw the largest gain – $10.2 billion (1.2%) – in their holdings of multifamily mortgage debt. Commercial banks increased their holdings by $10.0 billion (2.1%), and life insurance companies increased by $2.5 billion (1.5%). REITs saw the largest percentage increase in their holdings of multifamily mortgage debt, up $391 million (6%). Private pension funds saw the largest decline in their holdings of multifamily mortgage debt, down $65 million (12.5%).