Commercial/Multifamily Debt Outstanding Declined 0.9% In Q1

vel of commercial/multifamily mortgage debt outstanding decreased in the first quarter to $3.31 trillion, according to the Mortgage Bankers Association's (MBA) analysis of the Federal Reserve Board Flow of Funds data. Declines were driven by drops in commercial and multifamily mortgages held in commercial mortgage-backed securities (CMBS) and construction loans held by banks and thrifts. The $3.31 trillion in commercial/multifamily mortgage debt outstanding recorded by the Federal Reserve was a decrease of $31 billion, or 0.9%, from the fourth quarter of 2009. Multifamily mortgage debt outstanding rose to $852 billion – an increase of $3 billion or 0.4% from the fourth quarter of 2009. "Low levels of commercial mortgage borrowing mean that property investors are paying off and paying down more in mortgages than they are taking out," says Jamie Woodwell, MBA's vice president of commercial real estate research. "The balance of construction loans at banks, and commercial and multifamily mortgages held in CMBS and by life insurance companies, saw the largest declines. The balance of multifamily mortgages backed by Fannie Mae, Freddie Mac and [the Federal Housing Administration] saw the largest increase." 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 in CMBS, collateralized debt obligations (CDOs) and other asset-backed securities (ABS) for which the security issuers and trustees hold the note. Commercial banks continue to hold the largest share of commercial/multifamily mortgages – $1.49 trillion, or 45% 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, the MBA notes. An MBA Research PolicyNote found that among the top 10 commercial real estate bank lenders, 48% of their aggregate balance of commercial (i.e., non-multifamily) real estate loans were related to owner-occupied properties. Because 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. Additionally, the Federal Reserve estimate of commercial and multifamily mortgage debt outstanding includes an estimate of construction loans held by banks and thrifts. Based on data from the Federal Deposit Insurance Corp. between the fourth quarter of 2008 and the fourth quarter of 2009, the level of commercial and multifamily mortgage debt (excluding construction loans) held by banks and thrifts increased by $30 billion, meaning the $54 billion decline in the Fed's estimate of bank- and thrift-held debt was driven by a decline of $80 billion in construction-loan holdings. CMBS, CDO and other ABS issuers are the second-largest holders of commercial/multifamily mortgages, holding $679 billion, or 21% of the total. Agency and government-sponsored enterprise (GSE) portfolios and MBS hold $309 billion, or 9% of the total. Life insurance companies hold $302 billion, or 9% of the total, and savings institutions hold $184 billion, or 6% of the total. SOURCE: [link=]Mortgage Bankers Association


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