Commercial/Multifamily Debt Increases to $2.4 Trillion, First Increase Since 2009

For the first time in seven quarters thernlevel of outstanding commercial/multifamily mortgage debt grew in the U.Srnaccording to information released Thursday by the Mortgage Bankers Associationrn(MBA).  The Association said that totalrndebt rose $3.5 billion or 0.1 percent in the second quarter of 2011 to a totalrnof $2.4 trillion.  The last time totalrndebt increased was in the third quarter of 2009.</p

Investment in multifamily mortgage debtrnincreased by $3.9 billion or 0.5 percent 0from first quarter 2011 figures torn$802.2 billion.   Agency and GSErnportfolios and mortgage backed securities (MBS) accounted for $331.8 billion orrn41 percent of the debt and banks and thrifts held $215.8 billion or 26.9rnpercent.  Both sectors increased theirrnholdings; the Agency/GSE/MBA sector by $4 billion (1.3 percent) and banks andrnthrifts by 1.3 billion (0.6 percent). rnLife insurance companies comprised the only other sector where the sharernof multifamily mortgage debt rose.  Thernsector took on $0.7 billion or 1.5% more debt, the largest percentage change ofrnany sector.  Agency/GSE/MBAs accountedrnfor 113.5 percent of the net change in debt and banks and thrifts for 34.1rnpercent</p

Debt held by CMBS, CDO, and other ABS issuesrnfell by $1.6 billion or -1.6 percent. rnThis change represented -41 percent of the net change in multifamilyrndebt.   While they hold only a small portion of thernoverall multifamily debt, nonfinancial corporate businesses divested over halfrnthe debt they held in the first quarter of 2011, dropping from $250 million torn$103 million, a 58.8 percent change. rnDebt held by private pension funds fell 5.3 percent and financerncompanies by 4.6 percent.  </p

The quarter-over-quarter change by dollar andrn(percent change) in other sectors:  staternand local governments, $0.24 billion (-0.3); federal government, $0.195 billionrn(-1.4); non-farm, non-corporate business, $31 million (-0.3) state and local governmentrnretirement funds, $5 million (-0.2); and REITs, $4 million (-0.2).  </p

The largest increase in total mortgage debt, commercialrnand multifamily, was in the REIT sector where holdings increased by $2.5rnbillion or 7.7 percent.  Banks andrnthrifts, the largest holders of debt at 33.5 percent, decreased their holdingsrnby $2.6 billion or -0.3 percent and CMBS, CDO, and other ABS issues which isrnthe second largest sector, fell by $1.4 billion or -0.2 percent.</p

“For the first time in a year-and-a-half, newrncommercial and multifamily mortgage originations outpaced the paying off andrnpaying down of existing loans,” Jamie Woodwell, MBA’s Vice President ofrnCommercial Real Estate Research said.  “Increasesrnin the balance of mortgages held and insured by life insurance companies,rnFannie Mae, Freddie Mac, and FHA outpaced declines among banks and thrifts andrnCMBS issues.</p

Thernanalysis summarizes the holdings of loans or, if the loans are securitized, thernform of the security. For example, many life insurance companies invest both inrnwhole loans for which they hold the mortgage note (and which appear in thisrndata under “life insurance companies”) and in commercialrnmortgage-backed securities (CMBS), collateralized debt obligations (CDOs) and otherrnasset backed securities (ABS) for which the security issues and trustees holdrnthe note (and which appear here under CMBS, CDO and other ABS issues).</p

MBA’srnanalysis is based on data from the Federal Reserve Board’s Flow of FundsrnAccount of the United States and the Federal Deposit Insurance Corporation’srnQuarterly Banking Profile.

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