The Mortgage Bankers Association (MBA) today released its analysis of Federal Reserve Board data, showing continued increases in commercial and multifamily mortgage debt outstanding. Commercial and multifamily mortgage debt increased by $60.8 billion, or 2.9 percent, to $2.17 trillion between the first and second quarters of 2004. The multifamily portion grew by $14.9 billion, or 2.7 percent, to $567 billion. The findings are a part of MBA's new Commercial Real Estate/Multifamily Finance Quarterly Data Book.

"The second quarter continues a string of records in the amount of commercial/multifamily mortgage debt outstanding," said Doug Duncan, MBA's chief economist and senior vice president. "It also marks the greatest single-quarter increase in the amount of commercial/multifamily debt. With moderate economic growth, low delinquencies and moderate interest rate increases, the trend is likely to continue."

Commercial banks continue to hold the largest share of commercial/multifamily mortgages, with $919 billion, or 42 percent, of the total. Many of the commercial mortgage loans reported by commercial banks are actually "commercial and industrial" loans to which a piece of commercial property has been pledged as collateral. In these loans, unlike commercial/multifamily income property mortgage loans, the borrower's business income-not the income derived from the property's rents and leases-drives the underwriting, pricing and performance of the loan.

Commercial mortgage-backed securities (CMBS) issuers that pool loans and sell tranches to investors are the second largest holders of commercial/multifamily mortgages, holding $392 billion, or 18 percent, of the total. Life insurance companies hold $250 billion, or 11.5 percent, of the total, and savings institutions hold $176 billion, or 8.1 percent, of the total. Government sponsored-enterprises (GSEs), including Fannie Mae and Freddie Mac, hold $116 billion in multifamily mortgages that back mortgage-backed securities they issue (referred to here as federally related mortgage pools) and an additional $49 billion in their own portfolios, for a total share of 7.6 percent. (It should be noted that these GSEs also purchase and hold a large number of CMBS issues, which are included in the CMBS category referenced above).

In dollar terms, commercial banks saw the largest increase in their holdings of commercial/multifamily mortgage debt-an increase of $26 billion (2.9 percent) which represents 43 percent of the total $60.8 billion increase. CMBS issuers increased their holdings of mortgage debt by $18 billion, or 4.9 percent-representing 30 percent of the net increase in commercial/multifamily mortgage debt outstanding. Life insurance companies experienced a net increase of $6.8 billion, or 2.8 percent.

In percentage terms, state and local government retirement funds saw the biggest increase in their holdings of commercial/multifamily mortgages-7.4 percent-while nonfarm, noncorporate businesses saw the biggest drop-12.3 percent.

Looking just at multifamily mortgages, the GSEs hold the biggest share of multifamily mortgages, with $116 billion in federally related mortgage pools and $49 billion in their own portfolios - 29.1 percent of the total multifamily debt outstanding. GSEs are followed by commercial banks with $111 billion, or 19.5 percent, of the total, savings institutions with $84 billion, or 14.8 percent, of the total, and CMBS issues with $70 billion, or 12.4 percent, of the total.

The $14.9 billion increase in multifamily mortgage debt outstanding between the first and second quarters of 2004 represents a 2.7 percent increase. In dollar terms, federally related mortgage pools saw the largest increase in their holdings of multifamily mortgage debt-an increase of $4.4 billion or 4.0 percent, which represents 29.7 percent of the total increase. Commercial banks increased their holdings of multifamily mortgage debt by $3.1 billion, or 2.9 percent-representing 21.1 percent of the net increase in multifamily mortgage debt outstanding. CMBS issuers saw an increase of $1.5 billion, or 2.2 percent, in their holdings.

In percentage terms, real estate investment trusts (REITS) saw the biggest increase in their holdings of multifamily mortgages, 9.5 percent, while nonfarm noncorporate businesses saw the biggest drop, -28.7 percent.

MBA's Commercial Real Estate/Multifamily Finance Quarterly Data Book is a compendium of the latest information on the commercial/multifamily finance markets. It includes economic commentary, as well as the latest information on long-term mortgage and economic forecasts; Treasury yields and bank rates; goods-producing and services-producing employment; multifamily building permits, starts and completions; commercial/multifamily mortgage banker originations; commercial/multifamily mortgage debt outstanding; and commercial/multifamily mortgage servicing. The Data Book is released quarterly, and can be found at www.mortgagebankers.org.

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