At the end of 2005, $2.64 trillion in commercial/multifamily mortgage debt outstanding was recorded by the Federal Reserve, an increase of $328 billion, or 14.2 percent, from the end of 2004, according to the Mortgage Bankers Association’s analysis of Federal Reserve Board Flow of Funds data.
The Federal Reserve 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 commercial mortgage-backed securities (CMBS) for which the security issuers and trustees hold the note (and which appear in the Federal Reserve data under CMBS issuers).
In the fourth quarter alone, commercial and multifamily mortgage debt outstanding increased by $103 billion, or 4.1 percent, also a new record. At the end of 2004, multifamily mortgage debt outstanding stood at $674 billion — an increase of $62 billion, or 10.2 percent, over the year, and $19 billion, or 2.9 percent, in the fourth quarter alone.
“2005 was a strong year for commercial and multifamily real estate finance,” said Doug Duncan, MBA’s chief economist and senior vice president of research and business development. “We saw record property sales, record mortgage origination levels, and record levels of commercial/multifamily mortgage debt outstanding — all in an environment of strong loan performance and improving property fundamentals. With 2006 well underway, these trends show every sign of continuing.”
Commercial banks continue to hold the largest share of commercial/multifamily mortgages, with $1.1 trillion, or 43 percent 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, and it is the borrower’s business income — not the income derived from the property’s rents and leases — that drives the underwriting, pricing and performance of the loan. Since the other loans are income property loans, meaning that the income primarily comes from rents, the commercial bank numbers are not comparable.
CMBS pools are the second-largest holders of commercial/multifamily mortgages, holding $553 billion, or 21 percent of the total. Life insurance companies hold $263 billion, or 10 percent of the total, and savings institutions hold $197 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 $130 billion in multifamily loans that support mortgage-backed securities they issue (referred to here as federally related mortgage pools) and an additional $65 billion “whole” loans in their own portfolios, for a total share of 7 percent. (As noted above, many life insurance companies and some GSEs also purchase and hold a large number of CMBS issues. These loans appear in the CMBS category referenced above.)
Looking just at multifamily mortgages, the GSEs and Ginnie Mae hold the biggest share of multifamily mortgages, with $130 billion in federally related mortgage pools and $65 billion in their own portfolios — 29 percent of the total multifamily debt outstanding. They are followed by commercial banks with $140 billion, or 21 percent of the total; savings institutions with $98 billion, or 15 percent of the total; and CMBS issues with $95 billion, or 14 percent of the total.
Between December 2004 and December 2005, commercial banks saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt — an increase of $151 billion, or 15 percent, which represents 46 percent of the total $328 billion increase. CMBS issuers increased their holdings of commercial/multifamily mortgages by $130 billion, or 31 percent — representing 40 percent of the net increase in commercial/multifamily mortgage debt outstanding. Savings institutions experienced a net increase of $15 billion, or 8 percent.
In percentage terms, Real Estate Investment Trusts (REITs) saw the biggest increase in their holdings of commercial/multifamily mortgages — a jump of 58 percent — while private pension funds saw the biggest drop (a net change of -2 percent).
The $62 billion increase in multifamily mortgage debt outstanding during 2005 represents a 10 percent increase. In dollar terms, commercial banks saw the largest increase in their holdings of multifamily mortgage debt — an increase of $21 billion, or 17 percent, which represents 33 percent of the total increase. CMBS issuers saw an increase of $20 billion, or 27 percent, in their holdings. Savings institutions increased their holdings of multifamily mortgage debt by $11 billion, or 12 percent.
In percentage terms, CMBS issuers recorded the biggest increase in their holdings of multifamily mortgages, 27 percent, while private pension funds saw the biggest drop, -1.9 percent.
In the fourth quarter, CMBS issuers saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt — an increase of $53 billion, or 11 percent, which represents 52 percent of the total $103 billion increase. Commercial banks increased their holdings of commercial/multifamily mortgages by $36 billion, or 3 percent — representing 35 percent of the net increase in commercial/multifamily mortgage debt outstanding. Savings institutions experienced a net increase of $4 billion, or 1.8 percent.
In percentage terms, CMBS issuers saw the biggest increase in their holdings of commercial/multifamily mortgages — a jump of 11 percent — while private pension funds saw the biggest drop (a net change of -0.8 percent).
The $19.1 billion increase in multifamily mortgage debt outstanding between the third and fourth quarters of 2005 represents a 2.9 percent increase. In dollar terms, CMBS issuers saw the largest increase in their holdings of multifamily mortgage debt — an increase of $9 billion, or 11 percent, which represents 48 percent of the total increase. Commercial banks saw an increase of $4.6 billion, or 3.4 percent, in their holdings. Federally related mortgage pools increased their holdings by $1.8 billion, or 1.4 percent.
In percentage terms, CMBS issuers recorded the biggest increase in their holdings of multifamily mortgages, 11 percent, while private pension funds saw the biggest drop, -0.8 percent.
The Mortgage Bankers Association is a national association representing the real estate finance industry.
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