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Commercial and Multifamily Mortgage Debt Grows in Q3

The level of commercial/multifamily mortgage debt outstanding increased by $37.1 billion (0.8%) in Q3 of 2023, according to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report.

Total commercial/multifamily mortgage debt outstanding rose to $4.63 trillion at the end of Q3. Multifamily mortgage debt alone increased $26.8 billion (1.3%) to $2.05 trillion from Q2 of 2023.

“The level of commercial mortgage debt outstanding has continued to increase despite a continued pullback in borrowing,” said Jamie Woodwell, MBA’s Head of Commercial Real Estate Research. “A decline in sales transaction and refinance volumes has meant less new debt being extended, but it also means that fewer loans are paying off than in many earlier periods. The result is that debt levels continue to rise, but at a pace that is roughly half of what was seen last year.”

The four largest investor groups included 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 $1.8 trillion. Agency and GSE portfolios and MBS reported the second-largest holders of commercial/multifamily mortgages (21%) at $986 billion. Life insurance companies held $702 billion (15%), and CMBS, CDO another ABS issues hold $593 billion (13%). 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 Q3 of 2023, agency and GSE portfolios and MBS held the largest share of total multifamily debt outstanding at $986 billion (48%), followed by banks and thrifts with $606 billion (30%), life insurance companies with $223 billion (11%), state and local government with $115 billion (6%), and CMBS, CDO and other ABS issues holding $67 billion (3%).

In Q3, agency and GSE portfolios and MBS saw the largest gains in dollar terms in their holdings of commercial/multifamily mortgage debt–an increase of $15.6 billion (1.6%). Life insurance companies increased their holdings by $10.4 billion (1.5%), bank and thrifts increased their holdings by $9.5 billion (0.5%), and federal government increased their holdings by $1.9 billion (2.1%).

In percentage terms, state and local government retirement funds saw the largest increase–3%–in their holdings of commercial/multifamily mortgages. Conversely, finance companies saw their holdings decrease 5.2%.

The $26.8 billion increase in multifamily mortgage debt outstanding from Q2 of 2023 represents a quarterly gain of 1.3%. In dollar terms, agency and GSE portfolios and MBS issues saw the largest gain–$15.6 billion (1.6%)–in their holdings of multifamily mortgage debt. Bank and thrifts increased their holdings by $5.6 billion (0.9%, and life insurance companies increased by $4.5 billion (2.0%).

Nonfinancial corporate business saw the largest percentage increase in their holdings of multifamily mortgage debt, up 7.1%. Finance companies saw the largest decline in their holdings of multifamily mortgage debt at 10%.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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