Multifamily and commercial mortgage debt
grew by $44.3 billion in the first quarter of 2018, a quarter-over-quarter
increase of 1.4 percent, and the largest gain since before the Great
Recession. The total debt at the end of
the quarter was $3.21 trillion with the multifamily portion increasing by 19.3
billion or 1.5 percent. It was the third
straight quarter that overall debt grew, the first time that has occurred since
The gains were reported by the Mortgage Bankers Association (MBA) which puts
holders of the debt into five major categories. The largest group consists of banks and thrifts, which hold 40 percent of the total, $1.3
trillion. The second group is agency and
government sponsored enterprise (GSE) portfolios and mortgage-backed securities
at 19 percent or $617 billion. Life insurance companies hold $471 billion, or
15 percent of the total, and commercial mortgage backed securities (CMBS), collateralized
debt obligations (CDO) and other categories of asset-backed securities (ABS) hold
$446 billion, or 14 percent. There is a
fifth category of miscellaneous investors including state and local
governments, public and private pension funds, other insurance companies, etc.
None of these have holdings exceeding 4 percent of the total.
The four largest groups all increased their
holdings during the quarter. Commercial banks were up by $15 billion or 1.2
percent, agency/GSE/MBS holdings gained $10.8 billion or 1.8 percent, life
insurance investments rose $9.1 billion or 2 percent, and the CMBS/CDO/ABS
sector grew $5.6 billion or 0.6 percent. In percentage terms, other insurance
companies saw the largest increase in their holdings of commercial/multifamily
mortgages, an increase of 4.9 percent. State and local government
retirement funds saw their holdings decrease 1.7 percent.
“During the first three months of 2018, commercial
and multifamily mortgage debt outstanding increased more than during any other
Q1 since before the Great Recession,” said Jamie Woodwell, MBA Vice President
of Commercial Real Estate Research. “Interestingly, Q1 holdings grew more
slowly this year than last among the three largest investor groups: banks, life
insurance companies, and the GSEs. This year’s increase was driven by the CMBS
market, which added $6 billion of mortgages to its balances. This is a sharp
contrast to the $21 billion decline over the same period in 2017.
The largest holder of the $1.3 trillion multifamily
portion of the debt is the agency/GSE/MBS group with $617 billion, or 48
percent of the total. They are followed by banks and thrifts’ 32 percent share which
is valued at $411 billion. State and local government are third at $96 billion,
or 8 percent. The remainder is held by life
insurance companies with 6 percent, CMBS/CDO/ABS issues with 3 percent and
nonfarm noncorporate business at 1 percent.
The $19.3 billion increase in multifamily mortgage
debt outstanding between the fourth quarter of 2017 and first quarter of 2018
represents a 1.5 percent increase. In dollar terms, agency and GSE
portfolios and MBS saw the largest increase in their holdings of multifamily
mortgage debt, an increase of $10.8 billion, or 1.8 percent. Commercial
banks increased their holdings of multifamily mortgage debt by $7.1 billion, or
1.8 percent. Life insurance companies increased by $1.4 billion, or 2.0
percent. CMBS saw the largest decline in their holdings of multifamily
mortgage debt, by $1.7 billion, or down 4.0 percent.
In percentage terms, finance companies recorded
the largest increase in holdings of multifamily mortgages, at 5.0
percent. Private pension funds saw the biggest decrease at 4.8 percent.
MBA’s analysis is based on data from the Federal
Reserve Board’s Financial Accounts of the United States, the Federal Deposit
Insurance Corporation’s Quarterly Banking Profile and data from Wells Fargo