Commercial, Multifamily Mortgage Debt Rises to $3.06 Trillion

CoStar - Mark Heschmeyer - October 4, 2017

CRE Loan Delinquencies Remain at or Near All-Time Lows According to MBA

Total commercial and multifamily mortgage debt outstanding rose to $3.06 trillion at the end of the second quarter of 2017, as three of the four major investor groups increased their holdings, according to the Mortgage Bankers Association (MBA)'s latest Commercial-multifamily Mortgage Debt Outstanding report. 

Total commercial and multifamily mortgage debt outstanding increased by $48.7 billion, or 1.6%, over the first quarter. Multifamily mortgage debt outstanding rose to $1.2 trillion in the second quarter, an increase of $21.7 billion, or 1.8%, over the first quarter of 2017. 

Of note is that for the first time since 2015, the dollar increase in multifamily mortgages was slower than the growth in debt backed by other property types. 

"The amount of commercial and multifamily mortgage debt outstanding ticked up during the second quarter. At the same time, the balance of loans in commercial mortgage-backed securities (CMBS) continued its decline, with more loans being paid off and down than new loans being originated,” said Jamie Woodwell, MBA's vice president of commercial real estate research. 

CMBS balances declined by more than $20 billion during the first quarter of this year and by $10 billion in the second quarter. 

Commercial banks continue to hold the largest share of commercial-multifamily mortgages, $1.2 trillion, or 41% of the total. 

Agency and GSE portfolios and MBS are the second largest holders of commercial-multifamily mortgages, holding $553 billion, or 18% of the total. Life insurance companies hold $448 billion, or 15% of the total, and CMBS, CDO and other ABS issues hold $428 billion, or 14% of the total. 
 

Multifamily Mortgage Debt Outstanding


Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share, with $553 billion, or 46% of the total multifamily debt outstanding. They are followed by banks and thrifts with $398 billion, or 33% of the total. State and local governments hold $92 billion, or 8% of the total; life insurance companies hold $71 billion, or 6% of the total; CMBS, CDO and other ABS issues hold $41 billion, or 3% of the total, and nonfarm noncorporate business holds $14 billion, or one% of the total. 
 

Second Quarter Delinquencies Remain Low, CMBS Increases Slightly


Delinquency rates for commercial and multifamily mortgage loans were relatively flat in the second quarter of 2017, according to the MBA. 

"Loans backed by commercial and multifamily properties continue to perform extremely well. For most lender types - including banks, life insurance companies, Fannie Mae and Freddie Mac - delinquency rates are at or near their all-time lows," Woodwell said. "The commercial mortgage backed securities (CMBS) market is the one outlier. The slower decline in the balance of loans that are delinquent than in the total of all loans has pushed the delinquency rate higher. We expect that situation to reverse in coming quarters.” 

Based on the unpaid principal balance (UPB) of loans, delinquency rates for each group at the end of the second quarter were as follows. 

Banks and thrifts (90 or more days delinquent or in non-accrual): 0.54%, a decrease of 0.02 percentage points from the first quarter of 2017; 
Life company portfolios (60 or more days delinquent): 0.02%, an increase of 0.02 percentage points from the first quarter of 2017; 
Fannie Mae (60 or more days delinquent): 0.04%, a decrease of 0.01 percentage points from the first quarter of 2017; 
Freddie Mac (60 or more days delinquent): 0.01%, a decrease of 0.02 percentage points from the first quarter of 2017; and
CMBS (30 or more days delinquent or in REO): 4.84%, an increase of 0.39 percentage points from the first quarter of 2017.