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MBA: Commercial, Multifamily Mortgage Debt Up

In the second quarter of 2011, the volume of outstanding commercial and multifamily mortgage debt increased by 0.1% marking the first quarterly increase since the third quarter of 2009, according to the Mortgage Bankers Association.

As expected, the level of mortgage debt held and insured by life insurance companies, Fannie Mae, Freddie Mac and FHA increased enough to outpace a decline in debt among banks, thrifts and commercial mortgage-backed security issues, said MBA’s vice president of commercial real estate research, Jamie Woodwell.

During the quarter the amount of commercial/multifamily mortgage debt outstanding reached $2.4 trillion, up $3.5 billion compared to the first quarter.

With an increase of $4 billion, or 1.5%, life insurance companies saw the largest increase in dollar terms in their holdings of commercial and multifamily mortgage debt in the second quarter.

Agency and GSE portfolios, along with MBS, reported a 1% increase that equals $4 billion in holdings of commercial and multifamily mortgages.

Real estate investment trusts emerged as the market segment with the highest growth reporting the largest increase in their holdings of commercial and multifamily mortgages at 8%.

Multifamily mortgage debt outstanding rose to $802 billion, up $3.9 billion, or 0.5%, from the first quarter.

For the first time in a year-and-a-half, new commercial and multifamily mortgage originations outpaced the paying off and paying down of existing loans, Woodwell said.

Commercial banks, CMBS, CDO and other ABS issues, finance companies, the household sector and non-financial corporate business all decreased their holdings. The household sector saw a 7% decrease in holdings. At $792 billion, or 33% of the total, commercial banks continue to hold the largest share of commercial/multifamily mortgages.

The MBA maintains that changes in its reporting of commercial and multifamily mortgage debt outstanding that now excludes loans for acquisition, development and construction and loans collateralized by owner-occupied commercial properties has helped “more accurately” reflect the balance of loans supported by office buildings, retail centers, apartment buildings and other income-producing properties that rely on rents and leases to make their payments.

The analysis summarizes the holdings of loans or, if the loans are securitized, the form of the security including collateralized debt obligations and other asset-backed securities for which the security issues and trustees hold the note.

CMBS, CDO and other ABS issues are the second largest holders of commercial and multifamily mortgages with $617 billion, or 26% of the total.

Multifamily mortgages, agency and GSE portfolios and MBS represent the largest share, with $332 billion, or 41% of the total multifamily debt outstanding. Banks and thrifts come second with $216 billion, or 27% of the total; CMBS, CDO and other ABS issues hold $96 billion, or 12%; state and local governments hold $73 billion, or 9%; life insurance companies hold $48 billion, or 6%; and the federal government holds $14 billion, or 2% of the total.

The multifamily mortgage debt outstanding between the first quarter and second quarter increased 0.5%, or $4 billion.

At $4 billion agency and GSE portfolios and MBS saw the largest increase in their holdings’ volume of multifamily mortgage debt, followed by a $1 billion increase in holdings of multifamily mortgage debt by commercial banks, and $701 million by life insurance companies. CMBS, CDO and other ABS issues saw the biggest decrease in their holdings of multifamily mortgage debt, by $1.6 billion, or 1.6%.