CRE Debt Growing Fast

Commercial and multifamily mortgage debt outstanding grew 2.4%, by $51.7 billion, to $2.2 trillion between the second and third quarters of 2004, the Mortgage Bankers Association reports.

Multifamily debt alone grew by $8.2 billion, 1.4%, to $582 billion, according to the MBA, which is basing its report on Federal Reserve Board data.

The total outstanding commercial and multifamily debt, which now exceeds $2.2 trillion, represents a "record high" according to Doug Duncan, chief economist and senior vice president, MBA.

He noted, "Last quarter the growth was powered almost entirely by the commercial bank and CMBS sectors, which pumped an additional $44 billion into the market. With interest rates still relatively low and investment property sales remaining active, 2005 is likely to continue to see strong flows of capital into the commercial and multifamily mortgage debt markets."

The largest share of the commercial and multifamily mortgages, $951 billion - which represents 43% of the total - is continued to be held by commercial banks.

However, banks also report "commercial and industrial" loans in the commercial mortgage category, according to the MBA.

Commercial mortgage-backed securities pools are the second-largest holders of commercial and multifamily mortgages, holding $401 billion, or 18% of the total.

Life insurance companies come next with a holding of $247 billion, or 11% of the total, followed by savings institutions with $178 billion, or 8% of the total.

And the government-sponsored enterprises - Fannie Mae and Freddie Mac - and Ginnie Mae hold $124 billion in multifamily loans that support the mortgage-backed securities they issue (which the MBA calls "federally related mortgage pools"), as well as $57 billion worth of whole loans in their own portfolios, making for a total share of 8.4%.

In dollar terms, commercial banks increased their holdings of commercial and multifamily mortgage debt by $32 billion, or 3.5%, the MBA reports, which represents 62% of the total increase of $52 billion.

CMBS issuers increased their holdings of the debt by $12.6 billion, or 3.2%, which represents 24% of the total increase.

And finance companies increased their holdings by $2.1 billion, or 4.6%.

Real estate investment trusts saw their holdings of commercial and multifamily mortgages rise by 6.3%, which represents the biggest increase in percentage terms, the MBA said.

At the other end of the scale, "non-farm, non-corporate businesses" saw their holdings of the debt drop 16%.

In terms of only multifamily mortgages, the GSEs and Ginnie Mae hold the biggest share of the debt outstanding. Including $123.8 billion in federally related mortgage pools and $56.6 billion in their own portfolios, they account for 31% of the total multifamily debt outstanding, the MBA reports.

Commercial banks come next with $115 billion, or 19.8% of the total, followed by savings institutions with $86 billion, or 14.8% of the total, and CMBS issuers with $72 billion, or 12.4% of the total.

Commercial banks also saw the largest increase in their holdings of multifamily mortgage debt, at $4.2 billion, which represents about 50% of the total $8.2 billion increase.

Savings institutions increased their holdings of multifamily mortgage debt by $1.9 billion, or 2.2%, federally related mortgage pools by $1.3 billion, or 1%, and CMBS issuers by $1.5 billion, or 2.2%.

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