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WASHINGTON, DC (December 14, 2023) — Commercial/multifamily mortgage debt outstanding increased by $37.1 billion, or 0.8%, in the third quarter of 2023, according to the Mortgage Bankers Association’s (MBA) latest quarterly commercial/multifamily mortgage debt outstanding report.
As of the end of the third quarter, total commercial/multifamily mortgage debt outstanding increased to $4.63 trillion. Multifamily mortgage debt alone increased $26.8 billion, or 1.3%, from the second quarter of 2023 to $2.05 trillion.
“Commercial mortgage debt balances continue to grow despite continued declines in borrowing volumes,” said Jamie Woodwell, MBA's head of commercial real estate research. “Lower purchase and sale transactions and refinance volumes mean less new debt is being taken on, but it also means fewer loans are being paid down than at many prior times. As a result, debt volumes continue to grow, but at about half the pace of last year.”
The four largest investor groups are banks and thrifts, federal government agencies and government-sponsored enterprises (GSEs) portfolios and issues of mortgage-backed securities (MBS), life insurance companies, commercial mortgage-backed securities (CMBS), collateralized debt obligations (CDOs), and other asset-backed securities (ABS).
Commercial banks hold the largest share of commercial/multifamily mortgages (38%) totaling $1.8 trillion. Government and agency portfolios and MBS are the second largest holders of commercial/multifamily mortgages (21%) totaling $986 billion. Life insurance companies hold $702 billion (15%) and CMBS, CDOs, and other ABS issuances total $593 billion (13%). Many life insurance companies, banks, and agency-backed companies purchase and hold CMBS, CDOs, and other ABS issuances. These loans appear in the report's “CMBS, CDOs, and Other ABS” category.
The MBA analysis summarizes the loan holdings, or the form of the security if the loans are securitized. For example, many life insurers invest in both whole loans where they hold mortgage receivables (shown here under Life Insurers) and CMBS, CDOs, and other ABS where the receivables are held by issuers and trustees (shown here under CMBS, CDOs, and other ABS issuance).
Outstanding multifamily mortgage debt
Looking just at multifamily mortgages for Q3 2023, agency and GSE portfolios and MBS accounted for the largest share of total multifamily debt at $986 billion (48%), followed by banks and thrifts at $606 billion (30%), life insurance companies at $223 billion (11%), state and local governments at $115 billion (6%), and CMBS, CDOs and other ABS issuances at $67 billion (3%).
Commercial/Multifamily Mortgage Debt Balance Trends
Agency and GSE portfolios and MBS saw the largest dollar increases in holdings of commercial/multifamily mortgage debt, increasing by $15.6 billion, or 1.6%, in the third quarter. Life insurance companies increased their holdings by $10.4 billion, or 1.5%, banks and thrifts increased their holdings by $9.5 billion, or 0.5%, and the federal government increased its holdings by $1.9 billion, or 2.1%.
Percentage-wise, state and local government retirement funds saw the largest increase in commercial/multifamily mortgage holdings at 3.0 percent. Conversely, finance companies' holdings declined 5.2 percent.
Trends in outstanding mortgage debt for multifamily homes
Outstanding multifamily mortgage debt increased by $26.8 billion from the second quarter of 2023, a 1.3% quarterly increase. In dollar terms, agency and GSE portfolios and MBS-issued holdings of multifamily mortgage debt had the largest increase ($15.6 billion, or 1.6%). Banks and thrifts increased their holdings by $5.6 billion, or 0.9%, and life insurance companies increased by $4.5 billion, or 2.0%.
Nonfinancial corporates saw the largest increase in multifamily mortgage debt holdings, increasing 7.1%, while finance companies saw the largest decrease in multifamily mortgage debt holdings, decreasing 10.0%.