Mortgage debt continues its long upward trajectory

Despite a significant drop in acquisition funding over the past two quarters, loan refinances, particularly for FHA, Fannie Mae, Freddie Mac and bank balance sheets, helped push total mortgage balances for the third quarter, according to Jamie. Woodwell, the Mortgage Bankers Vice President of the Association for Commercial Real Estate Research.

Woodwell also noted that lingering uncertainty about the long-term impacts of the pandemic is likely to weigh on new funding in the coming quarters. However, the big news from the latest MBA report is that the amount of mortgage debt backed by commercial and multi-family properties has increased for the 33rd consecutive quarter.

Namely, outstanding commercial / multi-family mortgage debt rose 1.5% to $ 57.0 billion in the third quarter.

The biggest providers of debt were banks and savings banks; Federal agency and government sponsored corporate portfolios and Mortgage Backed Securities (MBS); life insurance companies; and commercial mortgage-backed securities, secured debt securities and other asset-backed securities issues, according to MBA.

At 39%, commercial banks held the largest share of commercial and multi-family mortgages ($ 1.5 trillion). The agency and GSE portfolios come second with $ 798 billion, or 21%. Life insurance companies come next with $ 577 billion (15%), while CMBS, CDOs and other ABS issues hold $ 529 billion (14%).

In the third quarter, agency portfolios and GSE and MBS held the largest share of total multi-family debt outstanding at $ 798 billion (48%), according to MBA. Next come the banks and savings banks with $ 478 billion (29%) and life insurance companies with $ 168 billion (10%). The state and local communities held $ 108 billion (7%) and issues of CMBS, CDOs and other ABS held $ 52 billion (3%). Finally, unincorporated non-farm businesses held $ 20 billion (1%).

In the third quarter, REITs saw the largest percentage increase in their commercial / multi-family mortgage holdings at 5.6%, while the federal government saw a 2.0% decline.

The agency and GSE portfolios and MBS saw 3% gains in their commercial / multi-family mortgage holdings to $ 23.2 billion, the largest gains in terms of dollars. Commercial banks followed, increasing their holdings by $ 12.1 billion (0.8%). CMBS, CDO and other ABS issues increased their holdings by $ 10.6 billion (2.1%), while REITs increased their holdings by $ 4.9 billion (5.6%).

As for multi-family buildings, outstanding mortgage debt increased by $ 31.0 billion in the second quarter, which represents an increase of 1.9%. The agency and GSE portfolios and MBS saw the largest increase in their multi-family mortgage debt holdings in dollars at $ 23.2 billion (3%). Commercial banks and state and local governments also increased their holdings by $ 4.4 billion (0.9%) and $ 3.2 billion (3%), respectively. Issues of CMBS, CDOs and other ABS fell by $ 835 million (1.6%), the largest decline in multi-family mortgage debt holdings.

GSEs will remain important players in the coming year, although their focus may change. In 2021, the Federal Housing Finance Agency announced $ 70 billion in multi-family loan limits for Fannie Mae and Freddie Mac. In 2020, those caps were $ 80 billion each for Freddie and Fannie.

At least 50% of GSE loan arrangements must be devoted to affordable housing, compared to 37.5% in 2020. The ceilings apply to the four quarters of calendar year 2021, against five quarters totaling $ 100 billion in the previous cap, according to Marcus & Millichap.

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