Despite a significant fall-off in acquisition financing in the last two quarters, loan refinancings, particularly for FHA, Fannie Mae, Freddie Mac and bank balance sheets, helped lift total mortgage balances for the third quarter, according to Jamie Woodwell, the Mortgage Bankers Association’s Vice President for Commercial Real Estate Research.
Woodwell also noted that continued uncertainty about the pandemic’s long-term impacts is likely to weigh on new financing in the coming quarters. However, the headline news of MBA’s latest report is that the amount of mortgage debt backed by commercial and multifamily properties increased for the 33rd straight quarter.
Namely, the outstanding commercial/multifamily mortgage debt outstanding rose by 1.5% to $57.0 billion in Q3.
The largest providers of debt were banks and thrifts; federal agency and government-sponsored enterprise portfolios and mortgage-backed securities (MBS); life insurance companies; and commercial mortgage-backed securities, collateralized debt obligations and other asset-backed securities issues, according to MBA.
At 39%, commercial banks held the largest share of commercial and multifamily mortgages ($1.5 trillion). Agency and GSE portfolios came in second at $798 billion, which was 21%. Life insurance companies are next at $577 billion (15%), while CMBS, CDO and other ABS issues hold $529 billion (14%).
In Q3, agency and GSE portfolios and MBS held the largest share of total multifamily debt outstanding at $798 billion (48%), according to MBA. Next were banks and thrifts with $478 billion (29 percent) and life insurance companies with $168 billion (10%). State and local government held $108 billion (7%) and CMBS, CDO and other ABS issues held $52 billion (3%). Finally, nonfarm non-corporate businesses held $20 billion (1%).
In Q3, REITs saw the largest percentage increase in their commercial/multifamily mortgage debt holdings at 5.6%, while the federal government experienced a 2.0% decrease.
Agency and GSE portfolios and MBS saw 3% gains in their commercial/multifamily mortgage debt holdings to $23.2 billion, which were the largest gains in terms of dollars. Commercial banks were next, 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%).
On the multifamily side, outstanding mortgage debt increased $31.0 billion in Q2, which is a 1.9% increase. Agency and GSE portfolios and MBS experienced the largest gain in their holdings of multifamily mortgage debt 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 by $3.2 billion (3%), respectively. CMBS, CDO, and other ABS issues saw a $835 million (1.6%) decline, which was the largest decrease in multifamily mortgage debt holdings.
The GSEs will remain significant players in the year ahead, though their focus may change. In 2021, the Federal Housing Finance Agency announced $70 billion in multifamily lending caps for Fannie Mae and Freddie Mac. In 2020, those caps were $80 billion each for Freddie and Fannie.
At least 50% of the GSE’s loan originations must be dedicated to affordable housing, increasing from 37.5% in 2020. The caps apply to the four quarters in the 2021 calendar year, compared to five quarters totaling $100 billion in the previous cap, according to Marcus & Millichap.