According to the Mortgage Bankers Association’s U.S. Commercial/Multifamily Mortgage Debt Outstanding quarterly report, commercial and multifamily mortgage debt outstanding rose by an impressive 2.8 percent year-on-year to reach $840 billion at the end of 2023.
MBA’s report showed that total mortgage debt outstanding increased by 0.9 percent ($41.8 billion), to reach $4.69 trillion by fourth-quarter 2023. Multifamily mortgage debt also experienced growth during this quarter by increasing by $25.0 billion (1.2%) to reach $2.09 trillion and increased 4.44% overall during 2018.
Jamie Woodwell, MBA’s Head of Commercial Real Estate Research reported that commercial mortgage debt outstanding increased both during the final quarter and year as a whole, yet at one of the slowest paces since mid-2010s. Major capital sources increased their holdings during 2023 despite decreased originations activity – this meant few loans were paying off and helping maintain portfolio sizes even with reduced inflows.
Four main investor categories include banks and thrifts; commercial mortgage-backed securities (CMBS), collateralized debt obligations (CDO), and asset backed securities (ABS) issues; federal agency and government sponsored enterprise portfolios and mortgage-backed securities (MBS); and life insurance companies.
MBA’s analysis provides a snapshot of loans held or, if securitized, their forms. For instance, many life insurance companies invest both in whole loans where they hold the mortgage note (listed here as “Life Insurance Companies”) as well as securitized CMBSs CDOs or ABSs where security issuers and trustees own them (listed as “CMBS, CDO & Other ABS Issues”).
Commercial banks hold 38% of commercial/multifamily mortgages totalling $1.8 trillion at present. Agency, GSE portfolios and MBS comprise 21.1%; life insurers hold 16.1% while CMBS/CDO issues comprise 13.1%.
Multifamilies with outstanding mortgage debt
Agency and GSE portfolios and MBS make up 48% of total debt outstanding among multifamily mortgages, accounting for $1.0 trillion or 48%. Commercial banks follow behind with $235 billion (11%), followed by state/local governments at 116% (6%) and finally CMBS/CDO and other ABS issues at 35% (3%) of outstanding debt outstanding.
Changes to Commercial & Multi-Family Mortgage Debt are Remarkable
Agency and GSE portfolios and MBS experienced the largest dollar increase in dollar terms among their holdings of commercial/multifamily mortgage debt in 2023’s fourth quarter at $15.5 billion (1.6 percent), followed by commercial banks who increased by $14.8 billion (0.8 percent) as life insurers saw increases of $9.9 billion (1.4 percent) with nonfinancial corporate business increasing their holdings by an additional $1.3 billion (1 percent), and finance companies experiencing their biggest decrease (5.0 percent at $1.9 billion).
By percentage terms, Agency/GBSE Portfolios/MBS saw the greatest increase – 1.6 percent – in their holdings of commercial/multifamily mortgages.
Changes to Multifamily Mortgage Debt Remarkable
A rise of $25.0 billion in multifamily mortgage debt outstanding between the third and fourth quarters of 2023 represented a 1.2 percent rise. Agency/GSE portfolios/MBS saw the greatest dollar-term increase with $15.5 billion (1.6 percent). Commercial banks saw their holdings of multifamily mortgage debt increase by $5.3 billion (0.9 percent), life insurers by another $5.2 billion (2.2 percent), while finance companies saw an 8.9 percent decrease, dropping holdings by an astounding $1.2 billion.
Life insurance companies experienced the greatest increase in holdings of multifamily mortgages (2.2 percent) while finance companies experienced a large decrease (8.9 percent).
Changes to Commercial/Multifamily Mortgage Debt Due During 2023
Between December 2022 and 2023, agency and GSE portfolios and MBS showed the largest dollar increase in their holdings of commercial/multifamily mortgage debt – rising 5.1 percent year over year – while life insurance companies increased their holdings of such mortgages by an even larger 6.3 percentage increase of $43.5 billion (see graph above).
By percentage terms, nonfinancial corporate businesses saw the greatest rise (12.7 percent) in their holdings of commercial/multifamily mortgages.
Increase in Multi-Family Mortgage Debt Awaiting Settlement Through 2023
The $88.5 billion increase in multifamily mortgage debt outstanding during 2023 represents a 4.4 percent rise. Agency, GSE portfolios and MBS saw the greatest percentage increase (5.1 percent or $49.0 billion). Finance companies saw their holdings decrease the most: by 17.7 percent or $2.7 billion.