A Mortgage Bankers Association (MBA) on outstanding commercial and multi-family mortgage debt shows that mortgage lending on multi-family properties continued in the second quarter of 2020. Total multi-family mortgage debt increased 2% to $ 32.2 billion, reaching a level of $ 1.6 trillion.

supply the market

The shares of multi-family mortgage debt held by various categories of providers are shown in the first graph below.

multi-family mortgage debt
Source: Association of Mortgage Bankers

Of the $ 32.2 billion increase in outstanding multi-family mortgage debt, the vast majority, 71.4%, was provided by “agency portfolios and GSE and MBS”. These are agencies like the Federal Housing Administration and government sponsored companies (GSEs) like Fannie Mae and Freddie Mac that buy mortgages and sell some of the debt in the form of Mortgage Backed Securities (MBS). This share is much higher than that (48%) of the existing mortgage debt they hold, which means that these government-linked entities are strengthening their market dominance.

All other fund providers in the multi-family mortgage market have issued a share of new debt that is less than their share of outstanding multi-family mortgage debt, with the exception of unincorporated non-farm businesses, which only hold 1.3% of outstanding debt.

Banks and savings banks held 29.7% of outstanding multi-family mortgage debt at the end of the first quarter, but only increased their holdings by 16.5% of new debt in the second quarter. Life insurance companies held 10.5% of the debt in the first quarter, but only increased their stake to 7.8% of the new debt in the second quarter. State and local governments held 5.8% of the debt in the first quarter, but only increased their holding by 4.2% of new debt in the second quarter.

Reduce exposure

The federal government, finance companies, REITs and private pension funds all reduced their holdings of multi-family mortgage debt in the second quarter by $ 602 million. Fortunately, these are all relatively small players in the market, with none of them holding more than 1% of the outstanding debt.

The growing market share of lenders with implicit government support is a trend that has been developing for a long time. This is illustrated in the following graphic, below. This shows that, as recently as 2007, banks and savings banks held as much multi-family mortgage debt as GSEs. However, since the debt crisis, GSEs have stepped in to provide the majority of new financing.

multi-family mortgage debt
Adapted from the Mortgage Bankers Association

The comprehensive report also includes information on the overall commercial mortgage market. This encompasses types of properties such as retail, office, hospitality, and industry. The full report is titled Outstanding Commercial / Multi-Family Mortgage Debt | Q2 2020 and it can be found here.

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