Bucking other evidence of a pending bust in commercial real estate, the Mortgage Bankers Association said Monday that the level of commercial/multifamily mortgage debt outstanding grew by 0.7 percent in the fourth quarter of 2008, to $3.5 trillion. Based on an analysis of the Federal Reserve Board Flow of Funds data, the group said the total was an increase of $166 billion, or 5 percent from the end of 2007. The $3.5 trillion in commercial/multifamily mortgage debt outstanding recorded by the Federal Reserve was an increase of $23 billion from the third quarter of 2008. Multifamily mortgage debt outstanding grew to $900 billion, an increase of $5.4 billion or 0.6 percent from the third quarter. “Counter to what many expected, investors increased their holdings of commercial and multifamily mortgages during the fourth quarter,” said Jamie Woodwell, MBA’s vice president of commercial real estate research. “Banks, thrifts, Fannie Mae, Freddie Mac, life insurance companies and other lenders extended additional credit to the market during the fourth quarter, lending more in new commercial and multifamily mortgages than they saw paid off or paid down on existing loans.” Commercial banks continue to hold the largest share of commercial/multifamily mortgages at $1.55 trillion, or 44 percent of the total. Many of the commercial mortgage loans reported by commercial banks however, are actually “commercial and industrial” loans to which a piece of commercial property has been pledged as collateral. It is the borrower’s business income, and not the income derived from the property’s rents and leases that drive the underwriting, pricing and performance of these loans. An earlier research note from the mortgage banking group found that among the top 10 commercial real estate bank lenders, 48 percent of their aggregate balance of commercial (non-multifamily) real estate loans were related to owner-occupied properties, with 52 percent being income property loans. CMBS, CDO and other ABS issues are the second largest holders of commercial/multifamily mortgages, holding $746 billion, or 21 percent of the total. Life insurance companies hold $316 billion, or 9 percent of the total, and savings institutions hold $193 billion, or 5.5 percent of the total, the MBA said. Government sponsored enterprises, including Fannie Mae, Freddie Mac and Ginnie Mae, hold $189 billion in “whole” loans in their own portfolios and an additional $149 billion in multifamily loans that support the mortgage-backed securities they issue. In total, the GSEs represent 10 percent of the total outstanding commercial/multifamily mortgages. Read the full report. Write to Paul Jackson at [email protected].

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