Universe of Commercial Mortgages Dips Again in 3Q to $3.43 Trillion

Universe of Commercial Mortgages Dips Again in 3Q to $3.43 Trillion

Thursday, 17 December 2009

Commercial Real Estate Direct Staff Report The universe of commercial mortgages outstanding in the United States continued to decline during the third quarter, falling by $28.3 billion, or 0.8 percent, to $3.43 trillion from the second quarter, according to analysis of Federal Reserve Board flow of funds data by the Mortgage Bankers Association. The decline in the size of the universe should be no surprise as lenders in general remained very skittish in terms of writing new loans and CMBS lenders, specifically, were still on the sidelines. With new origination levels down from previous periods, it's only natural that the volume of loans would decline as a result of run-offs facilitated by writedowns among investors holding loans. Only government entities, including Fannie Mae and Freddie Mac, and private pension funds saw an increase in the volume of mortgages they own. The two housing-finance agencies saw their share of the commercial mortgage pie increase to 5.7 percent from 5.6 percent in the second quarter. They held $197.4 billion of loans at the end of the third quarter, up 1.7 percent from the second quarter. In addition, mortgage pools issued by the two hold another $162.2 billion of loans, up from $160.1 billion a quarter earlier. Commercial banks saw the biggest dollar decline in the size of their mortgage holdings, to $1.53 trillion from $1.55 trillion. But that drop is due largely to a reduction in the amount of construction loans they hold, according to the trade group's analysis. Exclude those and their holdings actually increased by $6 billion. REITs saw the biggest percentage decline in their holdings. They ended the third quarter with $31.9 billion of loans, down 11.6 percent from the second quarter. The MBA has found that 48 percent of the commercial real estate loans held by the country's top 10 commercial real estate bank lenders were related to owner-occupied commercial properties. Those properties rely on some operating business, as opposed to rental income, for their cash flow. CMBS now holds $708.6 billion of mortgages, for a 20.6 percent share of the market. That's down from $718.1 billion and a 20.7 percent share. And life-insurance companies hold $310 billion of loans, down from $311.9 billion in the second quarter. Meanwhile government - state, federal, their agencies and bonds they issue - now hold $531.1 billion of loans for a whopping 15.5 percent share of the entire commercial mortgage universe. That's up from a 15 percent share in the second quarter. If you look at only multifamily loans, the government's share of the market is even greater. It holds $443.8 billion of loans, or 49 percent of the country's $911.66 billion of apartment loans outstanding. CMBS and other private-label securitization structures now hold $110.3 billion of apartment loans, or 12.1 percent of the universe, down from $112.1 billion or 12.3 percent in the second quarter. Banks hold $216.8 billion, or 23.8 percent of the total, just about unchanged from the second quarter. Comments? E-mail Orest Mandzy or call him at (215) 504-2860, Ext. 211.