Banks, thrifts lower commercial mortgage debt holdings in 1Q

Five investor types increased holdings of commercial and multifamily mortgage debt in the first quarter and total debt outstanding in the sector remained unchanged from the fourth quarter at $2.4 trillion, the Mortgage Bankers Association said Thursday. Investor groups taking on additional debt in this segment include life insurance companies, federal and state governments, agency and government-sponsored enterprise portfolios, and issuers of structured finance products. The MBA compiled this report after analyzing flow of funds data from the Federal Reserve. Last week, Standard & Poor’s analysts said less than $5 billion of new nonagency residential mortgage-backed securities will come to market this year, a mere 0.5% of peak levels. Commercial banks, which hold 33% of the debt in this space, experienced an $8 billion drop in total outstanding multifamily and commercial debt holdings last quarter. “New commercial and multifamily mortgage lending offset the amount of debt paid-off and paid-down during the first quarter, leaving the outstanding balance essentially unchanged,” said Jamie Woodwell, MBA vice president of commercial real estate research. “Banks and thrifts and finance companies saw declines in the balances of commercial and multifamily mortgages they hold.” Issuers of commercial mortgage-backed securities, credit default obligations, and asset-backed securities hold 26%, or $626 billion, of the debt, while agency, MBS and GSE portfolios hold about $327 billion, or 15% of the market. When looking at multifamily mortgages alone, MBS, agency and GSE portfolios hold 41%, or $327 billion, of the outstanding debt. Write to Kerri Panchuk.