Commercial mortgages grew by a rate of 1.6 percent in the second quarter, an increase which helped push total commercial debt in the US above the 3 trillion dollar mark. Multi family mortgage debt reached 1.2 trillion dollars around the time time. The report cites the biggest players in the industry are commercial banks, life insurance companies , government sponsored enterprises ( issuers of mortgage securities backed by Fannie Mae or Freddie Mac) and CMBS bond issuers.
Life insurance companies have outpaced banks this year in expanding their holdings of commercial debt. Life insurers both originate and buy mortgage backed securities.This may mean life insurance companies have a larger footprint in the commercial mortgage market than the report indicates. Life insurance companies hold about 15 percent of all commercial debt, with a value of 448 billion dollars. This year they expanded that share by 12.7 billion, a 2.7 percent increase. Life insurers also expanded their stake in the multi-family market by 2.9 percent. Both of these increases on the part of life insurance companies, out paced commercial banks.
Commercial banks also took on a greater share of commercial and multi-family mortgages, but by a smaller percentage than life insurers. Commercial banks still hold a dominant share of 41 percent of all commercial debt. They expanded their lending efforts by 2 percent this year, about one percent lower than life insurance companies. Commercial banks are the second largest originators of multi-family mortgages, topped only by government sponsored enterprises. Commercial banks have expanded this share by 2.5 percent, a lower percentage when compared to life insurers. But by a dollar amount commercial banks still increased their debt holdings by a larger amount than life insurance companies. However the lower percentage increase may indicate commercial banks are scaling back their lending efforts.
CMBS bond issuers are the smallest of the major players noted in the report and account for just 14 percent of all commercial debt. Still CMBS providers decreased their footprint in the mortgage market by 2.4 percent this year. These groups seem to be retreating from the multi-family market as well. Their share of multi-family mortgage debt declined by 5.7 percentage points this year.
CMBS issuers were the only major group in the analysis to decrease their share of both commercial and multi family mortgage debt. The data may indicate that CMBS providers have scaled back lending activity in both the commercial and multi family sector.
MBA analyst, Jamie Woodwell claims in the report that the decline on the part of CMBS issuers may be due to an increased number of securities reaching maturity. Such securities were issued prior to the recession and the demand for these securities hasn’t reached similar levels since then. Naturally as these securities are paid off CMBS providers will see their share of outstanding commercial debt decline. The question is whether the CMBS market will ever return to similar levels of prominence under the new Dodd-Frank risk retention rules.
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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.