A Mortgage Bankers Association (MBA) report shows that total net growth in multifamily mortgage debt outstanding in Q2 2023 rebounded from the very low level of Q1. However, growth in multifamily mortgage holdings was well below the levels of recent years.
The MBA reported that multifamily mortgage debt outstanding rose by $26.4 billion in Q2, well above the $9.3 billion increase in Q1. Total multifamily mortgage debt reached a level of $2.027 trillion. Compared to the year-earlier level, multifamily mortgage debt was up $144 billion (7.6 percent).
The total of all commercial mortgage debt, including multifamily debt, outstanding at the end of Q2 rose 0.8 percent from its Q1 2023 level to $4.604 trillion. Multifamily mortgage debt represented 44 percent of commercial mortgage debt outstanding.
Earlier, the MBA had reported that multifamily mortgage originations had risen 37 percent in Q2. However, the Q2 2023 multifamily mortgage originations index was reported to be down 48 percent from the level of the index in Q2 2022.
Ranking the lenders
The shares of multifamily mortgage debt held by various classes of suppliers are shown in the first chart, below.
Of the increase in multifamily mortgage debt outstanding in the quarter, $13.4 billion, or 51 percent, was held by “Agency and GSE portfolios and MBS”. These are agencies, like the Federal Housing Administration and Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac. At the end of Q2, the GSEs holdings of multifamily mortgage debt rose to 47.9 percent of the total outstanding, up 0.1 percentage point in the quarter.
Banks and Thrifts, the second largest holders of multifamily mortgages, increased their multifamily mortgage holdings by $7.2 billion, a rebound from Q1 when their holdings of multifamily mortgage debt fell by $5.3 billion. The Q2 figure represented 27 percent of the increase in multifamily mortgage debt outstanding, in line with their holdings of 29.6 percent of total multifamily mortgage debt outstanding.
Life Insurance companies increased their direct holding of multifamily mortgage debt by $4.3 billion in the quarter, 16 percent of the total net increase. This raised their holdings to $219.0 billion. Their share of total multifamily mortgage debt outstanding rose 0.1 percentage point to 10.8 percent in the quarter. However, this figure does not account for the multifamily mortgages these companies hold through commercial mortgage-backed securities (CMBS).
State and local governments held 5.6 percent of outstanding multifamily mortgage debt at the end of Q2. They increased their holdings by $900 million to a total of $114.1 billion at the end of the quarter.
CMBS, CDO (collateralized debt obligations) and other ABS (asset backed securities) issuers decreased their holdings of multifamily mortgage debt in Q2 by $338 million. They were the only category of lender to reduce their net holdings in the quarter. However, this comes after a Q1 where they increased their holdings of multifamily mortgages by $7.0 billion, representing fully 75 percent of the total net increase in multifamily mortgage debt outstanding in Q1. Their share of multifamily mortgage debt outstanding fell to 3.2 percent in Q2.
The next chart, below, shows the quarterly changes in multifamily mortgage holdings of the 6 largest classes of lenders since Q1 2020. It shows that most of these classes of lenders did not increase their holdings of multifamily mortgage debt significantly in Q1 but their increase in holdings in Q2 is closer to their usual levels.
Who’s growing their share?
The next chart, below, plots the current share of multifamily mortgage debt outstanding for a given class of lender alongside that class of lender’s share of net new mortgage debt outstanding in Q2. When the latter share is greater than the former, that class of lender is increasing its share of the multifamily mortgage market.
The chart shows that the two biggest classes of lenders, the GSEs and banks, share of the increase in multifamily mortgage debt holdings was close to their shares of the total mortgage holdings outstanding. Life insurance companies grew their holdings at a rate well above their share of total debt outstanding. The other lenders either grew their holdings are a rate below their current share or actually reduced their holdings.
The report does not cover loans for acquisition, development or construction, or loans collateralized by owner-occupied commercial properties. The full report also includes information on mortgage debt outstanding for other commercial property types. The full report can be found here.