Commercial and multi-family mortgage debt increased by $6.6 billion to $2.38 trillion in the third quarter, an increase of 0.3 percent according to the Mortgage Bankers Association (MBA).  The multi-family share of that debt increased to $824.9 billion from $812.8 billion in the second quarter, an increase of $12.1 billion or 1.5 percent.

MBA tracks commercial and multi-family mortgages held by various sectors, principally life insurance companies, banks and thrifts, state and local government, federal government,  Agency/Government sponsored enterprise (GSE) portfolios and mortgage-backed securities (MBS);, and commercial mortgage-backed securities (CMBS) collateralized debt obligations (CDO) and other asset backed securities (ABS).

The largest amount of multi-family mortgage debt (44.7 percent) was held in Agency and GSE portfolios.  The total in this sector was $368.9 billion compared to $359.5 billion in the second quarter, an increase of $9.4 billion or 2.6 percent.   This sector accounted for 77.2 percent of the increase in multi-family debt.   Banks and thrifts held the second largest share of multi-family mortgages, $227.8 billion, up 1.4 percent form Q2 and a 27.6 percent share.  CMBS, CDO, and ABS holdings comprised 9.0 percent of the total at $74.3 billion.  This was a decrease in holdings from the second quarter of $2.5 billion of 3.2 percent.  State and local governments increased their holdings by 2.5 percent to $65.4 billion and held a 7.9 percent share of the total.  While they still hold only a negligible 0.4 percent of multi-family debt, private pension funds increased their holdings by 8.2 percent in the third quarter to $3.4 billion.

While multi-family mortgage debt increased, commercial debt actually decreased during the quarter, due to a $9.4 billion or 1.7 percent drop in CMBS, CDO and other ABS issues.  This was partially offset by increases by the other three major investor groups. Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $819 billion, or 34 percent of the total.  Commercial banks increased their holdings by 0.5 percent quarter-over-quarter.

Despite the quarterly decrease CMBS, CDO and other ABS issues remain the second largest holders of commercial/multifamily mortgages, holding $562 billion, or 24 percent of the total.  Agency/GSE portfolios and MBS hold $369 billion, or 16 percent of the total, an increase of 2.6 percent; and life insurance companies hold $323 billion, or 14 percent of the total. Many life insurance companies, banks and the GSEs purchase and hold CMBS, CDO and other ABS issues and these loans appear in the "CMBS, CDO and other ABS" category.

"The overall amount of commercial and multifamily mortgage debt continues to grow," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research.  "Fannie Mae, Freddie Mac, FHA, life insurance companies and banks are all increasing their holdings and/or guarantees of commercial and multifamily mortgages.  And for the fourth quarter in a row, the net increase by these and other investor groups has outpaced a decline in the balance of commercial and multifamily mortgages held in commercial mortgage backed securities (CMBS)."

MBA's analysis is based on data from the Federal Reserve Board's Flow of Funds Account of the United States and the Federal Deposit Insurance Corporation's Quarterly Banking Profile.