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Thursday, 23 September 2010

U.S. Commercial Mortgage Universe Shrinks in 2Q to $3.24 Trillion

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Commercial Real Estate Direct Staff Report

The commercial mortgage universe in the United States continued shrinking in the second quarter, to $3.24 trillion from $3.3 trillion in the first quarter, according to the Mortgage Bankers Association.

The Washington, D.C., trade group, which determines the size of the mortgage universe through an analysis of Federal Reserve Board flow of funds data, found that most traditional lenders - commercial banks, securitized vehicles, life-insurance companies and savings banks - saw a reduction in the volume of loans they hold.

Those declines were partially offset by increases in the volume of loans held by the housing-finance agencies and other government-sponsored entities, the federal and state governments, REITs and private pension funds.

Commercial banks remain the largest holders of commercial mortgages, with $1.46 trillion, down 2 percent from $1.49 trillion in the first quarter. Their share of the overall market was 45 percent at the end of the quarter, compared with 45.2 percent three months earlier.

But a large share of bank mortgages often are business loans tied to a piece of real estate that is usually owner-occupied.

In addition, banks commercial mortgage holdings include some construction loans. The MBA estimated that roughly $20 billion of the decline in bank mortgage holdings was due to a reduction in their holdings of construction loans.

The volume of loans held by CMBS and other securitization vehicles has continued to slip from its high of 23.6 percent of the universe at the end of 2007. They now hold $651.76 billion of mortgages, which represent 20.1 percent of the universe.

"Demand for commercial and multifamily mortgages, while increasing, remained weak in the second quarter," said Jamie Woodwell, vice president of commercial real estate research at the MBA. He added that loans have paid off more quickly than new loans have been originated.

Life insurers also saw their mortgage holdings slip, to $298.7 billion from $301.9 billion in the first quarter. Their market share remained flat at 9.2 percent.

Besides private pension funds, which saw their holdings climb to $13.6 billion from $12.5 billion, and REITs, whose holdings rose to $32.9 billion from $32 billion, only government-related entities saw their share of the universe increase. Freddie Mac, Fannie Mae and other government-sponsored enterprises, or GSEs, along with securitized affiliates increased their holdings by 0.5 percent to $310.5 billion, while the federal government's direct holdings increased by 0.8 percent to $80.5 billion from $80 billion.

If you look only at multifamily mortgages, the GSEs remain, by far, the biggest holders, with a portfolio that amounts to 36.8 percent of the $843 billion universe. Commercial banks hold 24.6 percent of the universe and CMBS and other securitized vehicles hold 12.5 percent.

Comments? E-mail Orest Mandzy or call him at (267) 247-0112, Ext. 211.

Copyright © 2010 Commercial Real Estate Direct


“The Weekly”

“The Weekly” is Commercial Real Estate Direct’s PDF newsletter, sent to subscribers every Friday morning. With over 100 news stories published on Commercial Real Estate Direct each week, “The Weekly” features the top stories in commercial real estate that industry participants need to know first. “The Weekly” also contains:

  • Breaking mortgage, CMBS, and REIT news

  • Quarterly league tables with rankings of B-piece buyers, book runners, and lenders

  • Industry moves and changes in “The Insider“

Additional Info

  • Syndicate to Realpoint: No
  • Subject: CMBS - non-deal specific (CMBS-G), Commercial MBS (CMBS), Mortgages/Financing (MOR), Research (RES)
  • Deal Name: Bear Stearns Commercial Mortgage Securities Trust, 2006-PWR12
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