Commercial mortgage debt increases in 2Q, despite slowing lockdown

Outstanding mortgage debt in the commercial and multifamily sector rose 1.2% in the second quarter as lenders had varying responses to the coronavirus, both by type of lender and by real estate sector, said the Mortgage Bankers Association.

“Despite a decline in new commercial and multi-family mortgages in the second quarter, the total amount of mortgage debt continued to rise,” said Jamie Woodwell, vice president of commercial real estate research at the MBA, in a press release. hurry. “The pandemic is having different impacts on different property types and sources of capital. Loans secured by multifamily properties accounted for nearly three-quarters of total growth, and Fannie Mae, Freddie Mac and the Federal Housing Administration accounted for nearly three-quarters of that growth amount.”

The future of multifamily loans may not be very bright. In August, Freddie Mac predicted a 20% to 40% decline in multi-family builds this year. A drop in multi-family housing starts reported in August confirmed Freddie Mac’s pessimistic forecast.

Meanwhile, other types of properties that have been hardest hit by COVID-19 shelter-in-place orders, such as retail and hotel, may face challenges securing new capital as their current loans are coming due.

As of June 30, $3.76 trillion of all types of commercial loans were outstanding, compared to $3.72 trillion at the end of the first quarter and $3.5 trillion a year ago.

Multifamily loans accounted for $32 billion of the $43.6 billion increase in outstanding commercial mortgage debt in the first quarter.

Banks hold $1.46 trillion of total commercial and multifamily debt outstanding, up slightly from $1.44 trillion in the first quarter, but its share of the total remained virtually flat at 38. 8%, compared to 38.9%.

Multifamily accounted for $474 billion of outstanding bank debt, up from $468.7 billion in the first quarter. Their share for the segment fell slightly to 29.5%.

As the second largest group of investors, government and FHA-sponsored companies were the only ones to see their share increase quarter over quarter, benefiting from rising multifamily debt. Outstanding agency debt fell from $751.6 billion at the end of the first quarter to $774.6 billion, while the share fell from 20.2% to 20.6%.

All of the outstanding GSE/FHA debt is secured by multifamily properties, and within this segment they hold a market share of 48.2%, up from 47.7% in the first quarter.

Meanwhile, real estate investment trusts were the only group of investors to see a drop in the total amount of commercial and multifamily debt they held from the first quarter, down $2.8 billion to amount to $89.4 billion. This group held just 0.3% of all outstanding multifamily debt for the first and second quarters.

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