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Commercial Mortgage Debt Dips in Q2

And now for a bit of good news: The level of commercial/multifamily mortgage debt outstanding decreased in the second quarter, to $3.24 trillion, according to the Mortgage Bankers Association’s (MBA) analysis of the Federal Reserve Board Flow of Funds data.

Declines were driven by drops in commercial and multifamily mortgages held in CMBS and loans held by banks and thrifts.

The $3.24 trillion in commercial/multifamily mortgage debt outstanding recorded by the Federal Reserve was a decrease of $52 billion or 1.6% from the first quarter of 2010. Multifamily mortgage debt outstanding declined to $843 billion, a decrease of $5.4 billion or 0.6% from the first quarter of 2010.

“Demand for commercial and multifamily mortgages, while increasing, remained weak in the second quarter and contributed to the continuing trend of loans paying down and paying off faster than new ones replace them,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “As a result, the balance of mortgage debt outstanding declined for every major investor group with the exception of Fannie Mae’s, Freddie Mac’s and FHA/Ginnie Mae’s multifamily portfolios and MBS.”

The Federal Reserve Flow of Funds data summarizes the holding of loans or, if the loans are securitized, the form of the security. For example, many life insurance companies invest both in whole loans for which they hold the mortgage note (included under Life Insurance Companies in this data) and in CMBS, collateralized debt obligations (CDOs) and other asset backed securities (ABS) for which the security issuers and trustees hold the note.

Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $1.46 trillion, or 45% of the total. Many of the commercial mortgage loans reported by commercial banks however, are actually "commercial and industrial" loans to which a piece of commercial property has been pledged as collateral.

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