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Commercial mortgage debt exceeds $2.76 trillion

Total mortgage debt on commercial and multifamily properties grew by $76.6 billion in the first half of 2006 to reach $2.7 trillion at midyear, according to the Mortgage Bankers Association’s analysis of Federal Reserve Board Flow of Funds data. That’s a 2.8% increase from the fourth quarter last year.

“The commercial/multifamily mortgage market has become a staple of the finance industry,” says Doug Duncan, chief economist at the MBA. “With mortgage bankers’ originations up 24% in the first half of the year and servicing volumes at record levels, the industry is more efficient than ever at connecting real estate with capital.”

Total debt at midyear included an increase of $9.4 billion or 1.3% in multifamily loans, which amounted to $703 billion at the close of the second quarter.

Commercial banks continue to hold the largest share of commercial/multifamily mortgages, with more than $1.2 trillion or 44% of the total. Commercial mortgage-backed securities pools are the second largest holders of loans with $560 billion or 20% of the total. Life insurance companies hold $271 billion or 10%, and savings institutions hold $207 billion or 8%.

Government-sponsored enterprises and federally related mortgage pools, including Fannie Mae, Freddie Mac and Ginnie Mae, hold $135 billion in multifamily loans that support the mortgage-backed securities they issue and an additional $78 billion whole loans in their own portfolios, for a total share of 8% of outstanding commercial/multifamily mortgages.

In the second quarter of 2006, commercial banks saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt — an increase of $39 billion, or 3%, which represents 51% of the total $76.6 billion increase. CMBS issuers increased their holdings of commercial/multifamily mortgages by $22 billion or 4%, representing 29% of the net increase in commercial/multifamily mortgage debt outstanding.

In percentage terms, CMBS issuers saw the biggest increase in their holdings of commercial/multifamily mortgages — a jump of 4% — while private pension funds saw the biggest drop with a net reduction of 0.9%.

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