Net Run-Off

By Jamie Woodwell

The level of commercial and multi-family mortgage debt outstanding decreased in the third quarter, to $3.2 trillion. Declines were driven by drops in construction loans held by banks and thrifts and commercial and multi-family mortgages held in CMBS.

The $3.2 trillion in mortgage debt outstanding recorded by the Federal Reserve marked a decrease of $42 billion, or 1.3 percent, from the second quarter of 2010. Multi-family mortgage debt outstanding increased to $847 billion, up $2.3 billion or 0.3 percent from the second quarter of 2010.

Borrowers continue to pay off and pay down loans at a faster rate than new loans are taken out. The CMBS market is experiencing the fastest net run-off, followed by commercial banks, which are seeing most of their net declines in construction lending. Fannie Mae, Freddie Mac and the Federal Housing Administration are increasing their multi-family mortgage books of business, and life companies are matching portfolio run-off with new originations.

The overall balance of commercial and multi-family mortgage debt outstanding is likely to continue to decline until commercial mortgage borrowing picks up significantly, although individual investor groups will take advantage of current market conditions to pick up share.

   —Jamie Woodwell is the MBA’s vice president
of commercial real estate research. This chart and analysis first appeared in the February issue of Commercial Property Executive.