Surge in U.S. Commercial Mortgage Debt: Record-Breaking $4.6 Trillion

Discover the record-breaking surge in U.S. commercial mortgage debt, as Mortgage Bankers Association (MBA) reports a $37.7 billion increase in the second quarter of 2023. The total outstanding debt reaches an astounding $4.6 trillion, with multifamily mortgage alone experiencing a $26.4 billion increase. Read more now.

According to the Mortgage Bankers Association (MBA), the second quarter of 2023 saw an increase of $37.7 billion (0.8 percent) in the level of U.S. commercial and multifamily mortgage debt outstanding. At the end of the second quarter, the total commercial/multifamily mortgage debt outstanding reached $4.60 trillion. Specifically, multifamily mortgage debt alone experienced a $26.4 billion (1.3 percent) increase, reaching $2.03 trillion from the previous quarter.

The report indicates that the four largest investor groups in commercial/multifamily mortgages are banks and thrifts, federal agency and government-sponsored enterprise (GSE) portfolios and mortgage-backed securities (MBS), life insurance companies, and commercial mortgage-backed securities (CMBS), collateralized debt obligation (CDO), and other asset-backed securities (ABS) issues. Commercial banks hold the largest share (38 percent) of commercial/multifamily mortgages at $1.8 trillion. Agency and GSE portfolios and MBS rank as the second-largest holders (21 percent) with $971 billion. Life insurance companies hold $692 billion (15 percent), while CMBS, CDO, and other ABS issues hold $593 billion (13 percent). Many life insurance companies, banks, and GSEs invest in and retain both CMBS, CDO, and other ABS issues as well as whole loans, which results in their appearance in the report under different categories based on the form of the investment.

Delving further into multifamily mortgages, the data shows that agency and GSE portfolios and MBS hold the largest share of total multifamily debt outstanding at $971 billion (48 percent). Banks and thrifts rank second with $600 billion (30 percent), followed by life insurance companies with $219 billion (11 percent), state and local government with $114 billion (6 percent), and CMBS, CDO, and other ABS issues with $65 billion (3 percent).

Analyzing changes in commercial and multifamily mortgage debt outstanding, banks and thrifts experienced the largest gain in dollar terms during the second quarter—an increase of $13.9 billion (0.8 percent). Agency and GSE portfolios and MBS witnessed a growth of $13.4 billion (1.4 percent), while life insurance companies increased their holdings by $12.0 billion (1.8 percent). Nonfinancial corporate business also saw an increase in their holdings, albeit smaller in scale, by $1.5 billion (5.3 percent). In terms of percentage increase, state and local government retirement funds had the highest growth rate of 10.3 percent in their holdings of commercial/multifamily mortgages. Conversely, finance companies saw a decrease in their holdings by 2.2 percent.

Examining changes in multifamily mortgage debt outstanding, the increase of $26.4 billion from the first quarter of 2023 indicates a quarterly gain of 1.3 percent. Agency and GSE portfolios and MBS issues recorded the largest gain in dollar terms at $13.4 billion (1.4 percent) in their holdings of multifamily mortgage debt. Bank and thrifts increased their holdings by $7.2 billion (1.2 percent), while life insurance companies increased by $4.3 billion (2.0 percent). State and local government retirement funds experienced the highest percentage increase in their holdings of multifamily mortgage debt, up 10.3 percent. On the other hand, CMBS, CDO, and other ABS issues reported the largest decline in their holdings of multifamily mortgage debt at 0.5 percent.

In conclusion, the MBA's latest report indicates growth and changes in commercial and multifamily mortgage debt outstanding in the second quarter of 2023. Commercial banks continue to hold the largest share of commercial/multifamily mortgages, followed by agency and GSE portfolios and MBS. Life insurance companies and CMBS, CDO, and other ABS issues also have significant holdings in this sector. The increase in multifamily mortgage debt outstanding signifies positive growth across various investor groups.