Commercial Loans Blog

Commercial Real Estate Loan Portfolios Are Shrinking as U.S. Commercial Mortgage Universe Shrinks Again to $3.31 Trillion

Posted by George Blackburne on Mon, Jun 28, 2010

Commercial Mortgages Are Being Paid Down or Written Off

The size of the commercial mortgage market in the United States continued shrinking in the first quarter, to $3.31 trillion from $3.34 trillion at the end of last year, according to the Mortgage Bankers Association's analysis of Federal Reserve Board flow-of-funds data. The universe of mortgages has now shrunk for five consecutive quarters and is now roughly the same size it was at the end of 2007.

Every major investor group, except the housing-finance agencies, private pensions, savings institutions and government entities, saw a reduction in the size of their mortgage portfolios. Commercial banking organizations saw an $18.9 billion, or 1.3 percent reduction in the size of their holdings, to $1.49 trillion. They are still the biggest holders of loans, accounting for 44.9 percent of the entire universe, down from 45.1 percent at the end of the fourth quarter.

CMBS and other securitization vehicles saw their portfolio of mortgages shrink by 1.6 percent over the last quarter to $679 billion. That accounts for 20.5 percent of the universe, down from 20.6 percent in the fourth quarter.

Life-insurance companies, which lately have become hungry to write loans but have faced tepid demand, saw their holdings fall by $4.4 billion, or 1.4 percent, to $301.9 billion. They now hold 9.1 percent of the total universe, down slightly from 9.2 percent at the end of last year.

The housing-finance agencies, meanwhile, saw their portfolios grow by $5.8 billion, or 1.9 percent, to $309 billion. That represents 9.3 percent of the commercial mortgage universe, up from 9.1 percent in the fourth quarter. If you look at only multifamily loans, the agencies - Fannie Mae, Freddie Mac and agency-backed mortgage pools - hold 36.3 percent of the $852.1 billion universe. That universe is up from $849 billion in the fourth quarter - testament that the agencies continue to actively write loans.

"Low levels of commercial mortgage borrowing mean that property investors are paying off and paying down more in mortgages than they are taking out," explained Jamie Woodwell, vice president of commercial real estate research at the MBA.  (Commercial Real Estate Direct)

Topics: commercial lender