- Multifamily mortgage debt jumped by $148.2 billion, or 8.2%, in 2022, according to the Mortgage Bankers Association’s latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report.
- The pace of growth slowed to 1.8% in Q4 as $35.6 billion of debt was added. Overall, multifamily sat $1.96 trillion in outstanding debt at the end of the year. Growth in multifamily mortgage balances accounted for almost half of the annual increase across commercial real estate.
- Overall, outstanding mortgage debt for multifamily and commercial real estate inched up 1.7%, or $77.9 billion in Q4. Through 2022, it rose 7.7% to $324 billion, the second-highest annual increase since 2007. Only 2021 saw more growth in debt.
As the multifamily sales market slowed in the fourth quarter, the government-sponsored enterprises and mortgage-backed securities portfolio saw an increase in debt outstanding of 2.9% or $27.3 billion.
The agencies, Fannie Mae and Freddie Mac, were still in the market — as they have been during different periods of capital market volatility. That should continue this year.
“I think the agencies will pick up a bigger portion of the pie,” said Dan Brendes, senior vice president and head of government-sponsored enterprise lending at New York City–based commercial real estate services firm Berkadia.
Commercial banks also increased their holdings of multifamily mortgage debt, adding $14.3 billion or 2.4%. They were followed by life insurance companies, which increased their holdings by $2.1 billion or 1.1%. Commercial mortgage-backed securities (CMBS), collateralized debt obligation and other asset-backed securities issues saw the largest decline (11.9 percent) in their holdings, by $8.1 billion.
The percentage of troubled CMBS loans is growing, which could hamper new originations. In February, the servicing rate rose 43 basis points to 2.7%, driven by the transfer of a $270.35 million loan backing 11 New York City properties owned by Blackstone, according to Trepp. Nineteen percent of new commercial real estate servicing transfers involved multifamily properties.
Lenders with the most multifamily debt
|Lender||Percent held||Total (billions)|
The recent banking failures at Silicon Valley and Signature Bank could further slow the multifamily lending market. “You did see the volatility [from the bank failures] right away on CMBS and CLO prices,” said Ross Pemmerl, chief credit officer at Boston-based private lender UC Funds.
But Pemmerl thinks the situation will stabilize. “I believe a lot of that is volatility that is reactionary,” he said. “Anytime there's a major crisis, especially in today's environment where with technology people can react instantaneously, you see a lot of that volatility spike right away.”
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