Mortgage debt in commercial/multifamily dwellings dropped 0.1% in the third quarter to 3.44 trillion, according to a Mortgage Bankers Association (MBA)examination of the Federal Reserve Board Flow of Funds data.

Commercial/multifamily mortgage outstanding debt fell by $3.3 billion from the second quarter of 2008. The federal Flow of Funds data is a collection of all loan holdings that have been securitized.

"Uncertainty surrounding the weakening economy, coupled with the continuing pressures of the credit crunch, led to a slight pullback among investors in commercial/multifamily mortgages in the third quarter," said Jamie Woodwell, MBA's vice-president of Commercial Real Estate Research.

In the third quarter, commercial bank holdings of commercial/multifamily mortgage debt increased $30 billion or 2%. Finance companies increased their holdings by 2.3 billion or 3.2%. Government Sponsored Entities (GSEs) also increased their holdings by $12 billion or 6.8%. Agency and GSE-backed mortgage pools increased their holdings of commercial/multifamily mortgages by $2.6 billion, or 1.8%.

"The government-sponsored enterprises and other finance companies have taken advantage of the limited competition to increase their holdings, but the numbers show banks and thrifts beginning to pull back on their holdings, life insurance companies slowing the growth of their portfolios, and the CMBS (commercial mortgage backed securities) market continuing to pay-down its holdings with few, if any, acquisitions," said Woodwell.

By Steve Stecyk and edited by Sarah Sussman
©CEP News Ltd. 2008