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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 64 October 2024 J O U R N A L COMMERCIAL/ MULTIFAMILY MORTGAGE DEBT OUTSTANDING CLIMBED IN Q2 T he Commercial/Multifamily Mortgage Debt Outstanding quarterly report from the Mort- gage Bankers Association (MBA) revealed that the amount of outstanding commer- cial and multifamily mortgage debt rose by $31.4 billion (0.7%) in Q2 2024. At the end of Q2, the total amount of outstanding commercial and multifamily mortgage debt increased to $4.69 trillion. The debt associated with multifamily mortgages alone climbed by $19.4 billion (0.9%) to $2.09 trillion from Q1 2024. "Commercial mortgage debt out- standing grew at a modest pace in the second quarter," said Jamie Woodwell, MBA's Head of Commercial Real Estate Research. "Every major capital source in- creased its holdings of mortgages backed by income-producing properties, but the growth was mixed, with life insurance companies increasing their holdings by 1.8% and banks increasing their holdings by 0.2%." The commercial mortgage-backed securities (CMBS), collateralized debt ob- ligation (CDO), and other asset-backed securities (ABS) issues, life insurance companies, federal agency and gov- ernment-sponsored enterprise (GSE) portfolios, and banks and thrifts are the four largest investor groups. At $1.8 trillion, commercial banks still control the lion's share (38%) of commer- cial and multifamily mortgages. At $1.02 trillion, agency and GSE portfolios and MBS represent the second-largest hold- ings of commercial and multifamily mort- gages (22%). The holdings of life insurance companies total $735 billion (16%), while CMBS, CDO, and other ABS problems account for $609 billion (13%) of the total. CMBS, CDO, and other ABS issues are bought and held by numerous banks, life insurance companies, and GSEs. The report lists these loans under the heading "CMBS, CDO, and other ABS." Changes in Commercial/ Multifamily Mortgage Debt Outstanding When focusing only on multifamily mortgages, as of Q2 2024, agency and GSE portfolios and MBS accounted for 49% of all outstanding multifamily debt, with $1.02 billion. Banks and thrifts came in second with $625 billion, life insurance companies for $234 billion, state and local government for $91 billion, and CMBS, CDO, and other ABS issues for $67 billion. With a $12.8 billion (1.8%) increase in their holdings of commercial and multi- family mortgage debt in Q2, life insurance firms had the biggest gains in terms of money. Banks and thrifts raised their hold- ings by $2.9 billion (0.2%), agency and GSE portfolios and MBS climbed by $8.1 billion (0.8%), and CMBS, CDO, and other ABS issues increased by $5.4 billion (0.9%). The biggest gain in percentage terms was seen by nonfinancial corporate businesses, whose holdings of commer- cial and multifamily mortgages increased by 2.0%. On the other hand, assets held by state and local government retirement plans dropped by 12.8%. "With fewer loans paying off, CRE mortgage balances have continued to grow in recent quarters despite a marked fall- off in the volume of loans being made," Woodwell said. "We anticipate that long- term interest rates, which are significantly lower than a year ago, will help increase origination activity in coming quarter— boosting both new loans coming onto the books and the payoff of existing ones." The multifamily mortgage debt out- standing as of Q1 of 2024 increased by $19.4 billion, or a 0.9% quarterly gain. The high- est rise in terms of dollars was observed in the holdings of multifamily mortgage debt by agency and GSE portfolios and MBS offerings, which showed a gain of $8.1 billion (0.8%). Life insurance firms saw a gain of $4.4 billion (1.9%) in their assets, while banks and thrifts saw an increase of $4.7 billion (0.8%). With a 7.8% gain, REITs saw the biggest percentage increase in their mul- tifamily mortgage debt holdings. With a 12.8% decrease, state and local govern- ment retirement funds had the biggest reduction in their multifamily mortgage debt holdings. WHERE ARE FORECLOSURE RATES HIGHEST? I n total, some 30,227 U.S. homes had foreclosure filings, such as default notifications, scheduled auctions, or bank repossessions, according to ATTOM's August 2024 U.S. Foreclosure Market Report. This number was down 5.3% from a month ago and down 11% from a year ago. "Foreclosure activity has remained relatively steady in recent months, with both foreclosure starts and completed foreclosures declining in August," said Rob Barber, CEO at ATTOM. "While overall activity is significantly lower than the peaks seen during the 2008 financial crisis, when filings exceeded 300,000 per month, the current economic environ- ment, coupled with rising interest rates and affordability challenges, suggests a continued focus on potential housing market instability." Highest Foreclosure Rates Found in Nevada, Florida, and Illinois In August 2024, one foreclosure filing was made for every 4,662 housing units nationwide. Nevada had one foreclo- sure filing for every 2,473 housing units; Florida had one for every 2,605 housing units; Illinois had one for every 2,837 housing units; South Carolina had one for every 2,877 housing units; and New Jersey had one for every 3,227 housing units. These states had the highest rates of foreclosure. The highest percentage of foreclo- sures among the 224 metropolitan statis- tical areas with a population of at least 200,000 were found in Lakeland, Florida (1 in every 1,245 housing units with a foreclosure filing); Chico, California (1 in every 1,526 housing units); Columbia, South Carolina (1 in every 1,796 housing units); Bakersfield, California (1 in every 1,972 housing units); and Las Vegas (1 in every 1,526 housing units). The worst rates of foreclosure, excluding Las Vegas, were found in the following metropolises with a population of at least one million: Riverside, Cali-