Commercial Mortgage Debt Spikes Due to Slow Loan Payoffs

Difficult refinancings and late payoffs have led to higher outstanding commercial and multifamily debt levels across lender categories, despite fewer originations.

Outstanding U.S. commercial/multifamily mortgage debt grew by $40.1B to reach $4.7T in Q1.
The debt spike occurred despite slower mortgage originations, driven by fewer loan payoffs through sales or refinancings.
Commercial banks hold the largest share of commercial/multifamily mortgages at $1.8T.

Key Takeaways

The latest data from the Mortgage Bankers Association (MBA) reveals a spike in outstanding U.S. commercial and multifamily mortgage debt in 1Q24, as reported on MPA.

Meddling Maturities

Total commercial mortgage debt rose by $40.1B (0.9%) during the quarter, bringing the total debt load to $4.7T. This spike in mortgage debt took place even as new loan originations slowed down, due to a broader trend of fewer loans being paid off.

Jamie Woodwell, head of CRE research at MBA, noted that “Every major capital source increased its holdings of commercial mortgages, as fewer loans than usual were paid off through property sales or refinancings.”

Quarterly Insights

In Q1, banks saw the largest jump in commercial/multifamily mortgage holdings, adding $12.8B to the pile. CMBS issuers followed with an $11.0B contribution, while agencies/GSEs and life insurers saw their holdings grow by $10.2B and $7.0B, respectively.

For multifamily debt, agencies/GSEs increased their holdings by $10.2B, banks by $9.1B, and life insurers by $3.8B.

Mortgage Breakdown

Zooming out a bit more, the MBA report also provided a detailed breakdown of current holders of commercial/multifamily mortgages by overall debt load:

Commercial banks: $1.8T (38% of market share)
Federal agencies/GSEs: $1.01T (22%)
Life insurers: $720B (15%)
CMBS: $604B (13%)

The breakdown looks a bit different when limited to multifamily mortgages:

Agencies/GSEs: $1.01T (48%)
Banks: $620B (30%)
Life insurers: $230B (11%)

Why It Matters

Due to lower originations, the rise in outstanding mortgage debt can be attributed to fewer loan payoffs. With fewer successful property sales and refinancings, lenders are having a harder time than ever getting mortgage loans off their portfolios.

This reflects a broader trend throughout the CRE industry—although there are signs of a rebound in some sectors, new deal activities are still being overshadowed by the existing debt pile, which looms larger than ever.