Despite a pullback in borrowing, multifamily mortgage debt increased 1.3%, or $26.8 billion, to $2.05 trillion from the second quarter to the third quarter of 2023, according to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report.
Overall, combined commercial and multifamily mortgage debt outstanding increased just 0.8%, or $37.1 billion, to $4.63 trillion in Q3.
Once again, agency and government-sponsored enterprises, including Fannie Mae and Freddie Mac, held the most multifamily debt.
Here is the full breakdown for Q3:
Multifamily debt by lender
| Debt holder | Percentage | Total held |
| Agencies and GSEs | 48% | $986 billion |
| Banks and thrifts | 30% | $606 billion |
| Life insurance companies | 11% | $223 billion |
| State/local governments | 6% | $115 billion |
| CMBS, CDO and ABS | 3% | $67 billion |
SOURCE: Mortgage Bankers Association
Among the groups with the most multifamily debt, delinquencies remain low. Delinquencies from Freddie Mac’s K-Deals, its securitization program, are only at 0.29%, while Fannie Mae’s sit at 0.54%. Bank delinquencies are at 0.40%, according to Jay Parsons, senior vice president and chief economist at RealPage.
Most of the debt at risk of default is held by mortgage CMBS and ABS providers, which together have a tiny percentage of outstanding apartment loans.
Parsons thinks there will be multifamily distress, but not at the magnitude many observers and opportunistic buyers expect. “The wild card is how much lenders continue to work with stretched borrowers in the higher-risk loan categories,” Parsons said. “Not every lender has flexibility, which is why most of the foreclosures that have made news have been CMBS related.”
Trepp projects that $352 billion in apartment loans will mature by 2027, which will certainly put more pressure on borrowers. Some of that should begin happening next year.
“You've got a lot of maturing bridge loans that were originated in 2021 and 2022 or caps that are expiring,” Kyle Draeger, senior managing director of multifamily debt and structured finance at CBRE Capital Markets, told Multifamily Dive. “Those values have gone down a lot. So there's going to be a need there's going to be a need to transact.”
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