November 2012

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THE LATEST SECONDARY MARKET Commercial, Multifamily Mortgage Debt Drops Slightly Recently released statistics from the MBA displayed a 0.4 percent decline over findings from the first quarter. C first quarter, according to recent data from the Mortgage Bankers Association (MBA). This is down 0.4 percent, or ommercial/multifamily mortgage debt outstand- ing totals $2.37 trillion as of the end of the asset-backed securities (ABS) reduced their multifamily debt by $4.8 billion. Among multifamily debt, $10.4 billion, from the first quar- ter. However, while commercial and multifamily debt decreased, multifamily debt alone increased by $5.4 billion. "CMBS loans paid off, paid the largest share is currently held by government agencies, including Fannie and Freddie, and mortgage-backed securities. Together, they hold 44 per- cent—$360 billion—in multifamily mortgage debt. The second-largest category of cial mortgage-backed securities (CMBS), collateralized debt obligations (CDOs), and other surance companies also increased their multifamily mortgage debt holdings over the second quarter of this year, by $3.6 billion and $576 million, respectively. At the same time, commer- ing now totals $826 billion after sustaining a 0.7 percent increase over the second quarter. While multifamily debt grew among several categories of debt hold- ers, the largest growth was seen among GSEs, agencies, and mortgage-backed securities (MBS). This group increased its holdings by $7.1 billion. Commercial banks and life in- down, and were liquidated at a far faster pace than new CMBS loans were originated during the quarter," said Jamie Woodwell, VP of commercial real estate research at MBA. Multifamily debt outstand- Weakening GDP Growth Drives multifamily mortgage debt holders is banks and thrifts, which ac- count for 27 percent of the total. Another 10 percent is held by commercial mortgage-backed securities, collateralized debt ob- ligations, and other asset-backed securities. When looking at commercial R agencies, and MBS also shed commercial/multifamily debt over the quarter. The amount of debt held by finance companies dropped $5.1 billion, while agen- cies, GSEs, and MBS shed $7.1 billion in debt. creased their amount of com- mercial and multifamily debt by $19.8 billion, the greatest amount of any category of commercial and multifamily debt holders over the second quarter. Finance companies and GSEs, and multifamily debt combined, the MBA reports commercial banks hold 34 percent, the largest share of any one category. That's $815 billion of the total $2.37 trillion. CMBS, CDO, and ABS de- eal gross domestic product (GDP) increased at an annual rate of 1.3 percent during the second quarter of 2012, down sharply from the 1.7 percent growth rate, the Bureau of Economic Analysis reported. In the first quarter, real GDP, which represents the output of goods and services produced by labor and property located in the U.S., increased 2 percent. The BEA release also included a revised report on second-quarter corporate prof- its, showing they were slightly higher than originally reported. However, profits for financial corporations were slightly lower than the previous data. The GDP report fell below the market's expectation, which called for no change of the growth rate and emphasized a moribund econo- my. The economy had expanded at a 3 percent pace in the fourth quarter of 2011. The data released thus far for July, August, and early September suggest no signifi- cant change for third-quarter 2012 economic activity, though residential fixed investment is Down Bank Profits Financial institutions are feeling the strain of increasingly modest GDP improvements. likely to show a strong positive contribution. Personal consumption spending accounted for $35.7 bil- lion, or 85 percent, of the growth in real GDP, according to the final estimate, compared with 69 percent in the revised estimate, issued one month earlier. Indeed, according to the final estimate, total consumer spending—about 70 percent of total GDP—was down about $4.4 billion from the earlier report. Residential fixed investment, at $7.2 billion, was down from the originally reported $7.5 billion and fell from the $16.1 billion spent in the first quarter of the year. Government spending was reported at $2.48 trillion, un- changed from the earlier report but down $4.3 billion from the first quarter. The drop in govern- ment spending subtracted about 0.1 percentage point from the GDP, according to BEA. Overall, the downward revi- sion to GDP reflected declining revisions to inventories—mainly farm inventories resulting from the summer drought. THE M REPORT | 75 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET

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