Dive Brief:

• As some banks and debt funds shied away from the market in 2023, the government agencies accounted for more than half of the balance of newly originated apartment loans, according to a report that data firm MSCI Real Assets shared with Multifamily Dive.
• Fannie Mae and Freddie Mac claimed 58% market share in 2023. In the five years before the pandemic, government-sponsored enterprises accounted for 54% of all new originations. In 2022, as more lenders became aggressive in an overheated market, their share fell to 39%. 
• The GSEs saw a 1.6%, or $15.5 billion, increase in their holdings of multifamily mortgage debt between the third and fourth quarters, according to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report. 

Dive Insight: 

Overall, multifamily mortgage debt outstanding increased $25 billion, or 1.2%, from Q2 to Q3, according to the MBA. Throughout 2023, it grew 2.8% to $130 billion, one of the slowest paces since the mid-2010s, according to Jamie Woodwell, the MBA’s head of Commercial Real Estate Research. 

“Every major capital source increased its mortgage holdings during the year,” Woodwell said in a press release. “Mortgage originations were down by roughly 50% in 2023 compared to 2022, but that meant that few loans were paying off, helping maintain portfolio sizes even in the face of lower inflows."

Other lenders lost share as the agencies took a larger slice of the apartment market in 2023. Regional banks fell from 19% of originations in 2022 to 13% in 2023, roughly on par with the percentages before the pandemic.

National banks saw their market share fall six percentage points from 2022 to 2023. However, the MBA said commercial banks increased their holdings of multifamily mortgage debt by $5.3 billion, or 0.9%, between Q3 and Q4. 

“These lenders seemed to be the most cautious of lenders, originating loans with an average loan-to-value of 55.8%, the lowest amongst all lender groups,” MSCI said in the report.

Insurance lenders hold around 8% of new apartment originations, according to MSCI. They increased their holdings by $5.2 billion, 2.2%, between Q3 and Q4, according to the MBA.

Life insurance companies, which usually handle the largest average loans at around $36 million, have had a relatively stable market share over the years. They are generally risk averse, with a loan-to-value ratio on new loans sitting about 415 basis points below the overall market average, according to MSCI.

Commercial-backed mortgage securities lenders, typically taking a small market share, came in at 2% in 2023. “Loans by this group tend to be more suitable for portfolio transactions, which were notably muted in 2023 compared to earlier periods,” MSCI said.

Investor-driven lenders, like debt funds, became more active before the pandemic, claiming about 5% of the market. In 2023, they originated about 9% of new loans, according to MSCI.

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