This week the Mortgage Bankers Associated reported that the level of commercial and multifamily mortgage debt outstanding had contracted in the second quarter to $3.47 trillion, a decrease of $9.9 billion or 0.3% from the first quarter 2009.

The decline was due to the fact that the amount of loans paid down and paid off exceeded the amount of new mortgages taken out, according Jamie Woodwell, vice president of commercial real estate research for MBA.

However, taken alone, multifamily mortgage debt outstanding actually grew to $914 billion, an increase of $6 billion, or 0.7% from first quarter.

"Most major investor groups, including the CMBS market, life insurance companies and banks and thrifts, saw reductions in their holdings of commercial/multifamily mortgages, while Fannie Mae and Freddie Mac increased their holdings of multifamily mortgages," said Woodwell.

The Federal Reserve Flow of Funds data summarizes the holding of loans or, if the loans are securitized, the form of the security. For example, many life insurance companies invest both in whole loans for which they hold the mortgage note and in CMBS, collateralized debt obligations (CDOs) and other asset backed securities (ABS) for which the security issuers and trustees hold the note.

Commercial banks continue to hold the largest share of commercial and multifamily mortgages, at $1.55 trillion, or 45% of the total. Many of the commercial mortgage loans reported by commercial banks, however, are actually "commercial and industrial" loans to which a piece of commercial property has been pledged as collateral.

CMBS, CDO and other ABS issuers are the second largest holders of commercial/multifamily mortgages, holding $714 billion, or 21% of the total. Life insurance companies hold $313 billion, or 9 percent of the total, and savings institutions hold $195 billion, or 6% of the total.

The GSEs, agency-backed mortgage pools and GSE-backed mortgage pools, including Fannie Mae, Freddie Mac and Ginnie Mae, hold $195 billion in multifamily loans that support the mortgage-backed securities they issued and an additional $157 billion in "whole" loans in their own portfolios. This represents a total share of 10% of outstanding commercial/multifamily mortgages.