The amount of commercial/multifamily mortgage debt outstanding decreased to $3.2 trillion in the third quarter, a $42 billion, or 1.3 percent, drop from the second quarter, according to the Mortgage Bankers Association’s (MBA) analysis of the Federal Reserve Board Flow of Funds data.

Declines were a result of drops in construction loans held by banks and thrifts and commercial and multifamily mortgages held in commercial mortgage-back securities (CMBS), according to a statement.

"Borrowers are continuing to pay-off and pay-down loans at a faster rate than new loans are being taken out," said Jamie Woodwell, MBA vice president of commercial real estate research. "The CMBS market is experiencing the fastest net run-off, followed by commercial banks, which are seeing most of their net declines in construction lending. The overall balance of commercial and multifamily mortgage debt outstanding is likely to continue to decline until commercial mortgage borrowing picks up significantly, although individual investor groups will take advantage of current market conditions to pick up share."