Commercial/Multifamily Mortgage Originations Fall in Q2

MBA (8/20/2008 ) Vasquez, Jason
Commercial and multifamily mortgage loan originations continued to fall on a year-over-year basis in the second quarter, according to the Mortgage Bankers Association’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.
Second quarter originations were 63 percent lower than during the same period last year. The year-over-year decrease was seen across most property types and investor groups.

“Commercial/multifamily mortgage originations remained low in second quarter,” said Jamie Woodwell, MBA’s vice president of commercial/multifamily real estate research. “Fannie Mae and Freddie Mac set a record high; banks, thrifts and life companies are back down from their 2006 and 2007 record paces; and originations for the commercial mortgage backed securities market hit a record low.”

Decreases in total commercial/multifamily mortgage originations were led by a drop in commercial mortgage-backed security conduit loans. These numbers show the impact of the recent credit crunch and other market disruptions.

“The slowdown in originations has come from both a decrease in the supply of capital available and a decrease in the demand for new mortgages,” Woodwell said. “It is likely volumes will remain muted until buyers, sellers, borrowers, lenders and their expectations of rates and terms match closely enough for transaction activity to pick back up.”

2Q Results Year-Over-Year
The decrease in commercial/multifamily lending activity during the second quarter was driven by decreases in originations for most property types. When compared to the second quarter of 2007, the overall 63 percent decrease included an 87 percent decrease in loans for hotel properties, a 65 percent decrease in loans for office properties, a 63 percent decrease in loans for retail properties, a 57 percent decrease in loans for industrial properties, a 42 percent decrease in multifamily property loans, and a 66 percent increase in health care loans.

Among investor types, conduits for CMBS saw a significant decrease of 98 percent compared to last year’s second quarter. Results showed a 29 percent decrease in loans for commercial bank portfolios and a 27 percent decrease in loans for life insurance companies. The dollar volume of loans for government-sponsored enterprises (Fannie Mae and Freddie Mac) saw an increase of 66 percent. The level of originations for the GSEs was the highest recorded for a March through June period; while the CMBS market saw the lowest level since the MBA survey began in 2001.

Comparison to 1Q
Second quarter mortgage originations were 2 percent lower than originations in the first quarter.

Among investor types, conduits for CMBS saw a decrease in loan volume of 53 percent compared to the first quarter, loans for commercial bank portfolios saw an increase in loan volume of 27 percent, life insurance companies increased by 8 percent, and GSE volume was essentially unchanged.

Compared to the first quarter, second quarter originations for industrial properties saw a 23 percent decrease; a 14 percent decrease for multifamily properties, a 7 percent decrease for retail properties, a 90 percent increase for health care properties, a 33 percent increase for office properties, and a 21 percent increase for hotel properties.