Commercial/Multifamily Originations Return to 2004/2005 Levels

MBA (6/4/2008 ) Vasquez, Jason
Commercial and multifamily mortgage bankers' loan originations fell on a year-over-year basis in the first quarter, according to the Mortgage Bankers Association’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations. First quarter originations were 53 percent lower than during the same period last year. The year-over-year decrease was seen across all property types and most investor groups.

“Three trends jump out from this quarter’s figures: the impact of the credit crunch, a return from the extraordinary origination volumes of 2005, 2006 and 2007 and strong variation among different investor groups,” said MBA Senior Director of Commercial/Multifamily Research Jamie Woodwell. “First quarter originations for the CMBS market were at their lowest since the survey began in 2001; originations for life companies and for banks and thrifts fell to levels last seen in 2004; and originations for the government-sponsored enterprises, Fannie Mae and Freddie Mac, hit record highs for a first quarter.”
Decreases in total commercial/multifamily mortgage originations were led by a drop in commercial mortgage-backed securities (CMBS) conduit loans. These numbers show the impact of the recent credit crunch and other market disruptions.

1Q 53 Percent Lower than 1Q 2007
The decrease in commercial/multifamily lending activity during the first quarter was driven by decreases in originations for all property types. When compared to the first quarter of 2007, the overall decrease included a 75 percent decrease in loans for office properties; a 60 percent decrease in loans for hotel properties; a 53 percent decrease in loans for retail properties; a 37 percent decrease in loans for industrial properties; a 27 percent decrease in multifamily property loans; and a 15 percent decrease in health care loans.

Among investor types, conduits for CMBS saw a significant decrease of 96 percent compared to last year’s first quarter. The report showed a 28 percent decrease in loans for commercial bank portfolios and a 25 percent decrease in loans for life insurance companies. The dollar volume of loans for GSEs saw an increase of 62 percent.

1Q 52 Percent Lower than 4Q 2007
First quarter mortgage bankers originations were 52 percent lower than originations in the fourth quarter of 2007. In part this reflects the industry’s usual push to finalize deals before the end of the year and subsequent drop-offs in first quarter numbers. It also reflects the impact of the credit crunch and a return from the extraordinary origination volumes of 2005, 2006 and 2007.

Among investor types, conduits for CMBS saw a decrease in loan volume of 95 percent compared to the fourth quarter of 2007; loans for commercial bank portfolios saw a decrease in loan volume of 56 percent; life insurance companies decreased by 27 percent; and GSEs saw a 5 percent decrease.

Compared to the fourth quarter of 2007, first quarter originations decreased in all property types. Hotel properties saw a 90 percent decrease compared to the fourth quarter 2007. The report found a 40 percent decrease for multifamily properties; a 31 percent decrease for retail properties; a 26 percent decrease for health care properties; a 21 percent decrease for office properties; and an 18 percent decrease for industrial properties. Fourth quarter 2007 hotel originations were heavily influenced by large portfolio sales during that period.

Detailed statistics on the size and scope of the commercial/multifamily origination market are available from these MBA commercial/multifamily research reports.