Washington, DC – February 4, 2008 – Commercial and multifamily mortgage bankers’ loan originations fell on a year-over-year basis in the fourth quarter, according to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations. Fourth quarter originations were sixteen 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 in the fourth down from last year’s fourth quarter. The slow-down comes most directly from disruptions in the capital markets although a few remaining large portfolio transactions continued to buoy the numbers,” said Jamie Woodwell, MBA’s Senior Director of Commercial/Multifamily research. “It’s important to note that while commercial/multifamily origination volumes have slowed, the underlying fundamentals of commercial and multifamily properties, loans and bonds generally remain quite strong.”Decreases in total commercial/multifamily mortgage originations were led by a drop in commercial mortgage-backed security (CMBS) conduit loans. These numbers show the impact of the recent credit crunch and other market disruptions.
The first and the second halves of 2007 proved to be dramatically different lending environments for the commercial/multifamily real estate finance industry.
In the first half of 2007, commercial/multifamily mortgage bankers originated 38 percent more, in dollar volume, than they had been during the first half of 2006. By contrast, originations in the second half of the year ran 11 percent lower than the second half of 2006.
A driving force of this change was changes in the commercial mortgage-backed securities (CMBS) market. Originations for CMBS during the first half of 2007 ran 70 percent ahead of 2006’s first-half level, while second-half volumes ran 30 percent below the 2006 second-half levels. Originations for Fannie Mae and Freddie Mac, on the other hand, ran 18 percent ahead of 2006 levels in the first half of 2007 and 49 percent ahead in the second half. Originations in 2007 for commercial banks and life insurance companies were below 2006 levels in both the first and second halves of the year.
FOURTH QUARTER 2007 SIXTEEN PERCENT LOWER THAN FOURTH QUARTER 2006
The decrease in commercial/multifamily lending activity during the fourth quarter was driven by decreases in originations for most property types. When compared to the fourth quarter of 2006, the overall decrease included a 73 percent decrease in loans for office properties, a 50 percent decrease in loans for industrial properties, an 38 percent decrease in loans for retail properties, an 7 percent decrease in loans for multifamily properties, as well as a 349 percent increase in loans for hotel properties and a 3 percent increase in loans for health care properties. The increase in hotel originations was heavily influenced by large portfolio sales during the period.
Among investor types, conduits for CMBS saw a decrease of 31 percent compared to last year’s fourth quarter. There was also a 15 percent decrease in loans for life insurance companies, and a 6 percent decrease in loans for commercial bank portfolios. The dollar volume of loans for Government Sponsored Enterprises (or GSEs – Fannie Mae and Freddie Mac) saw an increase of 41 percent.
FOURTH QUARTER 2007 11 PERCENT HIGHER THAN THIRD QUARTER 2007
Due to the seasonality of commercial/multifamily originations, originations tend to increase as the year progresses, and the fourth quarter held to that trend. Fourth quarter 2007 mortgage bankers originations were 11 percent higher than originations in the third quarter of 2007.
Among investor types, conduits for CMBS saw a increase in loan volume of 73 percent compared to the third quarter of 2007, loans for commercial bank portfolios saw a increase in loan volume of 17 percent compared to the third quarter of 2007, GSEs saw a 7 percent increase from third quarter to fourth quarter 2007, while loans for life insurance companies decreased 27 percent during the same time span.
Compared to the third quarter, fourth quarter originations decreased in most property types except for hotel and multifamily. Retail remained relatively the same from third quarter to fourth quarter 2007. The decline included a 50 percent decrease in loans for health care properties, a 48 percent decrease in loans for office properties, a 21 percent decrease for industrial properties, a 272 percent increase for hotel properties, and a 25 percent increase in loans for multifamily properties.
Detailed statistics on the size and scope of the commercial/multifamily origination market are available from these MBA commercial/multifamily research reports.
• Commercial Real Estate/Multifamily Finance: Annual Origination Volume Summation, 2006
• Commercial Real Estate/Multifamily Finance Firms: Annual Origination Volumes, 2006
• MBA Annual Report on Multifamily Lending, 2006
The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 500,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation’s residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 3,000 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA’s Web site: http://www.mortgagebankers.org/.