Commercial/Multifamily Loan Originations Down in Q4, Says MBA Report

Orlando, Fla.–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, released at the MBA Commercial Real Estate/Multifamily Housing Convention and Expo that opened in Orlando today. Fourth-quarter originations were 16 percent lower than during the same period last year. The year-over-year decrease was seen across most property types and investor groups.“The slow down comes directly from disruptions in the capital markets, although a few remaining large portfolio transactions continued to buoy the numbers,” says 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.” A drop in commercial mortgage-backed security (CMBS) conduit loans led decreases in total commercial/multifamily mortgage originations. At the morning’s opening session of the Commercial Real Estate/Multifamily Housing Convention and Expo, Kieran Quinn, chairman of MBA, said that the commercial real estate finance industry has undergone corrections. “On the whole, the corrections for us mean going back to the 1990s and early 2000s,” he said, adding that capital remains inexpensive but underwriting is more careful. “We are not seeing 90 percent loans, but loans that hover around 70 percent,” Quinn added.According to the report, 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 did 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 development 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.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.