Most Multifamily Properties Won’t Need Refi Soon: MBA Report

According to the Mortgage Bankers Association's 2009 Commercial Real Estate/Multifamily Survey of Loan Maturity Volumes released this week, the volume of commercial and multifamily mortgage debt maturing this year and during 2011 is only about one-fifth of the total. Of the $1.45 trillion balance of outstanding mortgages held by non-bank investors, only 13 percent of the total ($183.9 billion) will mature in 2010 and 7 percent ($99.8 billion) in 2011.

Dees Stribling, Contributing Editor

Las Vegas–According to the Mortgage Bankers Association’s 2009 Commercial Real Estate/Multifamily Survey of Loan Maturity Volumes released this week, the volume of commercial and multifamily mortgage debt maturing this year and during 2011 is only about one-fifth of the total. Of the $1.45 trillion balance of outstanding mortgages held by non-bank investors, only 13 percent of the total ($183.9 billion) will mature in 2010 and 7 percent ($99.8 billion) in 2011.

The MBA estimates that another $100 billion of commercial and multifamily mortgages is held by banks and thrifts. Those loans aren’t included in the survey because the organization believes the fragmented nature of bank real estate lending means that no useful conclusions can be drawn about the timing of the maturities.

Among those mortgages tied to multifamily properties that are coming due in 2010 and ’11, what’s the outlook for refinancing? One-fifth of the total might not represent a tsunami of loans that need refinancing, but it still represents a lot of borrowers facing deadlines.

“The mortgage markets continue to present challenges for multifamily property owners seeking to refinance their assets, even those that have met the terms of their current mortgage notes,” David B. Cardwell, vice president of capital markets and technology at the National Multi Housing Council, tells MHN. “The primary issues are value and what the level of borrower equity will be required. Coupled with more conservative underwriting and limited sources of mortgage capital, the expectation is 2010 will be only be marginally better than 2009.”

The various sources of refinance are all suffering in their own peculiar ways, adds Cardwell. “CMBS market is not expected to contribute, and even as the GSEs remain very active to meet market needs, we don’t expect them to be aggressive on their lending as their portfolios are expected to show more stress as the year progresses,” he says. “FHA has hit its limit, and they too are going to tighten their credit underwriting, so expectation that they will be a solution for many borrowers should be taken with a measure of caution.”

Most borrowers have a little more time, however. “Commercial and multifamily mortgages tend to be long-term loans, often for ten years or more,” said Jamie Woodwell, MBA’s vice president of commercial real estate research, in a statement. “The fact that a disproportionate share of commercial and multifamily mortgages were made in 2005, 2006 and 2007 means that for most investor groups, only a fraction of the balance will be maturing in the next couple of years.”

Maturities vary considerably by investor group. Only 2 percent ($4 billion) of the outstanding balance of multifamily mortgages held or guaranteed by Fannie Mae, Freddie Mac, FHA and Ginnie Mae will mature in 2010, while life insurance companies will see 7 percent ($17.5 billion) of their outstanding mortgage balances mature in 2010. Thirty-two percent ($69 billion) of commercial mortgages held by credit companies and other investors will mature this year.

Among loans held in CMBS, 12 percent will come due in 2010, including 7 percent of the $650 billion of loans in fixed-rate conduit CMBS. More ominously, some 72 percent of the $54 billion of loans in floating rate and large-borrower CMBS will come due this year.

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