Bank Lending to Commercial Real Estate Plunged 73%
- Nov 13, 2008
By Anuradha Kher, Online News EditorWashington, D.C.–Multifamily mortgage loan originations remained low in the third quarter, but witnessed a slight increase as compared to the second quarter of 2008, according to the Mortgage Bankers Association’s (MBA) quarterly survey of commercial/multifamily mortgage bankers originations. Third quarter originations for all commercial property types 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. “Uncertainty stemming from the credit crunch, and now the deteriorating economy, has led to a continued pull-back among both lenders and borrowers,” says Jamie Woodwell, MBA’s vice president of Commercial Real Estate Research. “The need among most investor groups to conserve capital, and the uncertainty of how the slowing economy will affect property fundamentals, is fueling a prolonged pause in all aspects of commercial real estate activity.” Year-over-year, multifamily property loans in the third quarter 2008 saw a 30 percent decrease, a much smaller hit compared to most other property types, which saw over 50 percent decreases.On the other hand, when compared to the second quarter of 2008, third quarter originations for multifamily properties saw a 9 percent increase. The only other commercial property types to see an increase were industrial and retail properties. Third quarter 2008 mortgage originations for all sectors were 11 percent lower than originations in the second quarter of 2008.Decreases in overall commercial/multifamily mortgage originations were led by a drop in commercial mortgage-backed security (CMBS) conduit loans and loans for commercial bank portfolios. These numbers show the impact of the recent credit crunch and other market disruptions. Year-over-year, among investor types, conduits for CMBS saw a significant decrease of 93 percent. There was also a 71 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 (or GSEs – Fannie Mae and Freddie Mac) saw an increase of 15 percent. As compared to the second quarter, commercial bank portfolios saw a decrease in loan volume of 55 percent but loans for conduits and life insurance companies increased, by 67 and 27 percent respectively. GSE loan volume increased as well (12 percent). However, these increases were overwhelmed by the size of the decline in loans for commercial banks.