Multifamily Lending Volume Expected to Increase in 2014

A majority of respondents expect loans for CMBS, commercial banks, life companies, and pension funds to increase this year, while loans for Fannie Mae, Freddie Mac and FHA will decrease.

Multifamily and commercial mortgage lending volume is expected to increase in 2014, according to a new Mortgage Bankers Association survey of commercial and multifamily mortgage origination firms. The survey finds that the increase will come as lenders’ appetites to place new loans grow even stronger.

Fully 91 percent of respondents expect originations to increase in 2014, with 48 percent expecting an increase of 5 percent or more. Almost two-thirds (64 percent) expect their own firm’s originations to increase by 5 percent or more. The 2014 MBA CREF Outlook Survey was conducted in December, querying executives at 50 of the top commercial/multifamily mortgage origination firms, as determined by MBA’s 2012 Annual Origination Rankings Report.

A majority of respondents expect loans for CMBS, commercial banks, life companies, and pension funds to increase this year, while loans for Fannie Mae, Freddie Mac and FHA will decrease. CMBS in particular is making a strong comeback, with 85 percent of the respondents anticipating growth in that form of lending to be greater than 5 percent in 2014.

Nearly as many — 78 percent — anticipate that bank lending growth to be greater than 5 percent this year, while 56 believe that pension/life insurance lending will grow by more than 5 percent. As for the declines in lending, 60 percent of the respondents believe that Fannie Mae and Freddie Mac volume will be lower this year than last, and just over half (51 percent) say that FHA lending will decline.

Regarding the relative eagerness of lenders and borrowers to put loans out, the MBA surveyed its respondents on a scale of very weak, weak, fair, strong, or very strong. A majority — 65 percent — anticipate a ‘very strong’ appetite among firms to make loans, but only 23 percent anticipate a ‘very strong’ appetite among borrowers to take out loans. In 2013, 53 percent of respondents thought there was a ‘very strong’ appetite among lenders to make new loans.

Loan risk is expected to increase in 2014, according to the survey. Most respondents (88 percent) characterized the loans made in 2013 as ‘medium’ to ‘somewhat low’ risk.  In 2014, most respondents (89 percent) expect loans to be ‘medium’ to ‘somewhat high’ risk.  Lenders were surveyed on a scale of very low, somewhat low, medium, somewhat high, and high.

Finally, loan return is expected to moderate this year. Half of respondents (50 percent) characterized the loans made in 2013 as “medium” return. In 2014, nearly three-quarters (74 percent) expected loans to be “medium” return.