Loan volume dropped by 16 percent in the fourth quarter of 2007 in comparison with the same period in 2006, according to the MBA. The drop was largely attributable to the slowdown in the CMBS market.
“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.