Commercial/Multifamily Mortgage Originations Jump 36% in 2010, MBA Survey Shows

Commercial/Multifamily Mortgage Originations Jump 36% in 2010, MBA Survey Shows

Mortgage bankers originated $110 billion of commercial and multifamily mortgages during 2010, a 36% increase over 2009 levels, according to the Mortgage Bankers Association. The results are based on preliminary estimates from the MBA’s quarterly survey of commercial/multifamily mortgage banking originators.

Conduit lending activity soared 6,100% from the fourth quarter of 2009 to the fourth quarter of 2010. The average deal size for conduit loans — loans originated to be securitized — climbed from $12.4 million to $69.6 million.

As much as anything, the “wild” increase of 6,100% in securitized lending shows how inactive the commercial mortgage-backed securities (CMBS) market was in 2009, says Jamie Woodwell, MBA’s vice president of commercial real estate research. “The most interesting point for me overall [in the report] was the CMBS increase. That market started to get a little more traction in the fourth quarter of 2010.”

Meanwhile, life insurance companies were a leading source of lending in 2010, with origination volume 155% higher than 2009 levels. Fannie Mae, Freddie Mac and FHA/Ginnie Mae also experienced strong volume, with increases in production for FHA/Ginnie Mae offsetting a decline in production for Fannie Mae and Freddie Mac. Originations for commercial banks saw a year-over-year decline.

“Commercial and multifamily mortgage originations jumped 63% in the fourth quarter, pulling the annual total for 2010 up to a preliminary estimate of $110 billion,” says Woodwell. “Life companies and FHA led the increase in dollar volume, but a large percentage increase in originations for CMBS is likely the most symbolic change from last year.”

The Commercial Real Estate Finance Council estimates that total CMBS issuance was just $3 billion in 2009 and $12.3 billion in 2010, and Moody's Investors Service projects that total CMBS issuance will rise to $37 billion in 2011.

A banner fourth quarter

The 88% overall increase in commercial/multifamily lending activity between the fourth quarter of 2009 and the fourth quarter of 2010 was driven by increases in originations for office and hotel properties.

When compared to the fourth quarter of 2009, the increase included a 170% spike in loans for office properties, a 169% rise in loans for hotel properties, a 98% increase in loans for industrial properties, a 94% jump in loans for retail properties, an 81% bump up in multifamily property loans, and a 4% increase in health care property loans.

Among investor types, loans for conduits for CMBS saw a 60-fold increase compared to last year's fourth quarter as previously mentioned. There was also a 170% increase in loans for life insurance companies, and a 65% increase for government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Loans originated for commercial bank portfolios saw a decrease of 25%.

Momentum builds

Fourth-quarter 2010 mortgage originations were 63% higher than originations in the third quarter of 2010. Origination volume typically grows over the course of the year, and changes between the third and fourth quarters are likely driven at least in part by seasonal factors.

Among investor types, loans for conduits for CMBS posted a 298% increase in volume compared with the third quarter, originations for commercial bank portfolios increased 102% from the third quarter to the fourth quarter of 2010, loans for GSEs saw an increase in loan volume of 68%, and loans for life insurance companies increased by 42% during the same period.

Compared with the third quarter, fourth-quarter originations for hotel properties saw a 333% increase. There was a 204% increase for health care properties, a 119% increase for retail properties, a 76% increase for office properties, a 38% increase for multifamily properties, and a 3% increase for industrial properties.

To view the report, please click here.

MBA will release detailed figures on 2010 commercial/multifamily origination volume at the end of March in its annual origination summation report.

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