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Commercial/Multifamily Mortgage Originations Plunge 80% from Fourth Quarter 2007

A new report from the Mortgage Bankers Association (MBA) shows a dramatic drop in commercial and multifamily mortgage loan originations in the fourth quarter of 2008. Originations fell 80% from the same period of 2007, a decline noted across all property types and investor groups.

"Commercial and multifamily mortgage lending slowed to a trickle in the fourth quarter," said Jamie Woodwell, vice president of commercial real estate research at MBA, in a statement. "Originations for all of 2008 were down approximately 60% from 2007 levels. Between the worsening economy and the continued credit crunch, lenders are extremely cautious about lending and borrowers are likely to hold onto the assets and the loans they already have."

MBA’s quarterly survey of commercial/multifamily mortgage bankers’ originations was released during its 2009 Commercial Real Estate Finance/Multifamily Housing Convention & Expo, currently underway in San Diego.

A drop in commercial mortgage-backed securities (CMBS) conduit loans and loans for commercial bank portfolios led the declines in originations, a further effect of the current credit crunch and other market problems.

According to MBA, the fourth-quarter decrease in commercial/multifamily lending activity was driven by decreases in originations for multiple property types. Compared with the fourth quarter of 2007, the overall 80% decline included a 99% decrease in loans for hotel properties and an 82% decrease in loans for retail properties.

Other sectors were not spared, though their declines were somewhat less. Loans for industrial properties decreased 76%. In the office sector, there was a 72% drop in loan origination. Meanwhile multifamily originations declined by 62% and health care property experienced a 47% drop.

Conduits for CMBS saw a plunge of 98% from the fourth quarter of 2007. Commercial bank portfolios suffered an 86% decrease in loans, while life insurance companies recorded a 73% decline. For government-sponsored enterprises (GSEs), including Fannie Mae and Freddie Mac, the decrease was much less at 15%.

The fourth-quarter mortgage originations were 53% lower than originations in the third quarter of 2008, MBA reports. Loans for life insurance companies saw a decrease in loan volume of 73% from the third quarter of 2008, while loans for CMBS conduits dropped 60%. Commercial banks decreased by 43% over the same period, while GSEs volume decreased 21% from the third quarter.

The report shows further evidence of deteriorating conditions in the retail sector. Fourth-quarter originations for retail properties saw a 75% decline from the third quarter, steeper than the 68% for industrial properties and the 63% decrease for office properties. Multifamily originations declined 33%.

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