MBA: Credit crunch, economic concerns drive slower lending

WASHINGTON, D.C. - Commercial and multifamily mortgage loan originations remained low in the third quarter, according to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.

Third quarter originations were 53% 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,” said 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.”

Decreases in total commercial/multifamily mortgage originations continued to be 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.

The decrease in commercial/multifamily lending activity during the third quarter was driven by decreases in originations for all property types. When compared to the third quarter of 2007, the overall 53% decrease included an 87% decrease in loans for hotel properties, a 61% decrease in loans for office properties, a 59% decrease in loans for health care properties, a 39% decrease in loans for industrial properties, a 30% decrease in multifamily property loans, and a 30 decrease in retail property loans.

Among investor types, conduits for CMBS saw a significant decrease of 93% compared to last year’s third quarter. There was also a 71% decrease in loans for commercial bank portfolios, and a 27% 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%.

Third quarter 2008 mortgage originations were 11% lower than originations in the second quarter of 2008.

Among investor types, loans for commercial bank portfolios saw a decrease in loan volume of 55% compared to the second quarter of 2008, loans for conduits for CMBS saw an increase in loan volume of 67% compared to the second quarter of 2008, life insurance companies increased by 27% during the same time span, and GSEs volume increased 12% from the second quarter 2008 to third quarter 2008. On a quarter-over-quarter basis, the size of the decline in loans for commercial banks overwhelmed increases among other investor groups.

Compared to the second quarter of 2008, third quarter originations for hotel properties saw a 71% decrease. There was a 42% decrease for health care properties, a 28% decrease for office properties, a 22% increase for industrial properties, a 9% increase for retail properties, and a 9% increase for multifamily properties.