Commercial and multifamily mortgage originations turned sharply upward during the third quarter of 2011, rising 10 percent above levels in the second quarter and nearly doubling originations in the third quarter of 2010. Results of Quarter Three lending was released by The Mortgage Bankers Association (MBA) on Thursday in their Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.
MBA said that the 98 percent overall annual improvement in commercial/multifamily lending was driven by increases across the board. When compared to the same quarter in 2010, loans for hotel properties increased by 406 percent; retail properties by 164 percent and office properties 103 percent. Loans for multifamily properties were up 39 percent. Offsetting these strong gains were losses of 3 percent and 8 percent for industrial property and health care property loans.
The increased originations are reflected in MBA's Originations Index which rose from 70 in the third quarter of 2010 to 126 in the second quarter of 2011 to 138 in the quarter just ended. The index peaked at 352 in Q2 2007 and bottomed out at 40 in Q1 of 2009.*
Originations increased across all lender types but lending by commercial banks soared, increasing 433 percent over lending one year earlier from an index of 32 to 169. Lending by conduits for commercial mortgage backed securities (CMBS) was up 169 percent (although levels are still low; the index is 42). Life insurance companies increased lending by 61 percent from an index of 176 to 282, and the GSEs Freddie Mac and Fannie Mae increased their lending by 47 percent from 120 to 176.
The average loan sizes also increased. For all loans the average was $14.9 million compared to $10.5 million in Quarter 3 of 2010. Loans from conduits averaged $40.5 million, unchanged year-over-year. Commercial bank loans more than doubled in size from $4.9 million to $11.8 million; life insurance companies lent an average of $20.5 compared to $15.5 million and Freddie and Fannies' average loan size rose from $12.6 million to $13.8 million.
"Lending on commercial and multifamily properties continues," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research. "Mortgage originations by life company portfolios hit another new record in the third quarter, and lending by bank portfolios and Fannie Mae and Freddie Mac also picked-up. Mortgage originations for the CMBS market, which was caught up in the global economic uncertainty of recent months, declined from last quarter, but were higher than last year's Q3 level."
Quarterly changes in originations were also impressive; retail property loans increased by 37 percent, office properties 8 percent, hotel properties 4 percent, multi-family properties 2 percent. The remaining two properties types fell in quarterly statistics as well as annual; industrial property originations were down 14 percent and health care properties 30 percent.
Among investor types, between the second and third quarters of 2011, loans for commercial bank portfolios saw an increase in loan volume of 55 percent, loans for GSEs 32 percent, and originations for life insurance companies 3 percent. Loans for conduits for CMBS decreased by 48 percent.
*The Index has a base of 100 = the average originations per quarter in 2001.
