Despite record low interest rates, the Mortgage Bankers Association's (MBA) Commercial and Multifamily Originations Index fell during the third quarter of 2012.  MBA reports that volume was down seven percent from one year earlier and 17 percent below that in the second quarter of 2012.  Year-to-date originations however are running 15 percent ahead of the same period in 2011.  The Index has improved three-fold since hitting bottom in the first quarter of 2009 but remains at less half the level of most quarters between the second quarter of 2005 and the end of 2007.  

The multi-family component of the index was one of two to increase during the third quarter.  Lending increased by 7 percent from Quarter Two and 30 percent year-over-year.  Originations for most other types of property covered by the MBA survey were down from the previous quarter, (Retail -43 percent; Office -29 percent; Health Care, -25 percent; Hotel -25 percent), industrial lending was the only other sector to improve, increasing by 8 percent.

Most sectors fared better on a year-over-year basis with retail and office properties again having the largest downside, decreases of 35 and 24 percent respectively. The remainder showed annual increases; 4 percent for hotel properties, and a 19 percent increase for both industrial and health care properties.  The multi-family lending market, with its 30 percent increase may have been assisted by declining rental vacancy rates and lower homeownership reported by the Census Bureau.

"Commercial and multifamily mortgage borrowing slowed in the third quarter," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research. "Even though low interest rates continue to make borrowing extremely attractive, a moderate pace of commercial property sales transactions and a continued drop in the volume of commercial mortgages maturing limited the overall amount of commercial mortgage loans originated."

Among investor types, between the second and third quarters of 2012, loans for conduits for CMBS saw a decrease in volume of 55 percent, loans for life insurance companies dropped 37 percent, originations for commercial bank portfolios increased six percent and loans for GSEs increased by 14 percent.

On an annual basis, the dollar volume of loans acquired by life insurance companies dropped 32 percent from a year earlier.  There was an 8 percent increase for commercial bank portfolios and 30 percent for the government sponsored enterprises Fannie Mae and Freddie Mac.  The volume of loans originated for CMBS conduits was unchanged.