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May 15, 2014

Commercial and multifamily mortgage originations decline in first quarter

Commercial and multifamily mortgage loan originations fell during the first quarter, according to figures contained in a recent Mortgage Bankers Association report.

Originations plunge sharply between quarters
Data from the MBA's quarterly survey of commercial and multifamily mortgage bankers indicated that in the first three months of 2014, new loans of this type dropped 45 percent from the prior quarter.

One major cause of this sharp decline was a 65 percent plunge in originations for health care properties. New loans extended for retail real estate also fell significantly, moving 53 percent lower between the two time frames. In addition, originations for industrial properties decreased 24 percent, while the lines of credit extended for hotels, multifamily and office real estate dropped 51, 44 and 50 percent, respectively.

New loans drop modestly year-over-year
The number of commercial and multifamily loan originations also fell year-over-year, but by far less than the decline from the previous quarter. Between the two periods, there was a decrease in new loans of this type of less than 1 percent.

Originations for retail properties dropped 19 percent, according to American Banker. In addition, new loans for multifamily real estate fell 17 percent.

The number of new lines of credit for office and health care properties also decreased, moving lower by 15 and 10 percent. However, some types of lending surged. There was a 52 percent spike in the number of industrial property loans, and originations for hotel properties rose by 44 percent.

In terms of the dollar value of new credit extended, there was a 55 percent year-over-year drop in debt for commercial bank portfolios, according to MortgageOrb. In addition, loans granted by government-sponsored enterprises plunged 55 percent between the two periods. Originations for life insurance moved 21 percent lower.

Jamie Woodwell, the MBA's vice president of Commercial Real Estate Research, commented on the recent market trends, saying that they might be partially due to seasonal factors.

"Commercial and multifamily borrowing typically starts the year slowly, with less than one-fifth of the annual volume usually done in the first quarter," he said in a statement. The market expert noted the mixed performance of the different types of lending, as well.

"This year is looking to continue the trend. Lending by banks and life companies increased compared to last year's first quarter, but first quarter originations for Fannie Mae and Freddie Mac and for inclusion in commercial mortgage-backed securities were lower than during the same period last year," he concluded." Taken together, commercial and multifamily mortgage originations started 2014 at the same pace they started 2013."