Published On: Sat, Sep 15th, 2018

MBA: Multifamily, Commerical Loan Originations Rise

Multifamily and commercial loan originations are gaining momentum in the second-half of the year, according to a report from the Mortgage Bankers Association (MBA), rising 4% year-over-year in the second quarter. Loan originations outpaced the first quarter by 32%.

Jamie Woodwell, Vice President for Commercial Real Estate Research, said in a statement, “Commercial and multifamily real estate borrowing and lending continues to track with last year’s level.”

He noted that investor demand for hotels and multifamily properties is helping push commercial real estate loan originations higher, despite demand for retail properties waning.

“New loan demand continues to be supported by still-low long-term interest rates, growing property incomes and rising values,” he said.

MBA says the increase in originations for multifamily properties and hotels was largely responsible for the rise in lending volumes.

Quarter-over-quarter, multifamily originations increased 25% between the first and second quarters. During the same period, hotels saw an 87% boost.

Year-over-year, multifamily originations increased 17% in the second quarter, while hotel originations increased by 22%.

photo/ mohamed Hassan

As for government-sponsored entities, dollar volume of loans originated increased by 18% year-over-year, according to MBA. Commercial bank portfolio loans decreased by 1% year-over-year, while life insurance companies increased by 6%. Commercial mortgage backed securities declined by 8%.

A report from the MBA in late August also showed that total mortgage application volumes were up 4.2%. Refinances accounted for 38.7% of total applications, while adjustable-rate mortgage (ARM) applications accounted for 6.5% of the total. Buyers prefer ARM when prices are higher, as they offer a lower interest rate and can often be fixed for up to ten years.

Mortgage applications for home purchases, rose 3% at the end of August, barely 1% higher than the previous year. Buyers are still facing an inventory shortage and continued price gains, making it harder for many to find affordable homes.

Home sales are the strongest at the high end of the market.

Commercial loan delinquencies are at near record lows in the second quarter, according to MBA.

Woodwell says strong property values and fundamentals along with low interest rates and numerous financing options are supporting commercial real estate owners and their ability to repay loans.

In the second quarter, delinquency rates for life insurance companies was at 0.03%, and the rate for multifamily loans held by Frannie Mac was at 0.01%. Fannie Mae’s delinquency rate stood at 0.1%. Bank commercial loans had a delinquency rate of 0.5%, an historic low.

Author: Jacob Maslow


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