Commercial/multifamily loan originations set another quarterly record

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Commercial and multifamily lending during the third quarter of 2003 set another new record, according to the Mortgage Bankers Association's survey of commercial and multifamily mortgage originations. MBA members reported originating a total of $29.7 billion during the third quarter. That's up from the previous record of $29.5 billion in the second quarter of this year and 45 percent above the $20.5 billion originated in the third quarter of last year. |ret||ret||tab|

For the year, commercial and multifamily originations are 40 percent, or $22.2 billion, above last year's total originations for the first three quarters of the year. The fourth quarter is normally the strongest quarter for commercial and multifamily originations, and if fourth-quarter production matches last year's level, loan production for the year will easily exceed $100 billion. |ret||ret||tab|

Lending for all property types showed increases. Lending for industrial park properties increased 64 percent, retail property lending was up 60 percent, office-building lending was up 58 percent, and multifamily lending was up 29 percent, all relative to the same period last year. |ret||ret||tab|

While commercial mortgage backed securities (CMBS) conduits continued to provide the largest share of the funding at $9.1 billion, life insurance companies increased their lending by 63.2 percent from the same quarter last year, increasing to $6.6 billion, or 22.4 percent of the total for the quarter this year. Commercial banks funded $4.9 billion, or 16.4 percent, of the total. |ret||ret||tab|

"The strong performance in commercial and multifamily lending during the third quarter of the year continues the trend we have seen all year," said Douglas Duncan, chief economist at the Mortgage Bankers Association, in a news release. "While property performance had deteriorated in terms of higher vacancy rates, prospects for an improving economy, and thus values, remained strong. In addition, the upturn in long-term rates in mid-June caused a number of borrowers to lock in deals that closed during the third quarter. The most recent trends in employment bode well for multifamily and commercial property revenues." |ret||ret||tab|

The 60 percent increase in lending on retail properties versus last year and the 13.3 percent increase over the last quarter is a sign of continued growth in this sector. During 2002, lending on retail properties increased by 25 percent. |ret||ret||tab|

In contrast, there was a sharp gain in lending on industrial properties in the third quarter, following a weak first half when lending volume was down about 3 percent on average. |ret||ret||tab|

Office building lending also showed a sharp turnaround. While mortgage volume on office properties fell 6 percent in 2002, lending volume is up 45 percent for the first three quarters of 2003. |ret||ret||tab|

Multifamily lending remains the largest category, with 41 percent of the total. While multifamily lending increased by 29 percent from the same quarter a year ago, its share of the total dropped as lending for the other property types increased. |ret||ret||tab|

The increase in multifamily lending was led by the government-sponsored enterprises. Fannie Mae purchases of reported originations were up nearly 40 percent from a year earlier; Freddie Mac's activity was up 34 percent during the same period. After several quarters of declining market share, the two GSE's share of total multifamily rose during the third quarter to 42 percent. That share is the highest thus far this year and above the average for 2002. FHA lending activity registered another strong performance, up 32 percent from a year earlier. |ret||ret||tab|

Lending for hotel and motel properties was up 16 percent from a year earlier during the third quarter, while activity in the volatile health care sector was down 8 percent. Each of these areas represents less than 2 percent of lending volume during the third quarter of the year. |ret||ret||tab|

The very large percentage increase in lending by pension funds of 448.3 percent was due to one large transaction relative to a traditionally small lending total for pension funds. |ret||ret||tab|

The Mortgage Bankers Association is the national association representing the real estate finance industry. The association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership prospects through increased affordability; and to extend access to affordable housing to all Americans.|ret||ret||tab|

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