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Commercial Mortgage Origination Activity Continues Uptick - 02/05/10
CRE News

Commercial mortgage origination volumes rose in the fourth quarter by 12% when compared to a year ago and 15% from the third quarter, indicating that capital might be starting to creep back into the market.

Origination volumes, as measured by an index calculated by the Mortgage Bankers Association, were volatile all of last year.

The index, which was set to 100 in 2001, reached a high of 352 in the second quarter of 2007. It started collapsing in 2008, when during the first quarter it registered 132, a 52% drop from the fourth quarter of 2007. Last year it started the year at 40, jumped to 60 in the second quarter, receded to 53 in the third and climbed again in the fourth.

But the MBA suggested that stability might be coming back into the market, albeit at far lower levels than during the market's peak.

The MBA calculates its index as a result of a survey of four major investor groups: CMBS lenders, life-insurance companies, commercial banks and the housing-finance agencies. Commercial banks and life-insurance companies both saw increases in origination activity, with life companies registering a whopping 112% increase in their activity. Banks increased lending by 17% when compared to a year ago. CMBS lenders are still in hibernation, with virtually no lending whatsoever. Fannie Mae and Freddie Mac saw a 26% decline in volumes.

For the full year, Fannie's volume fell to $19.8 billion from $35.5 billion in 2008, while Freddie's fell to $16.6 billion from $24 billion. The two agencies expect that volumes will be down again this year as sales transactions continue to slog along at a slow pace. The two agencies' originations slow down translated into an 8% drop in originations against apartment properties - the only sector to see a drop in originations.

The origination of hotel loans skyrocketed by 105% from a year ago, when relatively few hotel loans were written.

Lending against retail and industrial properties was up by 101% and 59% respectively, while lending against office properties was relatively unchanged. The average size of loans rose across the board.

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