Multi-family Lending Increases but Lags other Commercial Activity

Commercial and multi-family mortgage lending rose in the second quarter of 2012 due, the Mortgage Bankers Association (MBA) said, to low interest rates and continued stabilization and growth in the commercial real estate markets.  The volume of mortgage originations was up 39 percent from the first quarter of this year and 25 percent compared to lending one year earlier.

The MBA's Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations noted increased lending from every major investor group it surveys.  Commercial banks saw the largest annual increase at 58 percent while on a quarterly basis the index rose from 158 to 172.  Lending on the part of the two government sponsored enterprises (GSEs) Fannie Mae and Freddie May increased from 157 to 201 quarter to quarter; this was 50 percent above the lending one year earlier.   Conduit (Commercial mortgage-backed securities) lending nearly quadrupled from the first to the second quarter (23 to 94) but was up only 16 percent over the Q2 2011 figure.  The final investor group, life insurance companies, increased from an index of 220 in Q1 to 302 in Q2 but was up only 10 percent on an annual basis.

The quarter-over-quarter growth was driven by increases in lending for hotel and office properties, up 147 percent and 66 percent respectively.  Multifamily lending had the smallest quarterly increase, 21 percent.  There were also increases of 47 percent for industrial properties, 33 percent for health care facilities, and 29 percent for retail.  

Multifamily lending increased 19 percent year-over-year while retail lending was up 56 percent, hotels properties 22 percent, office properties 15 percent and health care properties 11 percent.  Loans for industrial properties fell five percent.

The average size of a multi-family loan in the second quarter of 2012 was $12.2 million compared to $14.2 million the previous quarter and $14.3 million in the second quarter of 2011.  The average size of a loan from the GSEs was $12.7 million compared to $14.2 million the previous quarter and $12.2 million in Q2 2011.