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Bank commercial, multifamily lending jumps.

* Bank lending on multifamily and commercial property ramped up as balance-sheet conditions improve, the Federal Deposit Insurance Corporation's (FDIC's) Quarterly Banking Profile reported.

"Banks' holdings of commercial and multifamily mortgages held steady through the recession, and are now expanding as the property markets recover," said Jamie Woodwell, vice president of commercial real estate research with the Mortgage Bankers Association (MBA). "We're seeing growth in the holdings of--and continued improvement in the performance of--both multifamily and other commercial property loans."

Sam Chandan, chief executive of Chandan Economics, New York, said the volume of commercial and multifamily loans held by banks jumped more than $20 billion in the fourth quarter--the largest single-quarter increase in four years.

"For the first time since the onset of recovery, a majority of banks with measurable exposure to the sector increased their net lending activities," Chandan said. "Lending increased across the board for multifamily properties, income-producing commercial real estate and owner-occupied commercial real estate."

Supported by improving fundamentals and an abundance of low-cost financing, the apartment default rate dropped to 1.6 percent in the fourth quarter, Chandan said--the lowest since 2008 and down from a peak of 4.7 percent. The default rate on commercial property loans fell to 2.9 percent and the construction loan default rate fell to 8.3 percent--less than half its first-quarter 2012 peak level.

More than two-thirds of banks with at least $10 million in multifamily loans and a non-zero default rate in the third quarter reported a lower multifamily default rate in the fourth quarter, compared with 59.9 percent in the first quarter of 2012. Across banks with at least $10 million in commercial property loans and a non-zero default rate, 63.1 percent reported a lower commercial property default rate in the fourth quarter, compared with 57.4 percent at the start of 2012.

But Chandan said that smaller regional and community banks and banks with smaller commercial property balance sheets lag their larger peers' improving loan performance trends. "Banks with $100 million or more in commercial real estate loans as of the fourth quarter reported a median default rate of 1.1 percent; banks with less than $100 million reported a median default rate of 1.7 percent," he said.

Michael Tucker is editorial director of MBA Commercial/Multifamily NewsLink. Contributor: Matt Robinson is senior public affairs specialist for the Mortgage Bankers Association (MBA). To subscribe, visit
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Title Annotation:Commercial
Author:Tucker, Michael
Publication:Mortgage Banking
Date:Apr 1, 2013
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