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Multifamily/commercial origination volume drops. (Commercial).

ACCORDING TO A QUARTERLY SURVEY OF mortgage bankers conducted by the Mortgage Bankers Association of America (MBA), multifamily and commercial mortgage originations fell slightly in the third quarter of 2002 relative to the second quarter of 2001.

The 46 MBA members responding to the survey originated $17.8 billion in mortgages on income-producing properties, down from the $20.4 billion reported in the second quarter and $18.7 billion reported for the same quarter in 2001. For the first three quarters of 2002, mortgage volumes totaled $50.8 billion, down just more than 1 percent from the total of $51.4 billion for the first three quarters of 2001.

The biggest decline came in multifamily lending, according to the MBA survey. While the $8.1 billion in multifamily originations during the third quarter exceeded the volumes for any other property type, this was down 19 percent from the same quarter in 2001 and down 22 percent from the second quarter of 2002. Part of the drop was attributable to a single very large multiproperty transaction that took place during the third quarter of 2001.

Lending for office properties was down almost 15 percent from a year earlier and almost 7 percent from second-quarter 2002, the survey showed. Mortgage originators report this is due primarily to uncertainty in the economic outlook and increased vacancies in certain markets. In contrast, retail property lending is up almost 50 percent over the same quarter of 2001, although down slightly from second-quarter 2002. Lenders attribute this to continued strength in the retail sector and investor demand--particularly for grocery-anchored shopping centers.

Lending in the hospitality industry continued to decline during third-quarter 2002 from already very low levels. While lending for health-care properties showed a modest dollar increase, continued problems in this sector have held lending to fairly low levels.

Commercial mortgage-backed security (CMBS) conduits funded s6 billion in loans in the third quarter, down slightly from the second quarter but up 28 percent from the third quarter of 2001. Whereas CMBS conduits funded 25 percent of the loans originated by mortgage banking companies' survey respondents during 2001, they accounted for 33 percent of all funding in the third quarter. One reason is that credit spreads for the subordinated pieces of CMBS issuances have fallen far more than the highest-rated pieces, thus making CMBS financing very attractive on some deals relative to other sources of financing.

In contrast, the dollar amount of loans financed by life companies declined 15 percent over the same period in 2001, and was off by $800 million from the second quarter of 2002. The life companies funded $4 billion, or 22.6 percent of the total, the MBA survey showed.

The amount of loans originated by MBA members and funded by Fannie Mae and Freddie Mac declined relative to the previous quarter and the same quarter of 2001. Fannie Mae's purchase total was off by 36 percent from a year earlier, and Freddie Mac's activity was down 14 percent, reflecting the overall decline in multifamily lending. (The level of Fannie Mae's and Freddie Mac's lending reported in the MBA survey may be lower than totals reported by the two agencies, because not all companies from which Fannie Mae and Freddie Mac purchase loans are included in the survey.) Fannie and Freddie's combined share of multifamily lending was 40 percent of the total, down from 45 percent in the third quarter of 2001.

In contrast, Federal Housing Administration-insured (FHA-insured) multifamily loans increased by 15 percent over the same period of 2001, reflecting the fact that most FHA multifamily programs no longer require credit subsidy. In previous years, the FHA program was forced to shut down in midyear when the credit subsidy appropriation was exhausted.
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Title Annotation:survey of Mortgage Bankers Association of America members
Publication:Mortgage Banking
Date:Jan 1, 2003
Words:621
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