Commercial and multifamily mortgage loan originations fell 48% in the second quarter compared with a year ago and decreased 31% from the first quarter, according to the Mortgage Bankers Association’s (MBA’s) quarterly survey of commercial and multifamily mortgage bankers originations.
“Commercial real estate borrowing and lending slowed dramatically in the second quarter, as uncertainty around the COVID-19 pandemic caused both borrowers and lenders to focus more of their attention on their existing books of business instead of new opportunities,” said Jamie Woodwell, MBA’s vice president of commercial real estate research. “The originations picture shows a marked divide between properties that were the most dramatically and immediately hit by the pandemic—lodging and retail—and those that have fared better—multifamily and industrial. Refinancing in government-backed loans has shown the greatest resilience.”
All property types showed a decline in lending volumes the second quarter when compared with the same period last year. However, out of property types, multifamily fared the best, with a 24% year-over-year decrease for property loan originations. Hotel properties saw a 91% year-over-year decrease in the dollar volume of loans, followed by a 74% drop for retail properties, a 71% decrease for office properties, a 44% decrease for industrial properties, and a 40% drop for health care properties.
Among the investor types, according to the MBA, the dollar volume of loans originated for commercial mortgage-backed securities (CMBS) decreased by 95% year over year, followed by a 55% decrease for commercial bank portfolio loans, a 49% decrease for life insurance company loans, and a 5% decrease in government-sponsored enterprise loans.
Multifamily property loan originations also fared better on a quarterly basis, declining 13% from the first quarter. While MBA’s recent annual report of the multifamily lending market showed record highs for 2019, with 2,589 different multifamily lenders providing $364.4 billion in new mortgages for apartment buildings with five or more units, 2020 will likely see a drop due to the pandemic.
“Last year’s numbers pointed to a robust and diverse multifamily lending environment, but conditions have changed with the onset of the COVID-19 pandemic, the greatest being increased uncertainty,” said Woodwell. “Interest rates are now lower than they were a year ago, and data has yet to show any marked changes in property incomes or values. Demand for refinancing because of low rates, particularly for government-backed loans, is unlikely to overcome a drop in sales transactions, which means multifamily borrowing and lending is likely to drop this year.”