“Since the onset of the credit crunch, we have seen an overall slowdown in multifamily property sales transactions, Commercial Mortgage Backed Securities (CMBS) loans and issuance of mortgages in general,” said Jamie Woodwell, MBA’s vice president of Commercial/Multifamily Real Estate Research. “This is the main reason there is a drop in the loan originations for multifamily.”
Woodwell explains that this is also because of an overall decrease in demand for multifamily mortgages. “In addition, there are differences in investor groups that contribute to this 42 percent drop. Financing from banks, thrifts and life companies has slowed down, though not to the extent the CMBS market has,” he explains.At the same time, Woodwell says the for Government Sponsored Enterprises (or GSEs – Fannie Mae FNM and Freddie Mac FRE<) have demonstrated the strongest second quarter on record.The dollar volume of loans for GSEs saw an increase of 66 percent (see Multifamily Market Stable; Fannie, GSE’s Share Growing).
The level of originations for the GSEs was the highest recorded for a March through June period, while the CMBS market saw the lowest level since the MBA survey began in 2001. Among investor types, conduits for CMBS saw a decrease in loan volume of 53 percent compared to the first quarter of 2008, loans for commercial bank portfolios saw an increase in loan volume of 27 percent compared to the first quarter of 2008, life insurance companies increased by 8 percent during the same time span, and GSEs volume was essentially unchanged from the first quarter 2008 to second quarter 2008.
“The slowdown in originations has come from both a decrease in the supply of capital available and a decrease in the demand for new mortgages. It is likely that volumes will remain muted until buyers, sellers, borrowers, lenders and their expectations of rates and terms match closely enough for transaction activity to pick back up,” Woodwell explains.
The report also found that second quarter 2008 mortgage originations were two percent lower than originations in the first quarter of 2008 with a 14 percent decrease for multifamily properties.“We saw extraordinary levels of property sales transactions and mortgage originations in 2005, 2006 and 2007 and in some ways, we have now come back from those highs. In addition, there isn’t a high percentage of loans maturing in 2008 (see High Yield Mortgage REITs, the Perfect Storm?), and in the face of the credit crunch, without a huge wave of loans needing refinancing, the decrease is expected,” explains Woodwell.
Woodwell believes that even though multifamily loans are performing very well for the GSEs, any impact on their portfolios due to a possible bail-out of Fannie Mae and Freddie Mac will have an impact on multifamily.
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Disclosures: None at the time of this writing