Commercial and multifamily mortgage bankers’ loan originations set a record during 2004, according to the Mortgage Bankers Association. The $136 billion in loan originations reported for 2004 were up by 16 percent from the $117 billion reported in 2003.

MBA also reported that loan originations in the fourth quarter were the highest ever recorded in MBA’s quarterly survey. The fourth quarter total of $42.7 billion was $7.1 billion above third quarter 2004 volume and $3.8 billion above fourth quarter 2003 volume.

“The continued availability of capital from lenders and demand from borrowers combined to produce new record loan originations in 2004,” said Douglas G. Duncan, MBA chief economist and senior vice president, research and business development. “With commercial property values strong, interest rates low, the economy growing, and real estate markets starting to improve, 2005 looks to produce more of the same.”

The increase in commercial/multifamily lending activity during 2004 was across most property and investor types. The $18.8 billion increase over 2003 included a $7.2 billion increase in office loans, a $4.7 billion increase in retail loans, a $1.8 billion increase in industrial loans and a $1.5 billion increase in multifamily property loans. Among investor types, commercial banks had the largest increase at $9.1 billion, while life insurance companies increased by $4.9 billion, CMBS conduits increased by $2.4 billion and Freddie Mac increased by $1.9 billion. Fannie Mae decreased by $1.9 billion and FHA decreased by $1.3 billion.

CMBS conduits purchased the largest share of loans originated during 2004. The $41.2 billion originated for conduits represented more than 30.3 percent of the year’s total. Originations for life companies were $29 billion or 21.3 percent of the total. Commercial mortgage bankers originated $26.1 billion or 19.1 percent of the total for commercial banks. The combined Fannie Mae and Freddie Mac total of $21.3 billion was 15.6 percent of originations.

Commercial mortgage bankers originated $50.4 billion of loans on multifamily properties, representing 37.3 percent of total originations, down from 41.6 percent in 2003. Office lending was the next most active property group, with $33.2 billion in originations or 24.5 percent of the total, followed by retail originations of $24.8 billion or 18.3 percent of the total.

The largest percentage increase in commercial mortgage lending was for office properties, where the $33.2 billion in originations for 2004 represented a 27.7 percent increase from 2003 volumes.

The $7.1 billion increase in lending activity between the third and fourth quarters of 2004 largely reflected the industry’s usual push to finalize deals before the end of the year. The quarter-over-quarter increase was led by a $2.4 billion increase in multifamily lending. The gains were widespread, with all investor and property types recording increase.

In percentage terms, health care lending led the way with a 72.5 percent increase from the third to fourth quarter. Hotel lending was up by 51.5 percent, and multifamily lending rose 17.9 percent. The leading investor gainers in percentage terms from the third to fourth quarter were Freddie Mac (59.1 percent), credit companies (50.6 percent) and conduits (41.8 percent).

The $42.7 billion of commercial and multifamily mortgage originations reported for the fourth quarter were up $3.8 billion from the fourth quarter of 2003. Office lending increased by $1.1 billion from a year earlier and hotel lending increased by $0.5 billion.

Among investor types, the largest increases in the fourth quarter of 2004 versus the fourth quarter of 2003 were $3 billion for conduits and $2.4 billion for commercial banks. Commercial mortgage bankers’ originations for Fannie Mae fell by $0.9 billion.

In the multifamily sector as a whole, the $7 billion of loans purchased by the two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, represented 44 percent of the multifamily loan volume in the final quarter of the year. In comparison, Fannie Mae and Freddie Mac accounted for 51 percent of the multifamily volume in the fourth quarter of 2003.

Commercial mortgage bankers’ FHA-insured lending activity was $608 billion in fourth quarter of 2004, a decrease of 47 percent over the same period a year earlier.

***

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