Commercial and multifamily mortgage bankers’ loan originations set a new record during the second quarter of 2005, according to the Mortgage Bankers Association.

The $44.4 billion in loan originations reported for the second quarter was 25 percent higher than the second quarter of 2004 and 41 percent higher than the first quarter of 2005. Second-quarter originations were also 4 percent higher than the fourth quarter of 2004, which had previously been the largest single quarter for originations volume.

MBA also reported that year-to-date loan originations were 31 percent higher than they were last year at this time.

“Capital continues to flow into the commercial and multifamily real estate markets on both the debt and equity sides,” noted Douglas G. Duncan, MBA chief economist and senior vice president, research and business development. “And so far, no significant obstacles to that flow have appeared, whether in the form of higher interest rates, declining loan performance or declining property performance.”

The increase in commercial/multifamily lending activity during the second quarter was across all property types. The $8.9 billion increase over the second quarter of 2004 included a 26 percent increase in loans for office buildings, a 14 percent increase in loans for multifamily properties, a 27 percent increase in loans for retail and a 34 percent increase in loans for industrial space. The largest percentage increase in lending was for hotel properties, which saw a 189 percent increase from the second quarter 2004.

Among investor types, commercial banks and commercial mortgage-backed securities (CMBS) conduits drove the overall increase. Mortgage bankers’ originations for conduits increased 91 percent from the second quarter of 2004; originations for commercial banks increased by 83 percent; and originations for life insurance companies increased 3 percent. Originations for Fannie Mae dropped by 13 percent; originations for Freddie Mac dropped by 47 percent; originations for FHA dropped by 34 percent; and originations for pension funds dropped by 75 percent.

Multifamily was again the dominant property type, representing 35 percent of total second-quarter 2005 originations. Office properties were the next most active property group, with 24 percent of the total, followed by retail properties with 18 percent of the total.

CMBS conduits purchased the largest share of loans originated during the second quarter, 43 percent of the quarter’s total. Originations for commercial banks were 23 percent of the total; loans for life insurance companies were 18 percent of the total; and the combined originations for Fannie Mae and Freddie Mac were 11 percent of the total.

The average loan size increased for all property types between the second quarter of 2004 and the second quarter of 2005, including a jump in the average loan size for hotels from $22 million to $32 million. A robust market in the sale and purchase of hotel properties drove the increase.

The Mortgage Bankers Association is a national association representing the real estate finance industry.


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