Commercial and multifamily mortgage lending is expected to increase in 2016, as lenders’ and borrowers’ appetites for new loans remain strong, according to a new Mortgage Bankers Association (MBA) survey of the top commercial and multifamily mortgage origination firms. A full 90 percent of the top firms expect originations to increase in 2016, with 50 percent expecting an increase of five percent or more, and almost two-thirds (61 percent) expecting their own firm's originations to increase by 5 percent or more.
"Commercial mortgage lenders anticipate another competitive year in 2016, as lender desire to make loans remains strong," said Jamie Woodwell, MBA's vice president for Commercial Real Estate Research. "With strong market fundamentals and the 10 year loans made during 2006 and 2007 maturing this year and next, lenders also anticipate strong demand from borrowers."
Specific findings include:
►Lenders are eager to make loans: 61 percent of originators reported that in 2015 lenders had a “very strong” appetite to make new loans. 58 percent expect lenders’ 2016 appetite to be “very strong”.
►Borrowers are eager to take out loans: 52 percent of originators reported that in 2015 borrowers had a “very strong” appetite to take out new loans. 45 percent expect borrowers’ 2016 appetite to be “very strong”.
►65 percent of originators reported that in 2015 their own firm had a “very strong” appetite to make new loans: The same share (65 percent) expect their own firm’s 2016 appetite to be “very strong”.
►In 2016, lenders and borrowers are expected to maintain strong appetites: A full 97 percent of originators expect lenders to have a “strong” or “very strong” appetite to make new loans in 2016 (58 percent “very strong”, 39 percent “strong”). And 100 percent of originators expect borrowers to have a “strong” or “very strong” appetite to take out new loans in 2016 (45 percent “very strong”, 55 percent “strong”).
►Originators expect the market to grow at a strong pace in: Half of respondents (50 percent) expect total market originations to increase 5 percent or more in 2016. Almost two-thirds (61 percent) expect their own originations to increase by 5 percent or more.
►Loans for all major investor groups are expected to increase in 2016, with CMBS seeing the fastest growth: Originations are expected to increase for commercial mortgage-backed securities (64 percent anticipate growth > 5%), pension/life insurance companies (48 percent anticipate growth > 5%), Fannie Mae and Freddie Mac (43 percent anticipate growth > 5%), bank portfolios (41 percent anticipate growth > 5%), and for FHA (27 percent anticipate growth > 5%).
►Loan returns are expected to moderate in 2016: Half of respondents (52 percent) characterized the loans made in 2015 as “somewhat” or “very low” return. Less than one-third (30 percent) expect loans to be “somewhat” or “very low” return in 2016.
►Loan risk is expected to tick up slightly in 2016: Most respondents characterized the loans made in 2015 and expected in 2016 as “medium” risk (52 percent for each year). In 2016, more respondents expect loans to be “somewhat high” or “high” risk (41 percent in 2016 versus 31 percent in 2015).
The 2016 MBA CREF Outlook Survey was conducted between Nov. 30 and Dec. 14, 2015. The Survey request was sent to leaders at 60 of the top commercial/multifamily mortgage origination firms, as determined by MBA's 2013 Annual Origination Rankings Report. The survey had a response rate of 50 percent. Percentages shown are calculated based on applicable responses. Non-responses and "n.a." responses are excluded from the percentage denominator.
