Loan Originations Expected to Rise as Lenders Show Increased Appetite

Liquidity may well be on the rise in 2014.

As real estate and capital markets in many of the county’s largest cities continue to rebound, the majority of the top 50 commercial and multifamily lending firms expect loan origination volumes to increase this year, a recent Mortgage Bankers Association survey shows.

“Commercial and multifamily lenders anticipate a market in which lending continues to grow and their firm gets a bigger piece of the pie,” said Jamie Woodwell, MBA’s vice president for commercial real estate research.

A notable 91 percent of the top firms surveyed expect origination volumes to increase this year, with 48 percent of those lenders anticipating an increase of 5 percent or more, according to the report. Nearly two-thirds of the firms surveyed expect their own loan originations to increase by 5 percent or more.

The outlook this year weighs in favor of lenders having a larger appetite than borrowers—a major turnaround from the peak of the financial crisis when few lenders were willing to provide debt for commercial real estate. While 65 percent of the firms surveyed anticipate a “very strong” appetite among lenders to provide loans in 2014, only 23 percent anticipate a “very strong” appetite among borrowers to take out loans.

On the bright side of the market, CMBS, bank and life company loan origination volumes are are all expected to rise this year, the report shows. As indicated by last year’s news of federal cutbacks in GSE lending, Fannie Mae, Freddie Mac and FHA loan origination volumes are all expected to decrease.

Another area of concern among the lenders surveyed is the expectation that loan risk will increase this year along with the rise in originations. A considerable 88 percent of the respondents classified the loans made in 2013 as “medium” to “somewhat low” risk. In 2014, 89 percent of the respondents expect loans to be “medium” to “somewhat high” risk. Those lenders were surveyed on a scale of very low, somewhat low, medium, somewhat high and high.

“Borrowers’ appetites to take out new loans are expected to remain strong but perhaps drop a bit from 2013 levels,” Mr. Woodwell said. “The resulting competition to lend leads originators to expect loan risk to increase marginally in the face of moderating returns.”

The 2014 MBA CREF Outlook Survey was conducted between Dec. 11 and Dec. 20, 2013. The survey request was sent to heads of the top 50 commercial and multifamily mortgage origination firms, as determined by the industry trade group’s 2012 Annual Origination Rankings Report. The survey had a response rate of 64 percent. The percentages shown were calculated based on applicable responses, while nonresponses and “N.A.” responses were excluded from the percentage denominator.  

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