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16 Percent Drop from 2001 Attributed to Loan Size, Not Loan Numbers

Washington, D.C. (May 14, 2002) -- New commitments for new commercial mortgages fell back during the first quarter of 2002, according to the quarterly Commercial Mortgage Origination survey conducted by the Mortgage Bankers Association of America (MBA). These data-along with the reading for the final quarter of 2001-suggest that commercial lending has retreated somewhat from the unusually strong pace seen during the first three quarters of last year.

The total reported commitments during the first quarter of the year were $12.4 billion. The decline from the $22.5 billion figure in the final quarter of 2001 in part reflected a normal seasonal adjustment, as the first quarter has traditionally been the weakest quarter for new originations. Moreover, the level of new lending activity during the first quarter of 2002 was off by 16 percent from the robust pace during the same period a year earlier.

The decline in new lending volume was primarily due to a sharp decline in loan size; the average reported loan amount fell from $8.9 million in the first quarter of 2001 to $7.5 million during the first quarter of 2002. The number of loans made was virtually unchanged.

The weakness in dollar volume was widespread across property types, but the reported declines were sharpest for hotel/motel and office loans (see attached chart). Both these sectors also saw the number of new loans decline from a year earlier. "The weakness in lending in the hotel and office sectors during the first quarter of 2002 hardly is surprising," commented Gary J. Kallsen, vice president, mortgages and real estate, Lutheran Brotherhood, and chairman of MBA's Commercial Real Estate/Multifamily Board of Governor's (COMBOG), research committee. "These are the two sectors in which property markets have been most affected by recent weakness in commercial real estate markets and by uncertainties about the economic recovery in general."

Multifamily lending also was considerably weaker than a year earlier in the first quarter of 2002, with Freddie Mac and Fannie Mae together absorbing just more than half of the new multifamily production during the quarter.

Two areas of strength emerged from the first-quarter results. The number of loans for retail properties was up 8 percent, although the dollar volume was essentially unchanged from the same period in 2001. Also, within the multifamily sector, FHA-insured loans were notably stronger than in the same quarters in 2001 and 2000 (see attached chart). "The strength in FHA-insured multifamily loans in part reflects FHA's ability to issue new commitments beginning October 1, 2001, after a five-month moratorium in its new construction program," Kallsen stated.

Mortgage Bankers Association of America

About MBA:
MBA is the national association representing the real estate finance industry. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership prospects through increased affordability; and to extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters excellence and technical know-how among real estate finance professionals through a wide range of educational programs and technical publications. Its membership of approximately 2,600 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site: www.mbaa.org.
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