Commercial mortgage originations for all of last year improved over 2013. In at least the multifamily sector, the momentum is likely to continue this year.
For 2015, Freddie Mac expects to build on 2014 momentum for another strong year in multifamily markets, albeit at a slower pace and with more dispersion across geographic markets.
Key market drivers, according to Freddie’s 2015 Multifamily Outlook Executive Summary, include household formation and improved employment, with 15-year annual highs of added jobs and unemployment dipping below 6 percent in 2014, as the biggest contributors to the forecast.
As well, demographics and supply are expected to keep the multifamily market strong.
“As we look deeper at demand, we know that when millennials form households, they are more likely than older adults to rent their homes,” said Steve Guggenmos, senior director of Freddie Mac Multifamily investments and research, in Freddie’s U.S. Multifamily Housing Outlook video presentation for 2015. “When you compare that with the fact that 2015 will be the year of the largest increase in apartment building completions in recent history, then the millennials can help absorb the new units in some markets.”
Freddie’s forecast was in alignment with the Mortgage Bankers Association’s forecast for commercial and multifamily originations, which the MBA released at its 2015 Commercial Real Estate Finance/Multifamily Housing Convention & Expo on Feb. 2.
Here, the MBA projected commercial and multifamily originations would increase to $414 billion for the year, a 7 percent rise over 2014. The association expected 2016 lending volume to grow to $430 billion.
Multifamily production by mortgage bankers is estimated to account for $152 billion of this year’s volume.
“Commercial and multifamily real estate finance markets are strong,” MBA Vice President of Commercial Real Estate Research Jamie Woodwell said in the report. “Rising property values, improving property fundamentals, low interest rates and higher loan maturity volumes should all help boost mortgage borrowing and lending in the coming year.”
Also at the beginning of February, the Mortgage Bankers Association announced results from its Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.
The survey revealed commercial and multifamily originations increased 27 percent between the third and fourth quarters last year.
In these quarter-over-quarter comparisons, the office property loan production was flat from period to period.
New loans for health care properties skyrocketed 92 percent from the third quarter while multifamily property originations jumped 42 percent.
Also seeing significant origination growth over the prior three-month period were retail properties, blossoming 41 percent; hotel properties, climbing 32 percent; and industrial properties, jumping 20 percent.
Where investor types were concerned, loans for commercial bank portfolios grew 59 percent over last quarter.
Loans for government-sponsored enterprises grew 49 percent while life insurance company originations bumped up by 16 percent.
Loans for commercial mortgage-backed securities, however, decreased by 3 percent from the prior period.
Overall fourth-quarter 2014 commercial real estate loan production also jumped 11 percent higher than fourth-quarter 2013 volume of $358.5 billion.
Full-year originations from 2014 showed a 7 percent climb, a preliminary estimate from the Commercial/Multifamily Mortgage Bankers Originations Index said, over full-year 2013 volume.
“The fourth quarter set record quarterly origination volumes for life insurance companies, for Fannie Mae and Freddie Mac and for multifamily lending,” Woodwell said.
According to MBA’s 2014 Commercial Real Estate/Multifamily Survey of Loan Maturity Volumes, $121 billion, or 8 percent of the $1.5 trillion in outstanding commercial and multifamily mortgages held by non-bank lenders and investors will mature this year.
These recent results mean a nearly one-third mortgage maturity volume increase from the $91.7 billion that matured last year.
In 2016, this volume is expected to grow to $223 billion.
“After hitting a low last year, commercial and multifamily mortgage maturities are beginning to rise as the ten-year loans made in 2005, 2006 and 2007 come due,” Woodwell said in a Feb. 2. press release. “With strong market conditions, many of the loans slated to mature in coming years are already refinancing. Over the last year, the balance of loans set to mature in 2015 fell by $37 billion, or 24 percent.”
Three percent, or $11.5 billion, in outstanding balances for multifamily and health care mortgages held or guaranteed by Freddie, Fannie Mae, Ginnie Mae and the Federal Housing Administration have 2015 maturities.
For life insurance companies, 6 percent of their outstanding mortgage balances are set to mature this year, which equates to $19.4 billion.
Twelve percent, or $73 billion, of all loans held in CMBS will be due this year.
As well, $17.1 billion, or 12 percent, of commercial mortgages held by credit companies will reach their maturity dates in 2015.
As of Dec. 31, 2014, the MBA ranked 101 commercial and multifamily servicers in its 2014 Year-End Commercial/Multifamily Servicer Rankings. The top five servicer positions remained unchanged from 2013.
Wells Fargo Bank, N.A., finished last year as the top commercial and multifamily servicer with 33,590 loans serviced for$474.377 billion in U.S. master and primary servicing. The lender grew its portfolio over 2013 when it serviced 33,354 CRE loans at $434.375 billion.
Wells claimed the top servicing spot for CRE loans in U.S. CMBS, collateralized debt obligations and other asset-backed securities. As well, the lender claimed the top servicer spot for Freddie and loans held in warehouse facilities. The servicer, however, was ranked as No. 2 for Fannie loans.
Coming behind Wells in overall servicing was PNC Real Estate/Midland Loan Services with servicing responsibility for 32,704 loans at $396.785 billion. A year prior, PNC serviced 33,865 loans for $369.577 billion.
PNC claimed Fannie’s top servicer position. Additionally, PNC earned the top master and primary servicer position of commercial bank and savings institution loans; Ginnie Mae and FHA loans; and loans for credit companies, pension funds, real estate investment trusts and investment funds.
Berkadia Commercial Mortgage LLC claimed the No. 3 U.S. master and primary servicer spot with 25,954 CRE loans serviced at $236.270 billion, growing from the 2013 portfolio of 28,180 loans at $235.374 billion
Berkadia ranked as the top servicer for other investor-type loans and the fourth largest servicer on CMBS, CDO and ABS loans.
Rounding out the top five U.S. master and primary servicers were No. 4 KeyBank, N.A., with 16,747 loans serviced at $174.394 billion and No. 5 GEMSA Loan Services LP with servicing activity on 5,768 loans at $101.324 billion.
Again, both lenders increased portfolios over the prior year servicing.
Of other note, Prudential Asset Resources and MetLife claimed the top and No. 4 positions, respectively of servicers for life companies.
