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Commercial and multifamily mortgage loan originations declined 25% year over year in the fourth quarter, according to the Mortgage Bankers Association’s (MBA’s) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations. However, originations increased 13% from the third quarter.

“Borrowing and lending backed by commercial real estate remained subdued to close out 2023,” said Jamie Woodwell, MBA’s head of commercial real estate research. “The fourth quarter saw a small pickup from the previous quarter, as is usually the case, but was still down about 25% from 2022’s already suppressed fourth quarter pace. For the year, mortgage originations were about 50% below 2022 levels, with every major property type and capital source experiencing a decline.”

The MBA released its latest data this week at its annual Commercial/Multifamily Finance Convention and Expo. Originations for office, health care, multifamily, and industrial properties saw year-over-year decreases in the fourth quarter, while retail and hotel properties experienced increases. Multifamily was down 27% year over year.

Year over year, the dollar volume of loans originated for depositories decreased by 53%, followed by a 29% drop for government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, a 6% decline for life insurance company loans, and a 1% decrease for investor-driven lender loans. The dollar volume of commercial mortgage-backed securities (CMBS) loans was up 144%.

On a quarterly basis, originations for multifamily properties increased 13% in the fourth quarter, while originations for hotel properties jumped 131%. Originations for retail and health care properties also increased 91% and 72%, respectively. Originations for office properties declined 32%, while industrial properties saw an 11% decrease.

The dollar volume of loans for CMBS increased 68% quarter over quarter, followed by investor-driven lender loans, a 35% increase; depositories, 17%; and GSEs, 1%. The dollar volume for loans for life insurance companies declined 7%.

According to the MBA, its preliminary measure of commercial and multifamily originations finds last year’s activity to be 47% lower than in 2022. For multifamily properties specifically, originations decreased 46% year over year.

In other MBA news, 20%, or $929 billion, of the $4.7 trillion of outstanding commercial mortgages held by lenders and investors will mature this year. This is a 28% increase from the $729 billion that matured last year.

“The lack of transactions and other activity last year, coupled with built-in extension options and lender and servicer flexibility, has meant that many loans that were set to mature in 2023 have been extended or otherwise modified and will now mature in 2024, 2026, 2028, or in other coming years,” said Woodwell. “These extensions and modifications have pushed the amount of commercial real estate mortgages maturing this year from $659 billion to $929 billion.”

According to the MBA, the loan maturities vary by investor and property type groups: $28 billion, or 3%, of the outstanding balances for multifamily and health care mortgages held or guaranteed by Fannie Mae, Freddie Mac, the Federal Housing Administration, and Ginnie Mae will mature this year. Life insurance companies are expected to see $59 billion, or 8%, of their outstanding mortgage balances mature. In contrast, $441 billion, or 25%, of the outstanding balances of mortgages held by depositories; $234 billion, or 31%, in CMBS, collateralized loan obligations, or other asset-backed securities; and $168 billion, or 36%, held by credit companies, in warehouse or by other lenders, will mature this year.

By property type, 12% of mortgages backed by multifamily properties will mature this year. In addition, 25% of loans backed by office properties, 27% of industrial loans, and 38% of hotel loans will come due this year. Retail properties will see 17% of loans mature in 2024, while 18% of loans backed by health care properties will come due.

“Commercial mortgages tend to be relatively long-lived, spreading maturities out over several years, and questions about some property fundamentals have suppressed sales and financing transactions,” added Woodwell. “This year’s maturities, coupled with greater clarity in those and other areas, should begin to break the logjam in the markets.”

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