U.S. Commercial Mortgage Lenders Anticipate Growth in 2015

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According to a new Mortgage Bankers Association survey of the top commercial and multifamily mortgage origination firms, commercial and multifamily mortgage lending is expected to increase in 2015, as lenders' appetites to place new loans remains very strong and borrowers' appetites to borrow increase. A full 100 percent of the top firms expect originations to increase in 2015, with 68 percent expecting an increase of 5 percent or more.  Almost three quarters (72 percent) expect their own firm's originations to increase by 5 percent or more.

"Commercial mortgage lenders anticipate another competitive year in 2015," said Jamie Woodwell, MBA's Vice President for Commercial Real Estate Research.  "Lenders' appetites for loans remain very strong, and with the 10 year loans made during 2005, 2006 and 2007 maturing, lenders also anticipate growing demand from borrowers."
 
Majorities of respondents expect originations for every major investor group to increase.  83 percent anticipate a "very strong" appetite among firms to make loans and 50 percent anticipate a "very strong" appetite among borrowers to take out loans.  Lenders were surveyed on a scale of "very weak, weak, fair, strong, or very strong."
 
Specific findings include:

• In 2014, lenders were more eager to make loans than borrowers were to take out loans.  A "very strong" appetite among lenders (87 percent of respondents) to make new loans in 2014 faced a generally "strong" appetite among borrowers to take out new loans (57 percent of respondents).

• In 2015, lenders are expected to have a similar appetite to place loans, and borrowers a slightly stronger appetite to take out loans.  Compared to 2014, a similar share of respondents expect lenders to have a "very strong" desire to make loans (83 percent of respondents anticipate "very strong" appetite versus 87 percent in 2014) and more expect borrowers to have a "very strong" appetite to take out new loans (50 percent versus 43 percent in 2014).

• Originators expect the market to grow at a strong pace in 2015 (and their own firms to grow more quickly).  Two thirds (68 percent) of respondents expect total market originations to increase 5 percent or more in 2015.  Almost three-quarters (72 percent) expect their own originations to increase by 5 percent or more.

• Loans for every major investor group are expected to increase in 2015. Originations are expected to increase lending for commercial mortgage-backed securities (89 percent anticipate growth to be greater than 5 percent), bank portfolios (56 percent anticipate growth to be greater than 5 percent), Fannie Mae and Freddie Mac (46 percent anticipate growth to be greater 5 percent), pension/life insurance companies (41 percent anticipate growth to be greater 5 percent) and FHA (19 percent anticipate growth to be greater 5 percent).

• Loan risk is expected to increase in 2015.  Most respondents characterized the loans made in 2014 as "medium" risk (73 percent).  In 2015, more respondents expect loans to be "somewhat high" risk (38 percent versus 9 percent in 2014).  Lenders were surveyed on a scale of very low, somewhat low, medium, somewhat high, and high.

• Loan return is expected to moderate in 2015.  Half of respondents (52 percent) characterized the loans made in 2014 as "somewhat low" or "very low" return.  In 2015, nearly three-quarters (74 percent) expect loans to be "somewhat low" or "very low" return.