Commercial Mortgage Lending in U.S. Down 34 Percent in 2020

Based on a new forecast released this week by the Mortgage Bankers Association, commercial and multifamily mortgage bankers are expected to close $395 billion of loans backed by income-producing properties in 2020, a 34 percent decline from 2019's record volume of $601 billion.

Total multifamily lending alone, which includes some loans made by small and midsize banks not captured in the overall total, is forecast to fall 21 percent to $288 billion in 2020 from last year's record total of $364 billion. MBA anticipates a slight increase in lending volumes in 2021, with activity rising to $407 billion in commercial/multifamily mortgage bankers originations and $305 billion in total multifamily lending.

"There remains a great deal of uncertainty about the pandemic and its impacts on the economy and commercial real estate, with significant differences across property types and capital sources," said Jamie Woodwell, MBA's Vice President for Commercial Real Estate Research. "The downturn is putting downward pressure on some property incomes, particularly property types most impacted by the pandemic or with shorter lease terms. With low interest rates and investment yields, property values are likely to hold up better, which should help put a floor under sales and originations volumes this year and next."

Woodwell added, "Through the first three quarters of 2020, multifamily sales volume was 41% lower than a year earlier, with multifamily originations down just 17%. The strong level of refinance activity of multifamily mortgages, particularly into Fannie Mae, Freddie Mac and FHA loans, is lifting overall originations activity from where it might otherwise be, and is driving differences between property types and capital sources. These contrasts are likely to remain pronounced."