MBA: Recession effects on commercial lending not as severe as first thought

Commercial real estate did not see as negative of a lending effect as other aspects of the finance industry.

Property management companies may have weathered the recession better than initially thought, as mortgages for commercial properties did not struggle as much as other major loans.

Total commercial real estate loan capital remained level throughout much of the recession, despite the significant effects of the period on many aspects of finance, a report from the Mortgage Bankers Association noted, examining data recorded by the Federal Deposit Insurance Corporation. The multifamily market did not experience a decline in year-end loan balances held by financial institutions at any point during the economic downturn, while mortgage for other commercial properties only fell 3 percent. Those loans have since risen back into positive territory.

"Commercial and multifamily mortgages were a net positive for banks and thrifts through the credit crunch and recession," said Jamie Woodwell, vice president of commercial real estate research for MBA. "The amount of credit extended by banks stayed relatively constant during the recession, the delinquency rates for commercial and multifamily mortgages remained relatively subdued, and banks and thrifts saw far less in charge-offs for their commercial and multifamily mortgages than they did for other loan types."

Not every aspect of the lending industry did as well as commercial real estate mortgages. Construction loans experienced a drop of more than 60 percent from 2007 until last year, the report explained. Residential property loans fell by nearly 15 percent during that same period, while industrial loans dropped 21 percent from 2008 until 2010.

Charge-off rates for commercial properties were the least significant of any lending category, the report added. This figure was slightly higher than $41 billion, which was much lower than the $212 billion for residential properties, as well as more than $200 billion for credit cards.

Fannie Mae increases lending levels for multifamily properties
The multifamily industry recently received another boost. As it was not as significantly affected by the financial crisis compared to other parts of the industry, it also recently received more lending.

Government-sponsored enterprise Fannie Mae awarded nearly $34 billion in multifamily financing during 2012, the company noted. This was the third-highest level ever in a single year. With this lending increase, close to 560,000 units received funding. Additionally, nearly 98 percent of all funding was through commercial mortgage-backed securities.

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