Commercial mortgages expected to recover slightly in 2021

Commercial and multi-family mortgage origination volume is expected to rebound somewhat in 2021, the Mortgage Bankers Association said.

The business group predicts that $ 486 billion in loans secured by income-generating properties will be created this year, up from around $ 440 billion in 2020, a year in which commercial real estate has been hit hard by COVID-19. , specifically accommodation and retail.

“The economic rebound that MBA expects in the second half of the year should bring greater stability to markets, but with continued differentiation by type of property,” Jamie Woodwell, vice president of commercial real estate research, said in a statement. “Much of the way forward will depend on the virus, our confidence and our ability to overcome it. “

This will continue until 2022, with the MBA forecasting $ 539 billion in commercial and multi-family loans that year.

Nonetheless, this preliminary estimate of last year’s activity was much lower than that of the MBA. January 2020 prediction of $ 683 billion.

For the multi-family segment alone, the MBA projects $ 323 billion in start-ups in 2021, up from around $ 302 billion last year. Significant government guaranteed mortgage refinancing activity increased the 2020 total, Woodwell said.

For 2022, the MBA provides for $ 358 billion in multi-family mortgage arrangements.

Commercial arrangements are expected to be helped by the expected 36% year-over-year increase in mortgage maturities held by non-bank lenders this year.

A total of $ 222.5 billion of the $ 2.3 trillion in outstanding commercial and multi-family mortgages held by this group will mature in 2021, the highest number since 2009, Woodwell said in a press release. separate. About $ 163.2 billion in non-bank commercial and multi-family mortgages matured in 2020.

“Many loans from life insurance companies, government-sponsored businesses and the Federal Housing Administration that should have matured this year have been refinanced or prepaid,” said Woodwell. “These declines were more than offset by shorter-term loans with maturity dates of 2021 from commercial mortgage-backed securities and investor-focused lenders.”

In 2020, there was an increase in commercial and multi-family mortgages that matured but remained outstanding: 1.5% as at December 31 compared to 0.8% on the same date in 2019. These loans are likely to fail. were not refinanced because of the challenges posed by the pandemic.

But this amount was still much lower than the share of these mortgage loans during the years of financial crisis between 2009 and 2012, when the rate of matured loans still outstanding oscillated between 2.25% and 2.75%.

CMBS lenders have the largest total outstanding commercial and multi-family mortgages maturing this year at $ 100 billion; this represents 16% of their assets.

Then there is $ 72.6 billion or 30% of commercial mortgages held by credit companies and other investors maturing.

Life insurance companies have $ 39.8 billion (6%) of their outstanding mortgages maturing.

For government-guaranteed investors, $ 10.1 billion (1%) of the unpaid balance of multi-family and healthcare mortgages held or guaranteed by Fannie Mae, Freddie Mac, FHA and Ginnie Mae will mature in 2021.