WASHINGTON, DC—Although commercial and multifamily mortgage originations in 2016 fell short of the previous year's volume, a 3% year-over-year decline from 2015's near-record levels is nothing to sneeze at. The Mortgage Bankers Association said Thursday that lenders closed $490.6 billion of loans last year, compared to $503.8 billion the year prior.

“Last year was a strong year for commercial real estate finance,” says Jamie Woodwell, MBA's VP for commercial real estate research. “For originations, 2016 was the third highest year on record,” after '15 and 2007, when volume reached $508 billion. “Borrowing and lending backed by multifamily properties made up the largest share of the market, and Fannie Mae and Freddie Mac drove much of that activity.”
Looking at the track record for the current year thus far, “The post-election rise in interest rates has taken a bit of wind out of the sails of the transactions' market in the first quarter,” Woodwell says. He adds that the degree to which borrowing and lending are affected by rate increases and other potential market changes, including tax reform proposals, general economic growth, foreign investment and consumer confidence, remains to be seen.
Once again, commercial banks were the leading capital source last year, increasing their share of a slightly smaller pie. Banks originated $157.4 billion in commercial/multifamily mortgages in '16, compared to 138.6 billion in '15.

The GSEs—i.e. Fannie Mae and Freddie Mac—also increased their share, originating $105.8 billion in loans, compared to $99.4 billion for the previous year's second-ranked CMBS. CMBS came in fourth last year behind life insurance companies and pension funds, which were followed by REITS, mortgage REITS and investment funds.

In terms of property types, multifamily properties saw the highest origination volume: $214.1 billion, followed by office buildings, retail properties, hotel/motel, industrial and health care. First liens accounted for 97% of the total dollar volume closed. MBA says that among repeat participants in its latest survey, the dollar volume of closed loans declined by 1% Y-O-Y.