Commercial mortgage lending is expected to increase in 2017, as lenders' appetites to place new loans and borrowers' appetites to borrow both remain strong, according to a new Mortgage Bankers Association survey of the top commercial mortgage origination firms.
Nearly two-thirds (63 percent) of the top firms expect originations to increase in 2017, with one-quarter (26 percent) expecting an increase of 5 percent or more. A full half (50 percent) expect their own firm's originations to increase by 5 percent or more.
"Commercial mortgage bankers expect 2017 to carry-over much of the momentum from 2016," said Jamie Woodwell, MBA's Vice President for Commercial Real Estate Research. "Most of the top firms expect strong demand from both lenders and borrowers in 2017, although not quite as strong as 2016.
Originators generally see borrowing and lending volumes growing slightly, with just over half expecting potential regulatory and legislative changes to be positive for the market. The survey paints expectations of a strong, steady market in 2017.”
Specific findings include:
There are mixed views on how origination volumes may change for individual capital sources. Pluralities of originators believe each major investor group, with the exception of life insurance companies, will see no change in origination volume; the plurality expect life insurance companies to increase volumes by 0-5 percent. Originations are generally expected to be flat or increase for commercial mortgage-backed securities (25 percent anticipate growth > 5%), life insurance companies/pensions (18 percent anticipate growth > 5%), bank portfolios (18 percent anticipate growth > 5%), FHA (15 percent anticipate growth > 5%) and Fannie Mae and Freddie Mac (10 percent anticipate growth > 5%).
Loan risk is expected to increase slightly in 2017. More respondents characterized the loans made in 2016 as low risk than as high risk. In 2017, most respondents expect loans to be medium risk (53 percent), with the reminder evenly split between seeing higher and lower risk loans.
The majority of respondents (52 percent) expect potential regulatory and legislative changes could be positive for the market. One-in-four respondents (28 percent) anticipate a neutral impact and one-in-five (20 percent) see potential negative impacts.
The 2017 MBA CREF Outlook Survey was conducted between December 2 and December 22, 2016.
The survey request was sent to leaders of 60 of the top commercial/multifamily mortgage origination firms, as determined by MBA's 2016 Annual Origination Rankings Report.