Commercial Production Falls at Credit Unions

Commercial real estate lenders outproduced credit unions again this year.

A comparison of results from a Mortgage Bankers Association report released Tuesday with NCUA numbers retrieved from Callahan’s Peer Suite showed originations of commercial loans backed by real estate increased slightly in the first half in the MBA sample, while falling among credit unions.

Credit unions produced $9.2 billion in commercial real estate loans in the second quarter, down 3.7% from a year earlier and up 29% from the first quarter.

The MBA’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations showed total commercial real estate production in the second quarter was 3% higher than a year earlier and 27% higher than the first quarter.

“Borrowing and lending backed by commercial real estate remained subdued in the second quarter,” Jamie Woodwell, the MBA’s head of commercial real estate research, said. “Most capital sources remain ready, willing and able to lend on properties that can support a loan. Driven by growth in the single-asset single-borrower markets, originations for CMBS (commercial mortgage-backed securities) grew significantly during the quarter.”

“With interest rates moderating and a large slug of loans maturing, it is likely we’ll see more borrower activity in the coming quarters,” Woodwell said.

In the first quarter, credit unions originated $7.2 billion, down 21% from a year earlier and down 17% from the fourth quarter. The MBA’s sample showed total commercial real estate production in the first quarter was unchanged from 2023’s first quarter and down 23% from the fourth quarter.

The total included multifamily loans, which have performed worse this year for both credit unions and other lenders.

Credit unions originated $1.6 billion in multifamily loans in the second quarter, down 5.7% from last year’s second quarter. First quarter loans fell 31%.

The MBA found multifamily loans fell 7% in the first quarter and fell 14% in the second quarter.

The MBA reports the value of originations in its annual report, but not its quarterly report.

The MBA report for 2023 released Aug. 15 showed lenders produced $246.2 billion in multifamily loans, down 49% from 2022. Credit union production represented only about 2% to 3% of that volume.

The new estimate was 6.7% below its April estimate of $264 billion for 2023 multifamily loans. It forecast multifamily would rise 28% to $339 billion this year, and rise 19% to $404 billion in 2025.

Credit unions produced $36.1 billion in commercial real estate in 2023, down 38% from 2022. Originations fell 46% to $6.4 billion for multifamily and fell 35% to $29.7 billion for other commercial real estate.

“Multifamily lending fell by roughly half in 2023 as sales transactions declined and far fewer property owners sought to refinance their loans,” Woodwell said. “The analysis shows that even with the drop in activity, the multifamily lending market remains broad and deep, with more than 2,500 different lenders making more than 36,000 mortgage loans backed by multifamily properties in amounts ranging from tens of thousands of dollars to hundreds of millions.”

The MBA report for 2023 released Aug. 15 is based on the association’s surveys of the larger multifamily lenders and analysis of Home Mortgage Disclosure Act (HMDA) data that covers multifamily loans made by many smaller lenders, particularly commercial banks. Fifty-one percent of the active lenders made five or fewer multifamily loans over the course of the year.

The top five multifamily lenders in 2023 by dollar volume were Berkadia, Walker & Dunlop, JP Morgan Chase, CBRE and Greystone.

In April, the MBA estimated commercial real estate production fell 47% last year to $429 billion, and it forecast that production will rise 34% to $576 billion in 2024 and rise 25% to $717 billion in 2025.