Credit Unions Pick Up the Pace on Commercial Real Estate

But the Mortgage Bankers Association reports much slower portfolio growth nationwide in the second quarter.

Credit unions increased their holdings of commercial loans backed by real estate from March to June at a rate faster than the first quarter and nearly four times faster than the rest of the nation.

A report from the Mortgage Bankers Association released Sept. 19 showed banks, insurance companies and other investors held $4.69 trillion in commercial real estate loans on June 30, up 0.7% from March 31.

NCUA data showed the $154.7 billion in commercial real estate loans held by credit unions on June 30 was up 10.8% from a year ago and up 2.7% from March 31. The loans were held by only 1,642 of the nation’s 4,631 credit unions and represented 3.3% of the nation’s total.

Jamie Woodwell, the MBA’s head of commercial real estate research, said the second-quarter growth in total commercial real estate loans was “modest,” but included gains by every major capital source. Life insurance companies’ 1.8% gain was the biggest, while commercial banks increased their balance by just 0.2%. Banks continue to hold the largest share (38%) of commercial mortgages at $1.8 trillion in June.

Jamie Woodwell

“With fewer loans paying off, CRE mortgage balances have continued to grow in recent quarters despite a marked fall-off in the volume of loans being made,” Woodwell said. “We anticipate that long-term interest rates, which are significantly lower than a year ago, will help increase origination activity in coming quarters – boosting both new loans coming onto the books and the payoff of existing ones.”

The MBA’s Commercial/Multifamily Mortgage Debt Outstanding quarterly report also showed multifamily mortgage debt rose 0.9% to $2.09 trillion from March to June. Banks held $625 billion (30%) of multifamily loans in June, up 0.8% from March.

Credit unions held $38.3 billion in multifamily loans on June 30, up 13.1% from a year ago, and up 3.4% from March 31, according to NCUA data.

The MBA on Aug. 29 lowered its forecast for commercial real estate production for this year and 2025, but still said it expected both years to show improvement from 2023. The new forecast predicted total lending to rise 26% to $539 billion in 2024, and rise 23% to $665 billion in 2025.