The Mortgage Bankers Association (MBA) today released an updated forecast for commercial and multifamily real estate finance volumes for 2016. MBA estimates that 2016 volumes should reach $500 billion, roughly in line with 2015’s total of $504 billion and just below the record of $508 billion originated in 2007. Commercial and multifamily debt outstanding is expected to reach $2.9 trillion in 2016 up more than 3% from the end of 2015.
At the same time, Trepp, LLC reports that CMBS delinquencies rose in May for the fourth consecutive month to 4.35%. Much of the increase is being credited to higher maturity defaults – loans that have matured but haven’t been able to find refinancing to pay off the balloon balance. In reviewing these two reports, Q10 Capital’s president and CEO, Bob Stout noted that the market discussion around CMBS indicates more maturing loans will be unable to be refinanced in the coming months so the delinquency rate could climb even higher. The delinquency rates of loans owned in portfolio by life insurance companies and originated through the GSE’s continue to be near record lows.
“Given the continued lack of clarity around the impact of risk retention rules being implemented late this year, it is possible that CMBS origination levels continue to decline. This could reduce the total origination numbers being forecast by MBA”, Stout said. Current volume forecasts for CMBS are in the $60 billion range down from the $125 billion that was being forecast at the beginning of the year. Current CMBS debt outstanding in the US was $565.9 billion as of the end of the second quarter of 2016 down from its peak of $866.8 billion in the fourth quarter of 2007 according to SIFMA a securities industry trade group.
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