Commercial Property: Money Becoming Available

Lenders may be beginning to open up as they see some signs of an economy that is stabilizing. Data released by the Mortgage Bankers Association (MBA) notes commercial and multifamily mortgage originations rose 12% in the fourth quarter year over year. Loan originations in the fourth quarter also were 15% higher than in the third quarter. life insurance companies posted a whopping 112% increase in loan originations in the fourth quarter of 2009 compared with the fourth quarter of 2008, reports MBA. if you look to the chart, you can see releative stabilization in the last five quarters.

To be sure, commercial and multifamily originations remain at low levels. The Commercial/Multifamily Mortgage Bankers Originations Index, fell 79% over the last two years.The Commercial/Multifamily Mortgage Bankers Originations Index, for example, fell 79% over a two-year period ending in the third quarter of 2009.

And more to come: According to Foresight Analytics. For banks with $100 million in assets to $100 billion, commercial real estate is the largest part of their loan portfolio. Relatively little single-family. The regional banks are the sweet spot for bad commercial paper, with most small and midsized regional banks about to take the brunt of the storm.

Most of the problem loans were made between 2003 and 2007 and will be looking to refi or face possible default. They are expected to face the markets and the default rate should level off around 2011, Foresight Analytics thinks we are about 60% through the loss process.

Money from large insurers and REITs seem to be picking up the slack as the banks still remain on the sidelines, preferring to rebuild their balance sheets rather than lend into a recession. Wherever the money is coming from, it is looking up

What it means for buyers and sellers of small properties and residential homes is that loan availability may be more likely from larger banks rather than the regionals as they brace for the onslaught of bad paper expected to crest in late 2010 or 2011.

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