Primary Lenders Panel

SAN DIEGO-Recovery and regulation dominated the discussion here Tuesday as the Mortgage Bankers Association took a look at where the commercial real estate financing industry is headed. The capital markets are recovering, according to the consensus among the speakers and panelists at the MBA's Commercial Real Estate Finance conference, but just what's in store for the recovery depends at least in part on what happens in the regulatory realm.

Regulations were the theme of the Tuesday general session at the event, being held at the Manchester Grand Hyatt along the San Diego waterfront. The Tuesday general session picked up on a theme that MBA president and CEO John Courson sounded in the previous day's general session, when he pointed out that Dodd-Frank regulations will have far-reaching effects on the industry.

Industry analyses have shown that Dodd-Frank will generate an estimated 200 to 300 rules, and Courson said that more than 100 of them will directly affect the mortgage banking industry.

Recovery was a theme that kept recurring at events throughout sessions Monday and Tuesday, with most observers agreeing that we are at least part-way along in the comeback. "We're absolutely in a recovery from a capital perspective," senior managing director Sam Davis of Allstate Investments said during a panel discussion titled "Primary Lenders-Changing Competitive Landscape." Another panelist, Michael Higgins, pointed out that, "There's actually a great spread for high-quality deals versus three years ago." Higgins is managing director and head of US Real Estate Finance for CIBC World Markets Corp.

MBA Tuesday Panel

Other recurring themes at this year's conference were that 2010 turned out better than many people expected, and the news for 2011 may be better than expected as well. For example, Prudential Huntoon Paige reported at the conference that it closed almost $2 billion in multifamily, healthcare, and hospital loans in 2010 on behalf of the Federal Housing Administration. Prudential Huntoon Paige is a unit of Prudential Mortgage Capital Co., the commercial mortgage lending business of Prudential Financial Inc.

The $1.9 billion originated in 2010 is a record for the company since its founding in 1993, according to Marie Head, managing director and head of Prudential Huntoon Paige. The record year "illustrates the strength of the FHA business and the high demand for these properties,” Head said. “These results show that the fundamentals for FHA lending remain strong.”

Another upbeat report came from the MBA, which said that mortgage bankers originated $110 billion of commercial and multifamily mortgages during 2010, an increase of 36% from 2009, according to preliminary estimates. The figures are based on the MBA's quarterly survey of commercial/multifamily mortgage bankers originations.

Jamie Woodwell, MBA's vice president of commercial real estate research, pointed out that commercial and multifamily mortgage originations jumped 63% in the fourth quarter, pulling the annual total for 2010 up to the $110 billion estimate.

The MBA also reported that of the $1.4 trillion balance of outstanding commercial/multifamily mortgages held by non-bank investors, only 11% of the total ($155 billion) will mature in 2011. Explained Woodwell, "The long-term nature of commercial real estate means that relatively fewer―not more―commercial and multifamily mortgages have been maturing during the throes of the credit crunch and recession compared to other credit types."