With strong demand from borrowers and with eager lenders willing to cater to such needs, the Mortgage Bankers Association recently reported that 2016 will be a big one for commercial and multifamily loans.
According to the World Property Journal, about 90 percent of the country's top lenders are expecting to see a significant increase in their originations in 2016. As much as half of that number said they are looking at 5 percent or even more in terms of growth rate. An even more optimistic expectation comes from 61 percent who believe their own firms' originations will grow by 5 percent and up.
MBA Vice President for Commercial Real Estate Research Jamie Woodwell said, "Commercial mortgage lenders anticipate another competitive year in 2016, as lender desire to make loans remain strong. With strong market fundamentals and the 10 year loans made during 2006 and 2007 maturing this year and next, lenders also anticipate strong demand from borrowers."
However, in a post by Bloomberg, analysts from Deutsche Bank warned that contrary to what many experts say, the C&I loans business is likely to incur heavy losses for the year. They said that the loss rate could go as high as 90 basis points which is bigger than the rate the Wall Street bank is expecting. Currently it stands at 20 basis points and compared to 15 bps last year should be a cause for concern for many in the industry.
A note published on Tuesday by Deutsche Bank led by analyst Matt O'Connor said, "Credit concerns are rising given continued pressure on oil prices (and commodities more broadly) as well as mixed U.S. economic data. If credit does weaken more than expected, many think it will show up in C&I given strong growth (+57 percent at large banks since 2010 vs. total loans +30 percent), loosening of underwriting standards and the risk liquidity declines for certain borrowers."
