With all of the complaints about banks not lending money for commercial real estate, it may come as a surprise to some that commercial banks nationally had the largest quarterly increase in mortgage debt outstanding of any other lender category at the end of 2008. More than life insurance companies, more than Fannie Mae and Freddie Mac, more than HUD, more than anyone. Commercial banks are the largest holders of mortgage debt and lent more than anyone else in the last quarter of 2008. They are the go-to source for commercial real estate, even in tough times, albeit at more conservative terms and at pricing that reflects current realties.
According to the Mortgage Bankers Association, commercial and multifamily mortgage debt held by commercial banks increased by $23 billion during the last quarter of the year, increasing the banks’ share of the $3.5 trillion total outstanding to 44.3%. During the same period, life insurance companies increased their portfolios by $554 million and their share of the market declined slightly to 9%.
Fannie Mae and Freddie Mac combined for just under $10 billion in net increases, raising their share slightly to 5.4% of the total, and the Federal government’s outstandings increased by $2.5 billion, increasing their share to 2%. All of the growth in these portfolios is concentrated in multifamily lending, and you should consider these entities as the go-to sources for apartments.
Now these are clearly not large percentage increases in outstanding balances, and I am not suggesting that there is enough money being lent for good deals, but the quarterly numbers should give some comfort that banks are lending. And they are still giving away free stuff when you open a checking account.
There is a quote that is erroneously credited to bank robber Willie Sutton. The story goes that he was asked why he robbed banks and responded, “Because that’s where the money is.” According to his autobiography, Sutton never said those words and attributed the quote to the reporter who was making for interesting copy. Regardless of the source, it really is good advice: If you need money, go to the bank.
It is where the money is.
(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Mortgage and he can be reached at brian.andrews@acmla.com.)
