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VOL. 125 | NO. 15 | Monday, January 25, 2010

Upswing in Motion

December pickup gives hope to mortgage industry

By Eric Smith

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Atlanta-based SunTrust Bank Inc., whose local headquarters at 999 S. Shady Grove Road in East Memphis is shown here, made the largest commercial mortgage in December. -- Photo: Eric Smith

When mortgage numbers reach historic lows – as they have in Shelby County during the past two years – any improvement, however small, should be viewed as positive.

The commercial lending industry indeed received a rare dose of good news in December with a bump in commercial purchase mortgage activity, as opposed to refinances.

County banks and mortgage companies made 29 commercial loans last month. While that may not seem like much, that number represents a 32 percent increase from 22 loans made in December 2008 and a staggering 123 percent increase from just 13 loans made during November, according to the latest data from real estate information company Chandler Reports, www.chandlerreports.com.

It also marked just the second month in 2009 that enjoyed a year-over-year increase from the same month of 2008, with February being the only other month to achieve that status. It put a decent end to an abysmal year marred by an overall decline in commercial mortgages.

As Rick Wood, senior vice president for Financial Federal Savings Bank, told The Daily News for a recent article, the slowdown of commercial lending – especially in the capital markets – has had a huge impact.

“It’s pretty dramatic in terms of where we are today with the availability of lending sources to make anything work,” Wood said. “If the lenders can continue to be active as lending sources at any level, that helps the liquidity in the marketplace. But the scrutiny of all product types in underwriting the operations of the property and the rent roll is going to dictate the future of real estate activity going into 2010.”

Leading the way

Commercial mortgages averaged $1.3 million in December, a 42.2 percent increase from $915,800 in December 2008 and a 37.6 percent increase from $946,641 in November. Last month’s average was the second highest of 2009 behind October’s average of $1.5 million.

As for total dollar volume, December was tops with $37.8 million, an 87 percent improvement from $20.1 million in December 2008 and a 207 percent improvement from $12.3 million in November.

In a market defined by a dearth of reliable, viable financing sources, seller-financed loans became the primary way for businesses to get capital, albeit in much smaller amounts than normal. In December, Shelby County saw six seller-financed loans that averaged $112,841 and totaled $677,044.

As for top lenders, Regions Bank, doing business as Regions Mortgage, ranked first in terms of number of commercial loans made, with three. It was the only company that made more than one loan all month, although the bank’s average mortgage amount and total dollar volume were low. Regions’ loans averaged $205,133 and totaled $615,400.

The rankings by total dollar volume placed SunTrust Bank at the top of a list of companies that made one large loan during the month. Atlanta-based SunTrust’s loan of $4.3 million to SignificantPsychology LLC, the company that bought Crichton College, was the largest individual mortgage in December.

SunTrust was followed by InSouth Bank with one loan for $3.1 million, Wells Fargo Ltd. with one loan for $2.7 million, Financial Federal Savings Bank with one loan for $1.48 million and First Security Bank with one loan for $1.46 million.

Trending up

Year to date, the mortgage picture is pretty grim. 2009 saw just 247 commercial mortgage loans, a 38 percent dropoff from 397 in 2008 and a 62.7 percent dropoff from 662 in 2007, according to Chandler Reports.

Last year’s commercial mortgages averaged $734,372, a 39.2 percent decline from $1.2 million in 2008 and a 79.2 percent decline from $3.5 million in 2007. And last year’s total dollar volume of $181.4 million marked a 62 percent decrease from $479.9 million in 2008 and a 92.2 percent decrease from $2.34 billion in 2007.

Just like during the final month of 2009, seller-financed loans led the category of top commercial lenders in terms of number of mortgages made with 58 loans averaging $389,660 and totaling $22.6 million. The top company for loans made was First Tennessee Bank NA with 17 mortgages averaging $523,721 and totaling $8.9 million.

It was followed by Regions with 16 mortgages averaging $727,103 and totaling $11.6 million, First Commercial Bank (8, $709,000, $5.7 million), BancorpSouth Bank (7, $513,916, $3.6 million), SunTrust Bank (6, $1.3 million, $7.6 million) and First Citizens National Bank (6, $361,500, $2.2 million).

Chandler Reports is a division of The Daily News Publishing Co. Inc.

PROPERTY SALES 36 154 6,546
MORTGAGES 34 94 4,129
BUILDING PERMITS 201 554 15,915
BANKRUPTCIES 43 126 3,396