Lending Further Tightens as Mortgage REITS Pull Back
Typically originating an average of about $10 billion in loans a quarter, some of the biggest names in the mortgage REIT sector “have all but turned off the spigot,” further increasing the challenges of financing within the real estate industry. In contrast to equity-oriented REITs that buy and develop real estate, mortgage REITs lend to property owners. The projected $504 billion in total commercial and multifamily mortgage lending for 2023 is 38% lower year-over-year according to the Mortgage Bankers Association, with a decline in investors purchasing further attributing to the lower lending volume. Sparking the pull back by mortgage REITs is the priority to “protect their balance sheets during one of the most troubled commercial real-estate markets in decades;” and since mortgage REITs “have to pay most of their taxable income as dividends,” they are highly vulnerable to economic downturns.