CMLS Commercial Mortgage Overview

A quick look into the commercial and residential lending environment: past and present

CMLS Financial recently provided commentary on the commercial lending environment throughout 2013, as well as what to expect in 2014.

The report highlights recent regulatory changes within CMHC, activity with Commercial Mortgage Backed Securities (CMBS), debt securities amongst REITs and REOCs, and where mortgage investment entities (MIEs) are shifting in 2014. Below you will find a relatively high-level snapshot of the report and some key takeaways to keep in mind when discussing the commercial lending environment with your clients:


Commercial lending capital was in abundance throughout 2013 and available for many lenders, and you can expect the same into 2014.  Anticipate aggressive pricing and flexible underwriting standards will persist with cheap, readily available capital.

Regarding residential lending, CMHC introduced legislative and policy changes attempting to address the increasing need for more regulation on residential lending and limit the risk exposure to tax payers. The Minister of Finance has made significant changes to the guarantees of NHA Mortgage-Backed-Securities (MBS), which may impact lending behaviour across the country and make CMHC mortgages more expensive, thus slowing the residential market. Ultimately, CMHC identifies this as “…an important oversight mechanism to manage housing market risks and Government’s exposure to the housing sector” (CMHC, 2014).


REITs and REOCs were responsible for the issuance of $3.8 billion of senior, unsecured debentures during 2013, which can be attributed to the expanding REIT and REOC market. Q4 2013 was the most active quarter, which saw nine issues valued at $1.38 billion. The total outstanding, senior, unsecured debt held by REITs and REOCs is approximately $9 billion, of which RioCan and First Capital Reality are the largest issuers at 21.6% ($1.9 billion) and 18.4% ($1.6 billion), respectively.

What does this mean for you?

Tighter restrictions with CMHC residential lending could slow the residential sector. This will impact markets that are particularly more sensitive to domestic investment.

Although interest rates have nowhere else to go but up, they will still hover around historically low rates. This is good news not only for consumers, but for commercial real estate investors and developers.

The increases in restrictions could be an insight into the economic stability or recovery of the European and American economies. While we are seeing leaps and bounds from our neighbours in the south, the EU is still up against the ropes. It’s better to be safe than sorry. 

To learn more about this topic, view the full report.

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