: National Loan Restructuring :

1-10-2010 Congresswoman on Hold

 

1-9-2010 Defaulted Mortgages

Smart investors continue to prove that when it comes to troubled commercial real estate, it makes a lot of sense to buy defaulted mortgages from the bank, rather than wait for the bank holding the notes to foreclose.

Once you own the nonperforming notes, then you become the lender, you’re in the driver’s seat, and you can foreclose and take over the property yourself — often on unbeatable terms.

A San Francisco-based private equity investment group showed how that’s done late last month, when it acquired ten prime, cash-flowing apartment buildings in or near San Francisco for just fifty cents on the dollar.

Tribeca Companies, a privately-held investment group, acquired nine buildings in sought-after neighborhoods like Pacific Heights and the Van Ness corridor, plus another building in Burlingame -from international banking firm UBS, which provided the original financing on the properties for Lembi Group.

Until recently, Lembi was San Francisco’s largest apartment owner with a 300 building portfolio and 8,000 units.

Tribeca took over $62 million worth of nonperforming mortgage notes from UBS for an all-cash payment of $31 million. Immediately after closing, Tribeca filed for foreclosure against Lembi – effectively giving it control of the ten buildings.

A spokesman for Tribeca told Realty Times last week that the deal illustrates the company’s “opportunistic” strategy of acquiring high-quality assets in prime locations by targeting defaulted commercial notes that lenders are prepared to sell at deep discounts to face value.

Lembi Group, which defaulted on $300 million worth of loans during 2008, handed over 50 buildings securing these loans to UBS, which has since been attempting to dispose of them in package deals.

Ironically, Lembi’s strategy during the past decade had been opportunistic as well: It acquired dozens of buildings, persuaded or paid tenants to leave, then renovated units to produce higher rental revenues.

The problem with Lembi’s approach was that its purchases were highly leveraged –sometimes with loan to value ratios of 95 percent. UBS was its major financing partner.

When Lembi ran into financial difficulty, it reportedly stopped making payments , triggering its default problems with UBS.

A spokesman for Tribeca told Realty Times that the ten buildings have a 95 percent occupancy rate, and “are in great condition.” Though market analysts assume Tribeca will hold the buildings as rental investments, the spokesman said the long-term strategy has not yet been made public.

Whatever that strategy turns out to be, though, this much is certain: Anytime you can get prime, cash-flowing real estate in a magnet city like San Francisco for fifty cents on the dollar – you’ve done exceptionally well.

1-8-2010 Fed Plan To Stop Buying Mortgages

The Federal Reserve’s pledge to stop buying mortgages by the end of March is sparking fears among home builders, mortgage investors and even some Fed officials that mortgage rates could rise and knock the fragile housing recovery off course.

Home-mortgage rates have risen by about a quarter percentage point over the past month. Here, an unfinished home in Raleigh, N.C., in November.

Rates on 30-year fixed-rate mortgage have risen by a quarter of a percentage point in the past month to around 5.2%, according to HSH Associates, near their highest levels since September as the bond market has pushed up long-term interest rates amid signs of an improving economy.

The recent rise in mortgage rates could be a prelude to even bigger increases in coming months as the Fed steps away from support for the market. That prospect has some in the markets counting on the Fed to change course and keep buying past March, which many officials are reluctant to do.

When such a big investor stops buying, “that could lead to material increases in [interest] rates across the board,” said Ronald Temple, portfolio manager at Lazard Asset Management. He sees mortgage rates rising by a percentage point when the Fed stops buying. A withdrawal of government support, combined with high unemployment and rising mortgage foreclosures, could push home prices down 20%, he said.

The Fed now holds $909 billion of mortgage-backed securities. In the past year it has purchased 73% of the mortgages that government-backed Fannie Mae, Freddie Mac and Ginnie Mae have turned into securities. Purchases by the Treasury pushed total government purchases above $1 trillion. The Fed says it plans to top off its purchases at $1.25 trillion by the end of March, but must decide in the months ahead whether the economy is strong enough to stick with that plan.

The urgency of sustaining the housing market has sparked a debate inside the Fed. Many Fed officials don’t think ending the purchases will have a large effect.

If mortgage rates shoot up or the economy weakens, some Fed officials argue, the central bank might need to keep buying. But with the economy improving and the mortgage market already heavily dependent on government, other Fed officials are eager to get on with an exit.

“I think the economy is starting its recovery, and there’s reason to be optimistic,” Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, said Thursday.

Minutes from the Fed’s December meeting, released this week, pointed to the Fed’s internal debates.

Some Fed officials fretted that “mortgage markets could come under pressure as the Federal Reserve’s agency MBS [mortgage-backed securities] purchases wind down.” The bottom line, officials say privately, is that it would take a surprisingly sharp upturn in mortgage rates, or a worsening economic outlook, to prompt them to change their plans.

The government has already taken steps to reassure investors. In late December the Treasury Department said it would provide unlimited support to Fannie Mae and Freddie Mac, and wouldn’t force them to sell securities they hold. That should soften the sting of the Fed’s removal from the market.

“Now that the question of [Fannie and Freddie] selling is off the table, the market is less worried about the Fed’s exit,” said Mahesh Swaminathan, a mortgage strategist at Credit Suisse.

Nevertheless, home builders and others are hoping the Fed will flinch. Some market participants haven’t reacted to the Fed’s promises to exit, believing the central bank won’t have the will to wind down its purchase program.

If the Fed stops buying, “it would be the beginning of a crisis again, and we haven’t emerged from the last one,” said Larry Sorsby, chief financial officer at home builder Hovnanian Enterprises Inc., which had a $250.8 million loss in its last quarter on a 39% drop in revenue.

Mr. Sorsby figures the Fed’s withdrawal will prompt at least a one-percentage-point rise in mortgage rates, which he fears could squash recent glimmers of more demand for homes. He expects the Fed will, in fact, keep buying. “I doubt they’ll just pull out,” he said.

On a $250,000 conventional 30-year mortgage, a mortgage-rate increase from 5% to 6% would raise monthly payments by about $150 per month to $1,499.

“The Fed wants to keep mortgage rates low,” said Mitch Flack, co-head of the mortgage group at TCW Group Inc., a money manager that hasn’t been a big seller of mortgage securities. “It’s very possible that they’ll slow purchases now, but should mortgage rates rise significantly after the end of the program in March, they may decide to extend that purchase program further.”

Many Fed insiders expect the end to their mortgage buying to have a mild effect on rates, a half-percentage-point increase or possibly much less. Mortgage rates didn’t move up much when the Fed initially signaled in September that it intended to end the $1.25 trillion mortgage program by March.

One theory inside the Fed is that what matters for mortgage rates isn’t the central bank’s day-to-day purchases, but the magnitude of mortgages that it has taken from the private sector. According to this view, the impact of removing more than a trillion dollars of supply should help to keep rates low even after the Fed stops buying.

Fed officials take comfort that yields on Treasury bonds remained little changed during a stretch between August and November when the Fed was completing its $300 billion of Treasury purchases, meaning the Fed’s exit from that program didn’t severely disrupt that market.

12-22-2009 NLR Commercial

12-15-2009 Banks Revoke Mortgage Modifications, Refuse To Help

Hundreds of struggling Florida homeowners have filed complaints with Florida Attorney General Bill McCollum in the past year about failed or stalled home mortgage loan modifications with Bank of America.

Angry borrowers, desperate to hold on to their homes, say they’ve made dozens of calls to their lender and spent months asking for a change in their loan terms, only to be denied or to learn that Bank of America revoked their loan modifications a few months after they reached a deal.

“I wrote letters to the governor, I called the bank every single month,” said Yvonne McBride, a disabled former state worker who received a loan modification for the Sunrise home she shares with her husband, Herman Acosta. But the bank retracted the deal – after, she said, she’d paid more than $9,200 to cover mortgage payments through January 2010.

12-13-2009 Mortgage Rates Trying To Find Direction After Fed

Today’s mortgage rates seem to be still coming down. Even after the Federal Reserve announced that it may withdraw from the mortgage market, the loan rates are still easing. Observers expect Fannie Mae and Freddie Mac to fill the vacuum, but that’s not known fact yet. The banks have a special interest to keep the rates low.

While it’s not known if Freddie Mac and Fannie may will fill the gap when the Fed completes its 1,250 billion dollar purchase program of Mortgage Backed Securities the banks may and should act to do everything possible to keep the current mortgage rates low and keep homeowners in their houses.

According to Expected Returns there are seven million homeowners that currently are behind their mortgage payments. This is potential 7 million foreclosures in 2010. If these people start foreclosing because of the belief that they are paying more than what the house is worth everyone will be hurt: people, banks and the economy.

The taxpayers bailed out the banks and now is the time for the banks to take their fair share of burden and they may do that out of their interest. The banks may choose to reduce the mortgage rates for these homeowners or reduce the principle that families and mortgage loan holders own. The banks will report some losses to shareholders. However, this will help to keep the 7 million homeowners in their houses and prevent bigger economic problems.

This thinking may be behind the fact that the today’s mortgage rates are still low and not going up even after Fed’s announcement. The year 2010 may be a big year for foreclosures if you consider the story published in November in the Wall Street Journal and titled “One In Four Borrowers is Under Water.”

In the meanwhile here is how today’s mortgage rates are.

Wells Fargo mortgage rates are updated at 9AM EST. The 30-year fixed rate is 5.25. The 15 year rate is 4.50. The 5-year ARM is 4.00 percent.

According to Bankrate.com the national average rates have come down this week significantly from last week’s numbers. The 30 yr. fixed mortgage rate is 5.27, down from last week’s 5.33. The 15-year rate is 4.76 percent, which is down from last week’s 4.67. The 5/1 ARM is 4.43, down from 4.52. These are national averages.

Zillow shows national averages more in line with Wells Fargo’s mortgage rates. The current 30 year fixed rate there is 5.00 percent. The 15 yr. fixed is 4.42 and the 5/1 is 3.99.

Written by Armen Hareyan
HULIQ.com