U.S. Commercial Real Estate Loans Hit 10% Delinquency

U.S. 10 Year Treasury Hits

a Record Low Low yet...

NEW YORK, May 30, 2012 /PRNewswire via COMTEX/ -- Trepp, LLC, the leading provider of information, analytics and technology to the CMBS, commercial real estate and banking markets, released its May 2012 U.S. CMBS Delinquency Rate today (full report available Friday, June 1 at http://www.trepp.com/knowledge/research ).

The delinquency rate for U.S. commercial real estate loans in CMBS jumped 24 basis points in May to 10.04%. In the process, the rate broke through the 10% threshold for the first time ever.

Back in December, Trepp predicted that 2012 could be a rocky year for CMBS in terms of the delinquency rate. This prediction was in anticipation of five-year loans securitized in 2007 beginning to reach their maturity dates. At the time, the delinquency rate was around 9.51%, and it was expected that these maturing loans could lead to a spike of 70 basis points in the short term.

It appears that this prophecy has come true. Up 24 basis points in May alone, the delinquency rate has increased 67 basis points in total since February. Whether the rate finally breaching the double-digit mark will carry some psychological impact remains to be seen.

The good news for the CMBS market is that the five-year loans originated in 2007 were heavily front-loaded. This means that by the end of this June, the number of these loans reaching their maturity date will start to dwindle.

"While cracking the 10% barrier might weigh on the market's psyche for a short time, there are likely better days ahead in terms of delinquencies over the next six months. A big driver of the recent surge in the delinquency rate has come from loans that were originated in 2007 that are coming due now. As we get later in the year, the impact of this trend will dissipate. The next two or three months could be bumpy, but the second half of the year should bring a leveling off of the rate," said Manus Clancy, senior managing director at Trepp.

Currently, $59.1 billion in loans are delinquent. This excludes loans that are past their balloon date but are current in their interest payments. There are $79.2 billion in loans with the special servicer.

The increase in the delinquency rate was driven by weak performance among hotel and industrial loans. Overall, four of the five largest property types saw delinquencies rise. Only the apartment sector improved, and that was by a single basis point.

Delinquency Chart

Average U.S. Loan in Foreclosure: 537 Days Delinquent

JACKSONVILLE, Fla. - March 28, 2011 -The February Mortgage Monitor report released by Lender Processing Services (NYSE: LPS) shows that while delinquencies continue to decline, an enormous backlog of foreclosures still exists with overhang at every level. As of the end of February, foreclosure inventory levels stand at more than 30 times monthly foreclosure sales volume, indicating this backlog will continue for quite some time. Ultimately, these foreclosures will most likely reenter the market as REO properties, putting even more downward pressure on U.S. home values.

February’s data also showed a 23 percent increase in Option ARM foreclosures over the last six months, far more than any other product type. In terms of absolute numbers, Option ARM foreclosures stand at 18.8 percent, a higher level than Subprime foreclosures ever reached. In addition, deterioration continues in the Non-Agency Prime segment. Both Jumbo and Conforming Non-Agency Prime loans showed increases in foreclosures and were the only product areas with increases in delinquencies.

The data also showed that banks’ modification efforts have begun to pay off, as 22 percent of loans that were 90+ days delinquent 12 months ago are now current. Timelines continue to extend, with the average U.S. loan in foreclosure now having been delinquent for a record 537 days, and a full 30 percent of loans in foreclosure have not made a payment in over two years.

As reported in LPS' First Look release, other key results from LPS' latest Mortgage Monitor report include:

• Total U.S. loan delinquency rate: 8.8 percent
• Total U.S. foreclosure inventory rate: 4.15 percent
• Total U.S. non-current inventory: 6,856,000
• States with most non-current* loans: Florida, Nevada, Mississippi, New Jersey, Georgia
• States with fewest non-current* loans: Montana, Wyoming, Alaska, South Dakota, North Dakota

Link to additional LPS News Releases

CMBS Delinquency Rate Sets New All Time Record of 9.34%

Trepp Reports Another Record High

CMBS Delinquency Rate of 9.34%

for January Despite New

Issuance and Falling Spreads

2/2/2011
NEW YORK--(BUSINESS WIRE)--Trepp, LLC, the leading provider of CMBS and commercial mortgage information, analytics and technology to the global securities and investment management industry, released today its January 2011 Delinquency Report (full report available at http://www.trepp.com).

The U.S. CMBS delinquency rate rose again in January with the percentage of loans 30 or more days delinquent, in foreclosure or REO climbing 14 basis points to 9.34%, the highest in history for U.S. commercial real estate loans in CMBS. The value of delinquent loans now exceeds $61.4 billion.

The Glass 1/2 Full Perspective

“While the rate continues to head higher, optimists can point to the fact that the rate of increase is significantly smaller than it was in the prior two months,” said Manus Clancy, Managing Director of Trepp, LLC. “Pessimists can counter that the jump comes despite the fact that new issues continue to make their way into the calculation and servicers continue to resolve troubled loans.”

Additional CMBS Delinquency Data from

Barclays Capital via Housing Wire

The multifamily sector was up 120 bps to a 15.8% delinquency rate, according to Barclays Capital. Industrial delinquencies increased the most month-over-month yet still remained below multifamily, up to 8.9% from 6.3%. In the lodging sector, 17% of CMBS are delinquent, Barclays said.

CMBS Delinquencies up a mere 79% in 2010 (Moody's)

Wall Street Journal
1/12/2011
By Matt Jarzemsky, Dow Jones Newswires

Delinquencies on loans in U.S. commercial mortgage-backed securities, or CMBS, rose for the seventh-straight month in December, Moody's Investors Service said.

Last month's 8.79% rate was up from 8.63% in November and 4.9% at the end of 2009. Loans soured rapidly early last year but the growth in delinquencies moderated in the second half.

Commercial real estate has been pummeled as reduced occupancy rates and rents have put pressure on property owners, often causing them to fall behind on interest payments. Meanwhile, tightened credit standards and sharply lower property values have made it harder for landlords to refinance or sell buildings to repay maturing loans.

"The rate of newly delinquent loans is likely to continue moderating in the coming year as capital markets continue to heal and the flow of loans into special servicing slows," Moody's Managing Director Nick Levidy said.

In December, the total balance of delinquent loans increased by $1.1 billion to $54.9 billion.

Hotels again had the highest delinquency rate, at 16.37% for December, but were also the most-improved asset class as that was 0.05 percentage point lower than a month earlier. Industrial had the lowest rate, at 6.54%.

All four U.S. regions saw delinquency rates increase modestly. The South had the highest rate, at 11%. The best-performing region was the East, at 6.7%.

More from Housing Wire

The number of delinquencies within the conduit/fusion space of commercial mortgage-backed securities rose 79% in 2010, ending December at 8.79% up from 4.9% a year earlier, according to Moody's Investors Service.

CMBS Overall Delinquency Rate Up 52% Year Over Year (Trepp) as REITS Continue Launch

Overall CMBS Delinquencies Hit a

Record 9.2% in December as

REITS Spend 2010 Partying in the Exosphere.

Trepp Reports CMBS Delinquency Rate Hits

Record High of 9.2% in December Despite Market Optimism

(NEW YORK – JANUARY 5, 2010) - Trepp, LLC, the leading provider of CMBS andcommercial mortgage information, analytics and technology to the global securities and investment management industry, released today its December 2010 Delinquency Report. This month’s report contains a special section on the Major CMBS Events of 2010 as well as Delinquency Rate and Triple A Spread charts covering the past 10 years.

The U.S. CMBS delinquency rate rose again in December with the percentage of loans 30 or more days delinquent, in foreclosure or REO climbing 27 basis points to 9.20%, the highest in history for U.S. commercial real estate loans in CMBS. The value of delinquent loans now exceeds $61.5 billion.

The decline in the delinquency rate in October 2010 now appears to have been a blip, as the rate has since increased by 62 basis points. December’s 27 basis point jump comes despite the fact that new issues continued to make their way into the calculation and servicers continued to resolve troubled loans. The new deals - which theoretically should have low delinquencies for a while - will continue to put downward pressure on the delinquency rate as issuance continues to grow in 2011. Similarly, the resolution of troubled loans will also help to lower the rate.

“Many have speculated that between the emergence of new CMBS lending, the resolution of many troubled CMBS loans and an uptick in trophy property sales, that the commercial real estate crisis was nearing its final stages,” said Manus Clancy, Managing Director, Trepp. “The December delinquency rate underscored that there still may be some nasty surprises in store even as the market shows some signs of healing.” Trepp Report

Delinquency Rates (Percent 30 Days + delinquent)

• 8.97% Industrial (up 125% YOY)
• 14.31 % Lodging (up 11% YOY)
• 16.48% Multi-family (up 78% YOY)
• 6.93% Office (up 103% YOY)
• 7.86% Retail (up 43% YOY)
• 9.20% Overall (up 52% YOY)

Nearly 2.2 million loans are 90 days or more delinquent but not yet in foreclosure (retailers have loved it!)

One-third of loans that are 90 days

or more delinquent have not

made a payment in a year

(well giddyup holiday retail sales)

 

JACKSONVILLE, Fla., Dec. 27, 2010 /PRNewswire/ -- The November Mortgage Monitor report released by Lender Processing Services, Inc. (NYSE: LPS) shows that the volume of loans moving to REO continued to drop as moratoria further delayed foreclosure sales. While the 90+ delinquency category has steadily declined, the number of loans moving to seriously delinquent status beyond 90 days far outpaced the number of foreclosure starts. Nearly 2.2 million loans are 90 days or more delinquent but not yet in foreclosure.

Foreclosure inventories also continued to rise for the fifth straight month as delinquent accounts are referred for foreclosure, but the sale of foreclosure properties continued to decline. When compared to January 2008 levels, the foreclosure inventory of Jumbo Prime loans is nearly seven times higher; the inventory of Agency Prime loans is nearly six times higher; and the foreclosure inventory of Option ARM loans is approaching five times the inventory in January 2008.

The report also shows that one-third of loans that are 90 days or more delinquent have not made a payment in a year; however, the number of new problem loans declined nearly 5.4 percent from October, which is opposite of the seasonality trend that typically impacts new delinquencies this time of year. Self-cures for loans one to two months delinquent increased in November to a six-month high.

In the month of November, 261,153 loans were referred to foreclosure, which represents a 0.7% month-over-month decline. The total number of delinquent loans is nearly 2.1 times historical averages – and foreclosure inventory is currently at 7.7 times historical averages.

As reported in LPS' First Look release, other key results from LPS' latest Mortgage Monitor report include:

• Total U.S. loan delinquency rate: 9.02 percent
• Total U.S. foreclosure inventory rate: 4.08 percent
• Total U.S. non-current* loan rate: 13.10 percent
• States with most non-current* loans: Florida, Nevada, Mississippi, Georgia, New Jersey
• States with fewest non-current* loans: North Dakota, South Dakota, Alaska, Wyoming, Montana

*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state. LPS Link and complete report

US CMBS Loan Delinquencies Rise to 8.63% (up 76% YTD)

Global Credit Research - 13 Dec 2010

New York, December 13, 2010 -- The delinquency rate on loans included in US Commercial Mortgage-Backed Securities (CMBS) conduit/fusion transactions increased 24 basis points in November to 8.63%, according to Moody's Investors Service's Delinquency Tracker (DQT). The increase was larger than the 15 basis point increase in October, but continued a trend of moderate increases that has prevailed over the second half of the year.

In November, 294 loans became newly delinquent, while 245 previously delinquent loans became current, worked out, or disposed.

"As has been the case in recent months, the resolution and liquidation of troubled loans has helped to largely offset the increase in delinquent balance," said Moody's Managing Director Nick Levidy.

In all, the total number of delinquent loans increased in November to 4,091, and the total balance of delinquent loans increased by approximately $1.1 billion to $53.8 billion.

Year-to-date, the Moody's Delinquency Tracker has risen 373 points. Though the largest basis point increase since May, November's 24 basis point rise was still significantly below the average monthly increase of over 50 basis points that occurred during the first five months of the year.

Moody's Delinquency Tracker (DQT) tracks all loans in US conduit and fusion deals issued in 1998 or later with a current balance greater than zero.

The office sector had the greatest increase in delinquency rate among the five core property types in November, gaining 44 basis points to 6.72%. During the month, $1.2 billion in office loans became newly delinquent and only $455 million became current, worked out or disposed.

The other sectors saw moderate increases in delinquency or were essentially flat.

Retail properties saw the next highest net increase after offices, an increase of 27 basis points to 7.14%.

Industrial properties had a 13 basis points increase to the delinquency rate, its delinquency rate stands at 6.36%. Industrial remains the best performing of the five property types.

Multifamily also experienced a modest increase in its delinquency rate, ending November at 13.90%, a 13 basis point increase since October.

The hotel loan delinquency rate remained essentially flat in November, increasing only three basis points. The hotel delinquency rate remains the highest among the major property types at 16.42%.

By region, the Midwest had the best performance of the four regions covered by Moody's Delinquency Tracker in November. In the Midwest, the delinquency rate fell six basis points to 8.57%.

The South saw the largest increase in its delinquency rate in November, rising 67 basis points during the month to end at 10.86%, the highest delinquency rate among the regions.

The West posted the second largest increase, as its delinquency rate rose 34 basis points to 9.70%, more than double the rate a year ago.

The East had essentially no change in its delinquency rate, rising only one basis points to 6.60%.

By State, Nevada continues to have the largest delinquency rate by a very large margin. Its delinquency rate rose another 31 basis points to stand at 27.50%. With a jump in its delinquency rate of over 700 basis points, Alabama has surpassed Michigan as the second worst performing state, with a delinquency rate now of 18.81%. Michigan's rate dropped 45 basis points in November to 14.43%. Moody's Announcement


November 2010 Delinquency Rate Recap

• Overall          8.63%
• Office            6.72% (up 90% YTD)
• Retail            7.14% (up 36% YTD)
• Industrial       6.36% (up64% YTD)
• Multifamily  13.90% (up 58% YDT)
• Hotel           16.42% (up 67% YTD)

A Trip Down Memory Lane

December 2009 Delinquency Rate Recap

• Overall            4.9% 
• Office              3.19% 
• Retail              4.52% 
• Industrial         3.42% 
• Multifamily      8.14% 
• Hotel               9.07% 

CMBS Delinquencies Rise and Approach 8%

S and P 500 REIT IYR up 18% Year To Date

while CMBS delinquencies continue rising.

NEW YORK--(BUSINESS WIRE)--The reprieve in delinquency increases was short-lived as U.S. CMBS late-pays resumed their climb this past month, according to the latest delinquency index results from Fitch Ratings. The full results are featured in this week's U.S. CMBS newsletter.

Delinquencies rose 18 basis points (bps) to finish November at 7.96%. Driving the increase was $1.6 billion of new defaults on office-and retail-backed loans.

'Office and retail properties fared well during the recession due to generally longer-term lease agreements, but they are now most vulnerable to asset-specific performance declines for the same reason,' said Managing Director Mary MacNeill. 'As office leases originated at the peak of the market come up for renewal, they will be marked down to lower market rents, pressuring operating income.'

Current delinquency rates by property type are as follows:

• Multifamily: to 14.75% (from 14.57%);
• Hotel: to 14.27% (from 14.14%);
• Retail: to 6.55% (from 6.25%);
• Industrial: to 6.01% (from 5.83%);
• Office: to 5.63% (from 5.38%).

Additional information is available at Fitch Ratings

December 1, 2010 CMBS Delinquency Data Recapped

on Housing Wire

The delinquency rate on loans backing commercial mortgage-backed securities jumped to the second highest rate on record in November, up 35 basis points to 8.93%, according to a monthly report released by Trepp analytics firm.

A total of $60.3 billion in CMBS loans are delinquent. Of the nearly 9% that are delinquent, most (2.92%) are more than 90 days past due.

November's CMBS delinquency rate is second only to September's rate of 9.05%. The delinquency rate in November 2009 was 5.65%. The rate in October dipped down to 8.58% boosting analysts' anticipations delinquencies would continue to fall. Now they are not so confident.

"We frequently pointed out that as servicers became more adept at processing troubled loans, the delinquency rate would continue to see downward pressure," the Trepp report said. "The November numbers throw cold water on the enthusiasm that's built up over the last six months."

Delinquencies for loans on multifamily properties spiked in November, making it the worst performing sector for the first time in more than a year. The delinquency rate now stands at 15.8%, up from 14.6% in October and up from 8.8% one year ago.

The lodging sector of CMBS fell to 14.6% from 14.9% in October, but still maintains the second highest rate, followed by the retail sector (7.6%), the office sector (7%) and the industrial sector (6.6%). Housing Wire Site for More Real Estate Information

CMBS Delinquencies 8.39% in October, $3.45 billion became newly delinquent

Total balance of delinquent loans increased

by approximately $627 million to $52.7 billion.

New York, November 10, 2010 -- The delinquency rate on loans included in US Commercial Mortgage-Backed Securities (CMBS) conduit/fusion transactions increased 15 basis points in October to 8.39%, according to Moody's Investors Service's Delinquency Tracker (DQT). The increase was almost the same as the 14 basis point increase in September and the fifth consecutive month of modest growth in the rate.

In October, 282 loans totaling $3.45 billion became newly delinquent, while 211 previously delinquent loans totaling approximately $2.82 billion became current, worked out, or disposed. In all, the total number of delinquent loans increased in October to 4,042, and the total balance of delinquent loans increased by approximately $627 million to $52.7 billion.

One trend that has restrained the delinquency rate is the increasing number of loans that have left delinquency. In the four months July through October, $12.8 billion in loans became current, worked out, or disposed, more than the $12.6 billion for the preceding six months, January through June.

"The increased pace of loans leaving delinquency has helped moderate the delinquency rate, but the potential for monthly spikes continues to exist due to the large number of troubled CMBS loans on the watchlist and in special servicing," said Moody's Managing Director Nick Levidy.

Moody's Delinquency Tracker (DQT) tracks all loans in US conduit and fusion deals issued in 1998 or later with a current balance greater than zero.

By property type, hospitality properties had the greatest increase in delinquency rate in October, gaining 45 basis points to 16.39%, the highest of the five core property types.

At 35 basis points, multifamily experienced the next highest gain, its delinquency rate ending October at 13.77%, the second highest rate. Sixty-seven percent of all delinquent multifamily loans by balance in the East region are backed by New York City pro-forma rent conversion properties.

Retail saw the greatest net overall increase in total delinquency balance, with $427 million being added in October, which increased its rate 27 basis points during the month to 6.87%.

Office properties had a 12 basis point decrease in delinquency rate during October, which brought the rate to 6.28%. The delinquency balance shrank during the month by $275 million, the only time in 2010 that the balance has declined for office properties.

Industrial properties also saw a decline in delinquency rate, as it slipped 9 basis points during October to 6.23%.

Big Banks and Hedge Funds...The New Tax Man, courtesy of TARP...and not even a thank you note from the banks.

At first, property owners may owe

little more than a few hundred dollars,

only to find their bills soaring

into the thousands.

Five big banks involved in the industry,

known as tax lien investing, collected a total

of more than $106 billion in bailout money

through the government's Troubled Asset Relief Program, known as TARP.

By Fred Schulte and Ben Protess
Huffington Post Investigative Fund
10/18/10

Nearly a dozen major banks and hedge funds, anticipating quick profits from homeowners who fall behind on property taxes, are quietly plowing hundreds of millions of dollars into businesses that collect the debts, tack on escalating fees and threaten to foreclose on the homes of those who fail to pay.

The Wall Street investors, which include Bank of America and JPMorgan Chase & Co., have purchased from local governments the right to collect delinquent taxes on several hundred thousand properties, many in distressed housing markets, the Huffington Post Investigative Fund has found.

In many cases, the banks and hedge funds created new companies to do their bidding. They gave the companies obscure, even whimsical names and used post office boxes as their addresses, masking Wall Street's dominant new role as a surrogate tax collector.

In exchange for paying overdue real estate taxes, the investors gain legal powers from local governments to collect the debt and levy fees. At first, property owners may owe little more than a few hundred dollars, only to find their bills soaring into the thousands. In some jurisdictions, the new Wall Street tax collectors also chase debtors over other small bills, such as for water, sewer and sidewalk repair.

Some states allow the investors to tack on as much as 18 percent interest and a passel of legal fees and other charges. When property owners fail to make full payment, the investors can sue to foreclose - in some states within as little as six months.

In June, Bank of America snatched up liens on properties in Florida owned by low-income residents and nonprofit public interest groups, including a Salvation Army shelter, a preschool and a wildlife rescue group involved in the Gulf of Mexico oil spill cleanup, the Investigative Fund found in its examination. Bank of America also bought liens on properties of the wealthy, including a professional basketball star with the Los Angeles Lakers, Lamar Odom. Link to complete Article

Commercial Real Estate Delinquencies Continue to Rise (Fitch)

Nathan Becker
Dow Jones Newswires
10/15/10

Delinquencies of U.S. commercial real-estate loans bundled into collateralized debt obligations rose again in September, Fitch Ratings said Friday.

Commercial real estate has suffered mightily the past two years, with falling rents and occupancy rates. But there have been signs of stabilization in some quarters.

Loan delinquencies in CDOs for September were 12.9%, up from 12.1% in August. Fitch director Stacey McGovern said 70% of all new delinquencies last month were loans secured by office and multifamily properties.

Commercial real estate CDO asset managers reported more than $70 million in realized losses from the disposal of distressed assets in September, up from $68 million in August. Total losses in the commercial real-estate CDO universe have exceeded $1.7 billion.

CMBS delinquencies 8.24% in September (Moody's)

By: Jason Philyaw
Housing Wire

Moody's Investors Service said the number of delinquencies within commercial mortgage-backed securities rose 14 basis points last month to 8.24%.

Analysts said the increase was the smallest since October 2008 and the represents fourth-straight month of modest growth in the national CMBS delinquency rate. Moody's said there are now 3,971 delinquent mortgages with a total value of $52.07 billion.

Although the number of delinquencies and principal balance remain high, the level of mortgages that are current, have been worked out or disposed has increased the past four months, according to Moody's.

The hotel sector was hit hardest last month, as the delinquency rate increased to nearly 16% with 22 loans valued at more than $600 million going from current to 60-plus days in arrears. The rate is three times higher than a year earlier.

The rate of delinquencies in September for multifamily mortgages included in CMBS fell slightly to 13.42% from 13.45% a month earlier but remains more than twice as high as the roughly 6.1% last year.

Message from the media has been that consumers are focused on reducing debt levels, and paying down existing balances. Do you believe in fairy Tales?

If you believe that and think positive thoughts,

your good vibes might save Tinkerbell,

because that story is a fairy tale.

By Chuck Jaffe
10/13/10
BOSTON (MarketWatch) — If the media doesn’t understand consumer delinquency numbers, there’s no reason to believe consumers get it. But what became patently obvious last week when the American Bankers Association released second-quarter data on the nation’s credit picture is that the “good credit behaviors” we keep hearing about of late are mostly hogwash.

It’s not entirely surprising. In a nation that has a deficit problem, where average consumers have at least minor debt troubles, there are going to be a lot of delusions and misconceptions about how credit works.

Consider how three news organizations covered the American Bankers Association release on Oct. 5. According to the Associated Press, “Delinquency rates for three key consumer-loan categories improved in the second quarter,” which was surprising to anyone who read the Bloomberg Business News report which said that “U.S. consumer-loan delinquencies increased for the first time in a year…amid a slowdown in recovery from the worst economic crisis since the Great Depression.”

MarketWatch, meanwhile, noted that “In a positive sign for the economy, the number of consumers who were delinquent on their loans fell in seven of 11 loan categories.”

In other words, the economic data was pointing in every direction, signifying nothing. It certainly does not mean what economists, politicians and most in the media are saying it means.

Do you believe in fairy tales?

The message from the media has been that consumers are focused on reducing debt levels, and paying down existing balances. They are using credit cards less, building their savings and being prudent with their spending. The Federal Reserve’s G-19 Consumer Credit Report showed that, as of July, revolving consumer debt had been on the decline for 23 straight months, a period of nearly two years.

If you believe that and think positive thoughts, your good vibes might save Tinkerbell, because that story is a fairy tale.

“Look at the charge-off numbers for the banks and they are almost dollar-for-dollar the decline in consumer debt,” said Greg McBride, senior financial analyst for Bankrate.com. “So you are getting headlines about how much better off consumers are, and how they are paying down their debts, but that’s not what’s really happening.”

It’s an economic sleight of hand that should feel pretty familiar. It’s akin to statistics showing that unemployment is going down, when the numbers exclude the chronically unemployed who have been out of work for so long that they drop out of the active work force. They’re not working, but the overall statistics look better with them on the outside.

That’s how it is on consumer-debt numbers too. There are two main ways for things to get better: either consumers pays down their bills or banks write off the worst garbage on their books.

A recent study by CardHub.com looking at the G-19 report and comparing it to bank charge-off numbers found that revolving debt was off by $12 billion in the second quarter of 2010, but that banks actually charged off some $21.8 billion in bad debt. What that means is that consumers actually accumulated debt—nearly $10 billion more than the year before—and the only progress was caused by banks giving up on consumers who are too far gone to pay.

CardHub’s latest projection is that consumers will accumulate an additional $26.2 billion in credit card debt this year, relative to 2009.

Lenders aren’t just writing off their bad, old debts, they’re tightening up on making new ones. As a result, the few consumers who really have taken the tough economy to heart and who have made strides on debt reduction and credit-score improvement have been met with tougher credit terms.

Tighter limits

Many credit-card issuers, for example, are “walking up the balance,” which means they are reducing a customer’s credit limit as the consumer pays off outstanding debt.

Say someone has a credit card with a $10,000 limit and holds the average household credit debt of roughly $9,000 on that card. They pay off $2,000 of that debt; their balance has shrunk to $7,000, but the card issuer—wanting to reduce its potential liabilities—might cut that borrower’s available limit down to $7,500.

In this case, the borrower is doing the right thing, but they have little to show for it. When they started this debt-reduction effort, they were using 90% of their available limit; the reduced credit limit means they finish their pay-off using 93% of the reduced balance. That puts them closer to the edge and likely means the consumer’s credit score will not improve, in spite of the fact that they have less total debt. Link to the rest of the fairy tale

Overall CMBS delinquency rate rose to 8.66% in Spetember from 8.48% in August

Steep drop in property values has rendered many landlords

unable to sell their buildings for enough money to repy

the debt they borrowed to buy them.

RESULT: REITS move higher

By Matt Jarzemsky
Dow Jones Newswires
10/8/10

Delinquencies of loans underlying U.S. commercial mortgage-backed securities continued their climb in September amid poor performance in economically challenged states such as Nevada and Hawaii, according to Fitch Ratings.

CMBS delinquencies have continued to rise this year after spiking in 2009 as commercial property owners increasingly fell behind on loan payments because falling occupancy rates and rents crimped cash flow. The steep drop in property values has rendered many landlords unable to sell their buildings for enough money to repy the debt they borrowed to buy them.

Fitch said the overall CMBS delinquency rate rose to 8.66% from 8.48% a month earlier.

Among property types, hotel continued to see the worst performance, with a rate of 21.3%, up from 20.8% in August. Office buildings had the lowest rate at 5.48%, up from 5.06% a month earlier.

Delinquencies on CMBS loans in Nevada were 25.9%, followed by Hawaii at 18% and Michigan at 15.7%. Ten states had a rate of at least 10%.

Banks Continue Playing Extend and Pretend with Foreclosures thanks to Rep. Paul Kanjorski

On March 12, 2009, FASB Chairman Robert Herz was warned by Rep. Paul E. Kanjorski (D-Pa.) and other committee members that Congress would write its own mark-to-market rules if FASB didn't relax them.

Grandpa

The Notice of Defaults (NOD's) number is down only because banks are not sending out NOD's to borrowers who are seriously delinquent. It is in the bank's interest to delay processing mortgage delinquencies courtesy of Representative Paul Kanjorski's crusade for Mark-to-Model (a.k.a. extend and pretend) accounting.

After Kanjorski's cage match victory over FASB, banks assign whatever mark-to-model valuation on their toxic mortgages that best manages their earnings in any given quarter. Foreclosure forces the banks to mark-to-market as the $112,000 Sheriff sale price negates the $180,000+ mark-to-model valuation previously carried on the bank's books. As long as the bank extends and pretends, the $180,000 valuation rules.The Notice of Defaults (NOD's) number is down only because banks are not sending out NOD's to borrowers who are seriously delinquent. It is in the bank's interest to delay processing mortgage delinquencies courtesy of Representative Paul Kanjorski's crusade for Mark-to-Model (a.k.a. extend and pretend) accounting.

Diana Olick
Realty Check
9/16/10

I'm sure you've all seen the headlines from RealtyTrac today that show a new record for bank repossessions.

In some of the news reports today, I've also heard TV anchors make mention of some bright news in the report, that Notices of Defaults (NOD's) are down 30 percent from a year ago.

NOD's are the first stage in the foreclosure process. So that should mean that while there are still a lot of borrowers working through the system, at least the number of newly troubled borrowers entering the system is improving, right?

Wrong.

According to Rick Sharga at RealtyTrac, the NOD number is down only because banks are not sending out NOD's to borrowers who are seriously delinquent.

"We are seeing people in more and more serious stages of delinquency, who in a normal market long ago would have received an initial notice of default or been in the foreclosure process who are not there yet. I do think it is one of the mechanisms that the industry is using to manage supply and demand levels of this distressed inventory to keep the market from melting down."

We already know that banks are managing their owned inventory (REOs) by not flooding the market with all the properties they repossessed. They do this so as not to drive home prices down even further (although it's not really working).

I was really amazed to hear this from Sharga, who points to the bucket of seriously delinquent loans as proof. It keeps getting bigger, while the NODs get smaller.

That doesn't make sense.

Yes, banks are trying to get people into modifications, but we already know those numbers are very small in comparison.

Since I was so skeptical, and happened to also be doing an interview with Doug Duncan, the chief economist over at Fannie Mae, about their National Housing Survey released today, I posed the question to him. He agreed with Sharga.

"The survey shows significant softness on the demand side of the equation, and if you are concerned about the broad based economic effects of significant price declines, if you were to bring large quantities of foreclosed or distressed properties onto the market suddenly, you would definitely put serious downward pressure on prices and that would have broad effects," says Duncan.

He went on to say, "The various parties involved [banks, lenders], either on policy or in executing in the market, are attendant to that and are concerned about the possibility about making the problem greater. My sense is that there is not an attempt to avoid the problem but rather to manage the problem to minimize the damages to both the housing sector and to the economy."

This is why Sharga estimates we will not see a peak in foreclosures until 2011.

Foreclosures hit record high and bank's play hide and seek with Notice of Defaults

September 16, 2010

Realtytrac's August report shows American foreclosures have just hit a record high, with CNBC's Diana Olick.

1 in 5 hotel mortgage loans is delinquent, In the words of Tom Bodett, "We will leave the light on for you"

20.8% of hotel mortgage backed securities is delinquent while 14.18% of multi-family mortgage backed securities are delinquent and REITS continue their lofty climb. Welcome to the New Order of the U.S. Equity Market. We have gone well beyond insanity.

NEW YORK--(BUSINESS WIRE)--While the pace of defaults remains elevated, a record number of loan resolutions in August again tempered the effect of $3.1 billion of new delinquencies, according to the latest U.S. CMBS delinquency index results from Fitch Ratings. The full results are in the agency's weekly U.S. CMBS newsletter.

Recent defaults on five loans greater than $100 million contributed to a 23-basis point (bp) net increase in the U.S. CMBS delinquency rate to 8.48%. Meanwhile, $2.1 billion of loans were resolved or liquidated last month.

'Though special servicers are working out loans at an increased rate, the volume of new delinquencies has not yet subsided,' said Senior Director Adam Fox. 'Highly levered loans originated at the market's peak continue to default as borrowers seek modifications or hand back the keys to underperforming assets.'

In August, three Fitch-rated loans in excess of $100 million became newly delinquent due to performance issues, including:

--$825.4 million Innkeepers Portfolio;
--$140 million Hyatt Regency - Bethesda; and
--$129.5 million Lynnewood Gardens.

Current delinquency rates by property type are as follows:
--Hotel: 20.80% (from 18.64%);
--Multifamily: 14.18% (from 13.87%);
--Retail: 6.11% (from 6.35%);
--Industrial: 5.55% (from 5.20%);
--Office: 5.06% (from 5.08%).

Additional information is available in Fitch's weekly e-newsletter, 'U.S. CMBS Market Trends'. The link below enables market participants to sign up to receive future issues of the E-newsletter

Banks Playing "Foreclosure Roulette" with Delinquent Homeowners...Extend and Pretend

Arthur Delaney
HuffingtonPost
9/1/10

Bea Garwood has been bracing for foreclosure since May, but she says she's been told three times to expect a sheriff's sale in the next month and it still hasn't happened.

"We really at this point do not know where we are in the process," said Garwood, who lives in Pinckney, Mich. with her husband. "We have no clue. We haven't even heard from Chase bank in three weeks."

The Garwoods may have had a lucky spin in the game that industry analyst Sean O'Toole calls "Foreclosure Roulette."

Banks don't want to recognize losses by having to put homes on the market at foreclosure-sale prices, but they don't want to encourage borrowers to quit making payments either, so, O'Toole believes, they randomly foreclose on some people to prevent widespread "moral hazard." The rest are left hanging with the help of the government's "extend and pretend" approach to the collapse of the housing bubble.

"We just don't have the political appetite to bail homeowners out," said O'Toole, CEO of ForeclosureRadar.com. "On the other hand, we don't have the political appetite to kick them out."

The Gestation Period of HAMP

Last year the Garwoods tried to modify the mortgage on their Pinckney, Mich. home under the Obama administration's Home Affordable Modification Program, which is supposed to put eligible borrowers into a three-month trial period before making the modification "permanent" for five years. The Garwoods' trial period dragged on for nine months before they received a letter of rejection in March. They've been waiting anxiously since then for the day they will finally lose their house.

Extend and Pretend...courtesy of HAMP

It may be a while. The average foreclosure now takes 469 days, according to Lender Processing Services, whereas it took 319 days at the beginning of 2009. Many industry analysts say that is due to the Troubled Asset Relief Program, HAMP, and federal accounting-rule changes.

We weakened accounting standards to allow banks to keep non-paying mortgages in their books at full value," wrote economist Dean Baker, co-director of the progressive Center for Economic and Policy Research. "Banks also know that they are looking at glutted markets right now, so they have little incentive to take possession of a home and then try to sell it. And, the HAMP and other programs mostly delay foreclosures and hand money to banks, instead of keeping people in their homes."

American Banker reported last week that the procrastination on foreclosures could backfire: "With home prices expected to fall as much as 10% further, the refusal to foreclose quickly on and sell distressed homes at inventory-clearing prices may be contributing to the stall of the overall market seen in July sales data. It also may increase the likelihood of more strategic defaults."

Of the 1.5 million trial offers made by servicers participating in HAMP, 616,839 have resulted in cancellations, while only 434,716 have resulted in permanent modifications, according to government data released in August. But Treasury officials have said even if a person isn't able to stay in his or her home, HAMP is a success if assists that person in "transitioning with dignity to more suitable housing."

Borrowers rejected from HAMP are sometimes confused, as the Garwoods are, about the reason for their rejection. (Chase has declined to comment on the Garwoods' situation.)

"There's still a lot of uncertainty about why certain homeowners are receiving help in HAMP and others are not," said Diane Standaert, legislative counsel with the Center for Responsible Lending. Standaert said policymakers should consider allowing bankruptcy judges to write down mortgage principal (a process sometimes known as "cramdown"). "I think this new game of casino that lenders and servicers are playing with homeowners...is not going to cut it."

Treasury officials blame Fannie Mae for underestimating HAMP delinquencies, although neither Fannie nor theTreasury possess basic math skills

By Corbett B. Daly
WASHINGTON Aug 6 (Reuters) - The Obama administration on Friday acknowledged it had underestimated the number of homeowners who fell seriously behind on their mortgage payments even after getting government help.

Treasury officials blamed the error on mortgage finance giant Fannie Mae, which acts as the program administrator for President Barack Obama's $50 billion Home Affordable Modification Program (HAMP).

The program had been criticized for its overly optimistic estimates of the number of struggling borrowers helped by its subsidies of new mortgage terms.

The actual numbers of permanent modifications that have lasted at least nine months through the end of May is tiny: just 4,764 borrowers. And 53,041 borrowers had one for at least six months through May.

Treasury said about 14.9 percent of the 4,764 borrowers who have had a permanent modification for at least nine months by the end of May had re-defaulted on their loan. That's more than six times the 2.4 percent rate they reported on July 20.

For loans that had been permanently modified for at least six months, about 6.1 percent had re-defaulted, up from just 1.7 originally estimated. Re-defaults are defined as 90 days or more late.

For loans 60 days late and not yet in re-default, the number of borrowers in trouble is even higher.

For loans that had been permanently modified for at least nine months, 19.6 percent of the loans were at least two months behind on their payments, more than two and a half times the 7.7 percent rate first reported.

On loans permanently modified for at least half a year, 10.1 percent were 60 days or more behind on payments, compared to the 5.9 percent originally reported.

"We are confident that this data table correctly reflects the performance of the permanent modifications over time. Early program results indicate that the vast majority who receive permanent modifications through HAMP benefit from them and remain in the program," said Treasury spokesman Mark Paustenbach.

The issue arose after several Wall Street analysts said the numbers Treasury first issued seemed suspiciously low.

Treasury then asked Fannie Mae to review the numbers.

Fannie Mae spokesman Brian Faith said his company found "an issue in its implementation of the delinquency statistic methodology."

"Fannie Mae has now corrected the implementation and validated the revised table through review and verification by an independent third-party consultant contracted by Fannie Mae's Internal Audit Group," Faith said.

Treasury on July 20 said that the number of borrowers dropping out the program grew in June at almost twice the pace of those getting a permanent modification. Those figures were not revised.

The dropout rate could signal a rise in foreclosures in the second half of the year at a time when the housing market is still fragile and analysts fear another housing slump could threaten the nascent economic recovery.

About 91,000 borrowers dropped out of the program in June, putting the total number of dropouts at 530,000. At the same time, about 49,000 borrowers received a permanent modification in June, bringing that total to 389,000.

That means more than 40 percent of the roughly 1.3 million borrowers who have started in the program since its March 2009 inception have since dropped out, while just over 30 percent have received permanent new terms for their loan.

(Reporting by Corbett B. Daly; Editing by Gary Crosse, Gary Hill and Jackie Frank)

Fitch: CMBC volume of July delinquencies fall while late pays increase

NEW YORK - (Business Wire) The volume of new CMBS (Commercial Backed Mortgage Securities) delinquencies fell for the fourth straight month, according to Fitch Ratings in its latest U.S. CMBS newsletter.

CMBS late-pays increased 11 basis points (bps) to 8.25%, with new delinquencies totaling less than $2 billion for the first time since August 2009.

'Despite the slowdown in volume, loan defaults have not yet peaked,' said Managing Director Mary MacNeill. 'Further weakness in loan performance is likely, particularly among later vintages.'

The 2007 vintage is still contributing disproportionately to the index. Loans from the 2007 vintage comprise some 35% of the Fitch-rated universe but account for approximately 47% of all current delinquencies.

Current delinquency rates by property type are as follows:
--Hotel: 18.64%;
--Multifamily: 13.87%;
--Retail: 6.35%;
--Industrial: 5.20%;
--Office: 5.08%.  

Additional information is available in Fitch's U.S. CMBS newsletter.
Additional information is available at http://www.fitchratings.com/