tgage defaults is upon the industry, according to Fitch Ratings data released Thursday.
“If the rate of defaults continue at this accelerated pace combined with limited issuance in 2009, the cumulative default rate will exceed 5% by year end,” says Fitch managing director Mary MacNeill.
Multifamily properties and retail spaces are expected to lead defaults in 2009, both of which experienced high default rates in 2008. Multifamily spaces accounted for $1.06bn in new defaults and posted a 5.21% default rate in 2008, while retail defaults hit $1.03bn with a default rate of 2.52%.
As of year-end 2008, the cumulative default rate increased to 3.29% from 2.71% in 2007. Fitch says it expects the rate of defaults in 2009 to increase consistent with the levels of defaults in recent months, as the slow economy and lack of financing further stress loan performance.
So even though residential markets may see signs of recovery, the worst may lie ahead for the commercial sector.
The 2006 vintage had the highest dollar balance and number of commercial defaults in 2008 with $742.9 billion and 78 loans. But Fitch says loan defaults among 2007 CMBS transactions will lead all other vintages by year end as larger loans within these deals have begun to default in late 2008 and early 2009.
In a separate report Thursday, the Mortgage Bankers Association said commercial and multi-family mortgage origination volume in Q109 slipped 26% from the previous quarter and sits 70% below the reading a year ago. A drop in CMBS conduit loans led the overall decline in origination, the MBA said, plunging 96% year-over-year.
The government agreed to lend a helping hand to the commercial real estate market, effective in June. After aiding residential markets, the Federal Reserve decided in early May CMBS will also be eligible collateral for TALF participation.
The decision to incorporate CMBS into the TALF program, aims to stimulate lending in the commercial real estate sector by allowing private investors to purchase securities with a matching government investment.
By KELLY CURRAN…
The Obama administration is poised to unveil two new features that would widen its assistance to troubled homeowners in danger of foreclosure, a Treasury Department official said this week.
Speaking to participants at the annual Mortgage Bankers Association convention, Laurie Maggiano of the Treasury’s Office of Homeownership Protection said regulators would roll out a new, streamlined application for borrowers seeking a loan modification under the government’s Making Home Affordable Modification Program. She added that federal authorities also were on the verge of announcing a new program to assist homeowners that don’t qualify for modifications.
“We are hoping to set an industry standard so investors will know exactly what they can expect,” Maggiano told listeners at the San Diego conference. “There’s really no magic. We haven’t reinvented the wheel.”
Nevertheless, the proposals could be manna from heaven for troubled homeowners as well as lenders and servicers who have been stalled by the government’s ponderous modification bureaucracy. As DS News previously reported, last week the Congressional Oversight Panel tasked with supervising the government’s $700 billion financial bailout delivered a blistering critique of the government’s foreclosure mitigation programs, saying enough wasn’t being done to keep owners in their homes.
The paperwork jam – in which missing, incomplete or erroneous filings can grind the modification process to a halt – has been an issue with HAMP from the start, Douglas Potolsky, a senior vice president with Chase Home Loans, told reporters. “Getting those loans to the finish line is tough,” Potolsky said. “I think the streamlining will help dramatically.”
At the same time, concerns have grown over whether HAMP reaches enough borrowers to make a difference in the wider housing-based economy. The MBA in particular, as well as the servicers’ advocacy group HOPE NOW, has argued that too many homeowners are – or ought to be – ineligible for HAMP modifications, and so far the government has done very little to assist that population.
According to Maggiano, the Treasury will offer a schedule of financial incentives to servicers for negotiating short sales or deeds in lieu of foreclosure for the most troubled borrowers in their portfolio that can’t obtain a modification. That plan, too, will come with a streamlined application for fast action, and it will put caps on how much of a payout can go to lesser lien holders who waive claims to a short sale or deed-in-lieu property.
The program will not be for every mortgage investor, Maggiano warned. Some would choose to “walk away” from the incentives because they weren’t as high as might be hoped.
Nevertheless, she said that much tussling between borrowers, servicers and investors would be cut down by that plan and the new HAMP paperwork requirements.
Those new requirements include just two documents to be filled out and signed, a vast improvement over the mountain of paperwork that accompanied early modification applications, Maggiano said.
She added that the government also would process those applications with a mass-automation computer system provided by an agency that knows a thing or two about high volume and complicated filings: The Internal Revenue Service. Under that plan, Maggiano told the crowd, servicers should be able to get a yes-or-no answer within two days of filing a completed request, she said.
Borrowers who already are in the trial modification pipeline will get an extra two months to fill out the new simpler paperwork, she added.…