Headlines – Week of August 22, 2010

August 27, 2010

Continuing CMBS Woes

In last week’s Headlines posting, I reported on a Globest.com article about CMBS loans maturing during 2010.  This week brings more news from Globest.com about the avalanche of CMBS loans due in 2011.

According to sources from Fitch Ratings, 198 fixed rate commercial loans, with a total unpaid balance of $26.5 billion, are scheduled to mature in 2011. Of those loans, $4.7 billion, or 17.9%, are already in special servicing.

One-third of the loans are secured by retail properties, 29.4% by office and 16.4% by multifamily. The ratings agency says it believes loans secured by office, retail and hotel properties are the most challenging to refinance.

By date of origination, 34.7% of next year’s maturing loans are from 2001, followed by 33.7% from 2006 and 13.2% from 2007.  Fitch expects higher default rates among the ’06 and ’07 loans, partly due to the fact that the older loans have the advantage of a decade’s worth of amortization and partly because the newer loans carry a higher LTV.  The article notes that 83% of the loans that went into special servicing in July were from more recent vintages.

The cumulative loss severity rate will continue to rise from 35.4% as more loans from the 2006-2008 period of CMBS at relatively higher losses. Reasons for the higher losses from these years include lax underwriting standards, the absence of amortization and other loan structural features, historically low capitalization rates, current reduced market liquidity and the general impact of the economic downturn.

Full Article

100,000 Bank Repos in South Florida Since 2007

According to an article published by CondoVultures.com, more than 100,000 properties – or an average of 2,300 per month – have been repossessed in the tricounty South Florida region (Miami-Dade, Broward, Palm Beach counties) since the real estate crash began in 2007.

Lenders surpassed the 100,000 threshold on Thursday, Aug. 19, when 317 properties were repossessed.

For the year through Aug. 20, lenders have taken back more than 33,600 South Florida properties, which already outpaces the 30,400 tricounty properties repossessed in 2009 and the nearly 26,250 in 2008, based on the government records from county governments.

Going forward, Condo Vultures.com expects that the number of bank repossessions to slow since foreclosure filings for the year are down by about one-third in 2010 compared to 2009.

The big unanswered question is whether the bank repos will trigger another drop in the South Florida real estate market.

Despite the spike in repossessions, bank-owned properties still represent only about 6% of the 68,500 residences on the resale market in the tricounty South Florida region as of Aug. 16.

South Florida’s residential inventory has increased on a weekly basis for nine of the last 11 weeks, representing a 5% jump in available product since May 31. Still, the overall resale inventory is down more than 36% from November 2008 when there were nearly 108,000 residences available in South Florida according to the article.

A key reason the number of bank repossessions has increased rapidly this year is the implementation of a new online auction technology being used by the South Florida circuit courts to clear the backlog. The online auction technology now allows hundreds of properties to be auctioned off more efficiently.

At the start of the housing crash in 2007, lenders estimated the typical foreclosure would take about six months to repossess a property at a cost of about $40,000 in the loss of debt service, damage, court courts, and attorney’s fees.

By 2009 as the foreclosure filings were spiking, the process extended out to an average of 18 months with an estimated cost of at least $100,000 per repossession.

Full Article

FDIC Loses $2 Billion on Florida Bank Failures In 2010

The FDIC has lost more than $2 billion on bank failures in Florida in 2010 following the closing of two institutions outside of Tampa on Aug. 20.

Regulators realized a combined loss of $33.5 million with the closing of the Community National Bank at Bartow, with $67.9 million in assets and $63.7 million in deposits, and the closure of Independent National Bank in Ocala, with $156.2 million in assets and $141.9 million in deposits, according to a report based on Federal Deposit Insurance Corp data.

Florida bank failures now account for 14% of the $66 billion in overall losses realized by the FDIC since 2008.

As the losses pile up related to foreclosures, many Florida banks are opting not to do any lending, which is further exacerbating the problem. Banks generate revenue and profits based on originating and servicing loans.

The latest closings increase the total number of bank failures in Florida to 22 this year, reinforcing the state’s position atop the list of the most bank failures in 2010. Illinois is second with 15 bank failures, and Georgia is third with 11 failures.

Rounding out the top five rankings for states for bank failures in 2010 are California with 10 closures and Washington with eight closures, according to the report.

In 2008, regulators shuttered two Florida institutions seized two institutions at a cost of at least $152 million to the FDIC’s Deposit Insurance Fund. In 2009, regulators seized 14 institutions at a cost of $7.2 billion. In the first eight months of 2010, regulators have closed 22 institutions at a cost of more than $2 billion.

Nationwide, regulators have shuttered 278 banks at a cost of more than $66.4 billion since 2008.  These failed institutions had combined assets of $629.1 billion and deposits of $441.6 billion, according to the report.

The 38-failed Florida banks since 2008 had combined assets of $31.4 billion and deposits of $24.6 billion.

Posted by Scott R. Lodde

Comments

No Comments Yet.

Got something to say?





Our Philosophy

Our philosophy revolves around a simple goal - To achieve the objectives of our clients. Our plan is to introduce the necessary talents and resources to our clients and enhance their business goals and profitability

Our Services

*Hotel Management---------------------- *Asset Management---------------------- *Advisory Services----------------------- *Distressed Property Services------------- *Insurance Claim Support Services------- *Development Services-----------------

Warning: Unknown: open(/home/content/28/4334028/tmp/sess_ggt7odfdkooemkmkevebepg3o1, O_RDWR) failed: No such file or directory (2) in Unknown on line 0

Warning: Unknown: Failed to write session data (files). Please verify that the current setting of session.save_path is correct () in Unknown on line 0