Headlines – Week of September 2, 2012
September 13, 2012
Fewer Mortgages in Negative Equity
CoreLogic has just released a report showing that 10.8 million, or 22.3%, of all residential properties with a mortgage were in negative equity at the end of the second quarter of 2012.
This is down from 11.4 million properties, or 23.7%, at the end of the first quarter of 2012.
An additional 2.3 million borrowers possessed less than 5 percent equity in their home, referred to as near-negative equity, at the end of the second quarter.
Approximately 600,000 borrowers reached a state of positive equity at the end of the second quarter of 2012, adding to the more than 700,000 borrowers that moved into positive equity in the first quarter of this year.
Together, negative equity and near-negative equity mortgages accounted for 27.0 percent of all residential properties with a mortgage nationwide in the second quarter, down from 28.5 percent at the end of the first quarter in 2012.
Nationally, negative equity decreased from $691 billion at the end of the first quarter in 2012 to $689 billion at the end of the second quarter, a decrease of $2 billion driven in large part by an improvement in house price levels.
Most borrowers in negative equity are continuing to pay their mortgages. The share of borrowers that were underwater and current on their payments was 84.9 percent at the end of the second quarter in 2012.
This is up from 84.8 percent at the end of the first quarter in 2012.
Highlights as of the CoreLogic Q2 2012 Report:
- Nevada had the highest percentage of mortgaged properties in negative equity at 59 percent, followed by Florida (43 percent), Arizona (40 percent), Georgia (36 percent) and Michigan (33 percent). These top five states combined account for 34.1 percent of the total amount of negative equity in the U.S.
- Of the total $689 billion in aggregate negative equity, first liens without home equity loans accounted for $339 billion aggregate negative equity, while first liens with home equity loans accounted for $353 billion.
- Of the 10.8 million upside-down borrowers, 6.6 million hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $216,000, the average underwater amount is $51,000, and 18 percent of the 6.6 million are in negative equity.
CRE Loan Update
According to information provided by Cushman & Wakefield, we are now halfway through the digestion period for the super-bubble of CRE loan maturities that began in 2009 and is projected to peak in 2013.
The good news is that CRE maturities decline significantly after 2013, with a smaller spike in 2016-17 comprised of 10-year deals originated in 2006 and 2007.
The bad news is that the lending volume in the securitization market has not recovered to a level sufficient to fill the refinancing gap, which means that special servicers will continue to be very busy for the next 18-24 months.
Delinquency rates for CMBS moved higher in July, with Trepp reporting that the 30+ day delinquency rate had inched up 18bps to 10.34%.
The best performing asset class is retail, where strengthening consumer spending combined with the early wash-out of the sector’s weakest tenants, has helped retail assets relative to the office and industrial sectors.
Bank Lending Picks Up as Default Rates Drop
Another report shows the recovery in large and mid-tier banks’ commercial property balance sheets is accelerating. Data in a report by Chandan shows the default rate on income-producing real estate mortgages fell to 3.11 percent, the lowest level since mid-year 2009.
The 34 basis point drop from the previous quarter’s 3.45 percent default rate was the largest one-quarter improvement in legacy loan performance since the peak of the financial crisis.
Posted by Scott R. Lodde