Coastal REO Solutions: REO Asset Management Service » Lenders

Commercial Real Estate Loan Workouts Simplified

jellis — Tue, 03 Nov 2009 02:52:12 +0000

Good news for banks and commercial mortgage lenders was delivered recently by U.S. government banking regulators. They are recommending lenders work more closely with commercial borrowers to modify their commercial real estate (CRE) mortgages. They have become more aware of the negative burden that a high degree of defaults may cause on bank balance sheets. The Federal Financial Institutions Examination Council, which is comprised of the Federal Reserve, Federal Deposit Insurance Corp. and several other entities, said that responsible modifications to commercial real estate loans are often “in the best interest” of both borrowers and lenders.

More significantly, regulators announced that they will not penalize banks for performing loans where the currently appraised value of the mortgaged property is underwater. “Financial institutions that implement prudent CRE loan workout arrangements after performing a comprehensive review of a borrower’s financial condition will not be subject to criticism for engaging in these efforts,” according to the statement that was issued on Friday, Oct 30,2009. These guidelines will help to ease the confusion felt by lending institutions that are under tighter scrutiny to reign in the rampant irresponsible lending of the last few years that have created the current flood of foreclosure properties, both here in Myrtle Beach and throughout America.

The guidelines arrive just as commercial realty losses and foreclosures persist in causing worries for regulators and banking firms. Commercial real estate has shown increasing weakness in recent quarters, since it traditionally lags behind the disruptions in the residential home market. The continued increase in commercial real estate foreclosures and loan defaults are sending shockwaves through the financial sector as well. The default rate and late payments on real estate loans sold as commercial mortgage-backed securities (CMBS) soared to five times the previous rate in the third quarter. Approximately $26.64 billion of outstanding CMBS loans were 60 days or more past due in the last quarter, according to Reis Inc, a commercial real estate analysis firm. The delinquency and default rate rose to 4.52 percent from 0.8 percent just one year ago and 3 percent in the second quarter of 2009.

The firm said commercial property defaults and commercial foreclosures could exceed 6 percent near the end of the year. The Reis report said, “Downward pressure on net operating income and declining property values continue to make refinancing activity for existing loans a challenge.” The third quarter of 2009 became the fifth straight one in which no CMBS deals came to market in the U.S., according to the Ries report. Hotel loans constituted the poorest performers, with $6.83 billion of past-due loans, for a delinquency and default rate of 13.3 % of outstanding balances, said Reis. In comparison, the rates were 4.8 percent for apartments and 2.95 percent for offices in the last quarter. A delinquent loan is a minimum of 30 days and up to 89 days past due, with the loan going into default after 90 days. The Mortgage Bankers Association said the CMBS market represented nearly a quarter of all outstanding commercial loans as of the end of 2008.

The recent real estate market conditions here in Myrtle Beach, South Carolina have been challenging, to say the least, in both the residential and commercial housing sectors. Here at Coastal Reo Solutions, we have been working extremely hard to help our clients through these times. Our recent solution to a commercial real estate foreclosure for Horry Count State Bank was both a triumph and an illustration of the current difficulty many banks and lenders have in the commercial real estate market. We can assist both a borrower and a lending institution with a workable solution to assess, manage and market their foreclosure or pre-foreclosure property. Please contact us so we can start working on a resolution for your particular situation.

If you are a buyer, investor, or speculator looking to purchase foreclosed real estate be sure to use the proprietary search application located on our website. CRS also has access to Bulk REO packages and Bank Notes that may be purchased.

Short Sales Turning Into Foreclosures

admin — Mon, 14 Sep 2009 04:32:36 +0000

Reports from The National Association of Realtors show that approximately one-third of home sales over the last few months have been either a foreclosed property or a short sale. The sale of a property for less than the mortgage owed to a financial institution is known as a “short sale”. In some cases, the remaining debt is written off by the lender, and in others, the borrower must make provisions with the lender to settle the outstanding debt. Theoretically, delinquent homeowners get out from under a mortgage they cannot afford, and the institution avoids the costly procedure of a foreclosure, even though they generally lose money in the process. The money lost on the short sale is usually less than the cost of the foreclosure option, so it has a decided advantage for the institution. The Treasury department is expected to announce a new policy that will encourage mortgage lenders to increase short sale attempts through a financial subsidy and provide standardized guidelines and procedures for lenders and REO professionals. The Treasury plan, which is anticipated to be instituted later this month, would give loan servicers a $1,000 “success fee” when a short sale is finished, according to short sale specialists that have seen a preliminary outline of the policy. The home owner would be given up to $1,500 to aid in relocation expenses, like the “cash for keys” program that various servicers are offering.

A short sale has been considered a stopgap measure to prevent a surplus of foreclosures for an institution, but recent trends have shown that fewer and fewer short sales are actually being approved or completed, resulting in the continued climb in foreclose properties in the marketplace. Some buyers have become frustrated with the process and choose to pursue other options because short sale transactions have been delayed for many months. This has been attributed to the lack of standardized procedures within the mortgage industry to manage these arrangements. Each individual institution may have its own set of policies, which presents a difficult avenue for realtors and their clients to pursue. Many lenders simply do not have the requisite staffing, knowledge and systems in place to process short sales in a suitable time frame for a buyer to take advantage of the bargain. Another problem is lack of experience and education among real estate professionals in working with these new marketplace options.

Here at Coastal REO, we are ahead of the learning curve dealing with short sales and foreclosed properties and recently completed a million dollar deal on a property in Myrtle Beach, SC. You can be assured that working with our team can prevent the time loss and potential revenue loss that comes with attempting to complete these complex transactions with an inexperienced agent. Contact us today to see how we can move forward with your particular circumstance.

Foreclosures Jump as Moratorium Ends

jellis — Thu, 16 Apr 2009 15:23:49 +0000

Foreclosures jumped 46 percent in March compared to a year earlier and were up 17 percent compared to February with more than 340,000 properties affected nationwide, according to foreclosure marketer RealtyTrac.

Nearly 804,000 homes received at least one foreclosure-related notice from January through March, up from about 650,000 in the same time period a year earlier, RealtyTrac says.

Many lenders and servers had put a moratorium on foreclosures, waiting for the details of the Obama administration’s foreclosure plan. But now they are back with a vengeance. The end of the moratorium is also driving an increase in the availability of REO properties, according to RealtyTrac.

Nevada, Arizona and California had the nation’s highest foreclosure rate. Other states in the top 10 in the first quarter were Florida, Illinois, Michigan, Georgia, Idaho, Utah and Oregon.

States with the highest number of actual foreclosures, 60 percent of the total, were California, Florida, Arizona, Nevada and Illinois. Rounding out the top 10 were Michigan, Ohio, Georgia, Texas and Virginia.

One in every 159 homes nationwide was at some stage of foreclosure, according to RealtyTrac.

Source: RealtyTrac (04/09/2009)