Wednesday, September 29, 2010

Regulators break the law, violated firms have to apologize

Really it is not that big a deal - customer data was illegally distributed to an attorney by regulators and nothing will ever come of it that would impact customers. However, the WSJ reports that the Alabama Securities Commission obtained confidential customer information related to their investigation into Morgan Keegan's own personal subprime debacle. When an attorney who is suing Morgan Keegan requested unrelated data from the ASC, they went ahead and just sent him 14,000 clients, names, social security numbers, etc.

So, Morgan Keegan was required by law to give up the information, and then the ASC broke the law by disseminating, even if it was unintentional, and finally Morgan Keegan has to foot the bill for notifying customers, setting up credit monitoring, etc. Morgan Keegan may be a bad guy here in the big picture, but the regulators continue to violate their duties and public trust in a big way with no repercussions. After Madoff, there should have been public lynchings - where is the outrage - we don't need new laws, we need new deputies!

Tuesday, September 28, 2010

More than $3 billion in Loan Sales Coming...

Also on the CRENews website, from last week:

Since the beginning of September, loan-sales advisers have taken offers on some $1.5 billion of loans that they have been marketing on behalf of their bank, special servicer and government-agency clients. And the expectation is that substantially more loans - as much as $3 billion or more - will be offered in the coming weeks.

Among special servicers, LNR Partners, CWCapital Asset Management, C-III Asset Management and Midland Loan Services are each said to be preparing the sale of loans.

LNR will be offering $200 million of hotel loans through Jones Lang LaSalle and another $100 million of small-balance hotel loans through an auction venture of JLL and REDC. It will also be offering roughly $150 million of additional loans through DebtX.

Earlier this year, it [LNR] orchestrated the sale of a $1 billion portfolio that was comprised largely of small-balance loans. Those loans were sold through Eastdil Secured to four investor groups. But instead of going the bulk-sales route this time around, the Miami company is looking to sell loans individually.

CWCapital, meanwhile, will take bids for $207 million of loans later this month through Mission Capital. It has also offered loans through CB Richard Ellis and Eastdil.

The very excellent article goes on to list a number of other coming sales from banks including M&I, BB&T, KBW (for a third party) together are expected to sell another $2-3 billion in portfolio loans.

As previously noted, everyone was waiting to see how these late summer CMBS sales ($1.5 to $2 billion was CMBS loans via Eastdil and Mission Capital) went in order to judge what to do with the other $80 or so billion on special servicers' desks. At the end of the day, the big $1.04bln LNR package of small balance CMBS loans exceed expectations and were mostly bought up by a large financial institution and financed by another large financial institution (both household names) at higher than expected prices.

I don't know what that does to the market - so many buyers have to deploy capital or lose it, so maybe they acquiesce now that a high watermark has been set and they just keep bidding up prices. Surely sellers like the execution and will start flooding the market just as Orest Mandzy notes in the above article.

At the very least CMBS credit IO holders should probably start shortening their expected workout periods on the aged REOs. The LNR sale was officially announced on 4/29/2010 (there were some early looks in mid-April) and the losses were reflected on the loans on 7/21/2010. That seems pretty quick to me.

Wells Fargo/Principal teaming up again

Wells has both been hiring and originating in recent months to come to market with a deal, one would presume, in the not-so-distant future. Earlier today Bloomberg had a story linked to CRENews (subscription required) that Principal was coming back and would originate deals for the new Wells shelf.

Historically Principal and Wells, pre-Wachovia, co-contributed to the PWR, TOP, and IQ brands.

NY Appeals Court denies Ackman's request to stay the 10/4 foreclosure on PCV/ST

Thursday, September 23, 2010

MBS Investor Database

Talcott's basement smells and he created a database to track MBS investors:

This year, the former partner at lobbying firm Patton Boggs LLP also found a unique solution to an even bigger housing problem: getting money back for investors in residential mortgage-backed securities that went bad. Franklin created a clearing house where investors can pool claims and potentially create the necessary legal clout to force mortgage lenders to buy back improperly made loans at the heart of the securities.

Before Franklin’s innovation, investors in such securities had no way of knowing who other investors were. Franklin’s approach may cost banks such as Bank of America Corp. billions of dollars. Lenders can be required to buy back securitized mortgages if they misrepresented their quality.

Can't you see the vast majority of the investors just using PHDC in Bloomberg (the article is written by Bloomberg) or use one of the other data providers?

JPMCC 2010-C2 $1.1bln

Class S&P/Fitch Size ($MM) WAL Subordination
A-1 AAA/AAA $266.70 4.27 18.25%
A-2 AAA/AAA $243.10 7.18 18.25%
A-3 AAA/AAA $390.50 9.79 18.25%
B AA/AA $37.20 9.89 14.88%
C A/A $53.70 9.91 10.00%
D BBB+/BBB+ $33.00 9.97 7.00%

Wednesday, September 22, 2010

Former Kemsley buildings trade

NYPost reports that

Invesco has stepped up to the plate to win 100 Fifth Ave. for $93.5 million, while 183 Madison is going to Peter Armstrong's Rigby Asset Management with his partner, the Argentinean fund IRSA, for $75 million.

Pricing for 183 Madison on the southeast corner of 34th Street came in at $305 for 246,000 feet, while 100 Fifth's 258,000 square feet in the Union Square area ratcheted a bit higher at $360 a foot.

These are the buildings formerly owned by Paul Kemsley's Rock & HBOS and have been in receivership (PwC) for at least a year. PK also went long Lehman after it went bust and most recently bought the NY Cosmos (soccer).

The Queen is dead! Long live the Queen!

Younan refiedYounan Plaza with 70% LTV CMBS loan and a ~5% coupon.

With a loan maturity looming, Younan Properties has refinanced 4041 Younan Plaza, a 20-story, 405,693-square-foot office building located in downtown. The Woodland Hills, CA-based owner obtained the five-year, fixed-rate loan through a new conduit program with Deutsche Bank and used the proceeds to buy out the class A office tower’s largest investor.
“We were surprised by the availability and the terms of the CMBS loan,” Younan admits, adding that the new conduit loan provided 70% LTV and an interest rate near 5%. “We did not know CMBS was active because these days you’re not sure of anything. We learned that CMBS is coming back to life, and that a lot of banks are originating and able to package them.”

Rialto adds $7.7mm to LNRs bottom line

Distressed Debt Report:

Miami-based Lennar Corp. posted a profit for its fiscal quarter ending Aug. 31, thanks in part to the work of Rialto Investments, its division dedicated to acquiring distressed assets.

In February, Rialto teamed up with the Federal Deposit Insurance Corp. to acquire a 40% equity interest in 5,500 loans that had been originated by two dozen banks seized by the federal government. Rialto paid $243 million for its share of the loans.

Tuesday, September 21, 2010

August 2010 Delinquencies up 1/2 billion to $61.4 billion

Realpoint came out with their August numbers. This is substantially faster than the June to July change of $387.9billion.

Balance of 90+ day delinquent loans declined (first decline since we started down this rabbit hole), every other bucket increased.

Total Realpoint Delinquency Level - 8.14%
sans Agency -- 8.48%
Conduit/Fusion - 8.61%

They reference the pipeline of problem loans too. All brand name loans typical of '06 and '07: EOP, ESH, PCV/ST, Beacon & Seattle, Farallon MHC, and CNL Hotels & Resorts. (That's 3 pari passu loans now)

Average Loss Severity in August - 62%. They have a nice breakout at the end regarding losses if you want some references.

Their report is free -

Saturday, September 18, 2010

No Problems at Fannie & Freddie due to Multifamily?

The Wall Street Transcript had an interview with Michael Levy titled "CMBS Risk Even Fannie And Freddie Would Not Underwrite" that got picked up by a few outlets. They kind of glaze over some of the facts and imply that the Enterprises (or Agencies, whatever you want to call them) are not exposed to the multifamily in CMBS?!? Obviously, we all know that there was a directed tranche (A1A) in every Conduit deal that contained all the Multifamily loans, and it was solely purchased by Freddie and Fannie.

The fact they skip this little factoid makes you question the entire article.

A good example of that would be Peter Cooper Village and Stuyvesant Town - that was something that the agencies wouldn't issue a traditional mortgage for because it was underwritten with very little equity and at a relatively low debt service coverage ratio. That's really the prime example of where an apartment operator wouldn't go to Fannie and Freddie to get a mortgage at the peak of the market because they couldn't, because it didn't meet Fannie and Freddie underwriting standards. So they went to the CMBS market, and that's why, in my opinion, to some degree apartment CMBS has had weaker performance than non-apartment CMBS debt.

Uh, all the current problems aside, and even realizing that many (most) questioned the viability of the sub-1% cap rate trade of PCV/ST, the original LTV was something like 54% on the senior debt in question. That was not the issue. Further, guess who is exposed directly to the senior mortgage of PCV/ST, wait for it, wait for ... Freddie Mac and Fannie Mae, of course. They bought up the A1A notes on the CMBS deals that contain the mortgage.

So, let's leave aside their multifamily "portfolio" lending for a second and focus on their CMBS-like exposure. Freddie has a multifamily shelf called FHLMC Multifamily Structured Pass Through Certificates, off which they've issued $7.7 billion since late 2006, with $6.6 billion of that done since the crisis began (they just closed a deal this week run by BankofAmerillwide). Fannie has their DUS program (Delegated Underwriting and Servicing) - I don't know how bit it is, but I'll take a guess it is $50 billion-ish, and I'd be surprised if I were off by more than 20% (sorry not more firm).

Finally, let's look at their actual exposure to pure CMBS Conduit deals. Since 2003, virtually every Conduit deal had an A1A tranche that was purposefully designed and pre-sold to one of the Agencies. Guess how many deals Freddie/Fannie bought virtually all of the multifamily exposure (approximately 16% of the total deal size) from? 221 deals worth $562 billion dollars!

The current outstanding balance of the A1A bonds on their balance sheets is approximately $75 billion (the factor is just 0.90838 because most of the underlying loans have not started to mature yet). In all fairness, the A1A does have a 30% subordination, giving them additional protection as well.

The Enterprises were part of the problem. They deserve no slack, and you especially can't congratulate them for "avoiding" the problems with the CMBS multifamily mortgages, when they were the only two companies investing in them!

Cap Rates Fall Across the Board

CREConsole has a full update, but here it is graphically:

Sunday, September 12, 2010

NCREIF Cap Rate to Treasury Spread Update

This is a little "last week", but CREConsole did provide a couple of nice graphs (from Real Capital Analytics) to accompany the Bloomy article that was arguing Cap Rates current spread to Treasurys are a sign that you should invest in CRE... I don't agree with the Bloomberg article, to be clear, but the charts are still interesting.

Tuesday, September 7, 2010

Delinquencies up 21 bps in August per Trepp

Is there any other CMBS news out there to report on?