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Commercial/Multifamily Mortgage Delinquencies Down; Best Performing Bank Loans Dureing Recession - MBA (Washington DC)
Commercial and multifamily mortgage delinquency rates declined during the fourth quarter of 2011, and an analysis of data from the Federal Deposit Insurance Corporation (FDIC) shows that commercial and multifamily mortgages have fared better through the credit crunch and recession than any other major type of loan held by banks and thrifts, according to two reports released today by the Mortgage Bankers Association (MBA).
During the fourth quarter, the 60+ day delinquency rate for loans held in life company portfolios fell 0.02 percentage points to 0.17 percent. The 60+ day delinquency rate for multifamily loans held or insured by Freddie Mac fell 0.11 percentage points to 0.22 percent. The 90+ day delinquency rate for loans held by FDIC-insured banks and thrifts fell 0.20 percent to 3.55 percent. The 30+ day delinquency rate for loans held in commercial mortgage-backed securities (CMBS) fell 0.36 percentage points to 8.56 percent. The 60+ day delinquency rate for multifamily loans held or insured by Fannie Mae increased 0.02 percentage points to 0.59 percent. These and other figures come from MBA’s Commercial Real Estate/Multifamily Finance Mortgage Delinquency Rates for Major Investor Groups report.
In a Research DataNote analyzing year-end data from the FDIC, MBA found that over the course of 2011, and throughout the credit crunch and recession, commercial and multifamily mortgages have had the lowest charge-off rates of any type of loan held by commercial banks and thrifts. In 2011, banks and thrifts charged off 0.84 percent of their balance of commercial mortgages and 0.74 percent of their multifamily mortgages, compared to charge-off rates of 1.22 percent and 1.24 percent respectively in 2010, and a 2011 charge-off rate of 1.55 percent for their total portfolios of loans and leases.
“Commercial and multifamily mortgage delinquency rates continue to stabilize and improve in parallel with the broader economy,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “And counter to what many have predicted, commercial mortgages have proved to be neither ‘the next shoe to drop’ nor a ‘ticking time bomb’ for the banking sector or the economy as a whole. The data show that, to the contrary, commercial and multifamily mortgages have generally performed well for most investor groups and have been the best performing loans held by banks and thrifts through this recession.”
DELINQUENCY RATES
At the end of the fourth quarter, the delinquency rate for commercial and multifamily mortgages held in life insurance company portfolios was 7.36 percentage points lower than the series high (7.53 percent, reached during the second quarter of 1992). The rate for multifamily loans held by Freddie Mac was 6.59 percentage points lower than the series high (6.81 percent, reached in the fourth quarter of 1992) and the rate for multifamily loans held by Fannie Mae was 3.03 percentage points below the series high (3.62 percent, reached during the fourth quarter of 1991). The fourth quarter 2011 delinquency rate for commercial and multifamily mortgages held by banks and thrifts was 3.03 percentage points lower than the series high (6.58 percent, reached in the second quarter of 1991). The rate for loans held in CMBS was 0.46 percentage points below the series high (9.02 percent, reached in the second quarter of 2011).
Construction and development loans are not included in the numbers presented here, but are included in many regulatory definitions of ‘commercial real estate’ despite the fact that they are often backed by single-family residential development projects rather than by office buildings, apartment buildings, shopping centers or other income-producing properties. The FDIC delinquency rates for bank and thrift held mortgages reported here do include loans backed by owner-occupied commercial properties.
The MBA analysis looks at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, CMBS, life insurance companies, Fannie Mae and Freddie Mac. Together these groups hold more than 80 percent of commercial/multifamily mortgage debt outstanding.
The analysis incorporates the same measures used by each individual investor group to track the performance of their loans. Because each investor group tracks delinquencies in its own way, delinquency rates are not comparable from one group to another. Differences between the delinquency measures are detailed in Appendix A of the report.
BANK LOAN PERFORMANCE
Over the course of 2011, and throughout the credit crunch and recession, commercial and multifamily mortgages have had the lowest charge-off rates of any type of loan held by commercial banks and thrifts. In 2011, banks and thrifts charged off 0.84 percent of their balance of commercial mortgages and 0.74 percent of their multifamily mortgages, compared to charge-off rates of 1.22 percent and 1.24 percent respectively in 2010.
By contrast they charged off 0.89 percent of their balance of commercial and industrial loans, approximately 1.43 percent of their one-four family residential loans, 1.25 percent of other (non-credit card) loans to individuals, 3.33 percent of their construction loans and 5.45 percent of their credit card loans. Commercial and multifamily charge-off rates tend not to rise as rapidly as other charge-off rates during the onset of a recession and tend not to decline as rapidly as others during the onset of a recovery.
In aggregate dollars, the charge-offs of commercial and multifamily mortgages by banks and thrifts also remained far below those of other loan types during the recession. Over the course of 2007, 2008, 2009 2010 and 2011, banks and thrifts charged off $181 billion of single-family mortgages, $178 billion of credit card loans, $88 billion of commercial and industrial loans, $81 billion of construction loans and $65 billion of other loans to individuals. By contrast, over the same period, they had to charge-off only $35 billion in commercial mortgages and $8 billion in multifamily mortgages.
To view MBA’s Q4 2011 Commercial/Multifamily Mortgage Delinquency Rates report, click here.
To view MBA’s Research DataNote, click here.
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Mortgage Applications Decrease in Latest MBA Weekly Survey - MBA (Washington DC)
Mortgage applications decreased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 2, 2012.
The Market Composite Index, a measure of mortgage loan application volume, decreased 1.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 10.2 percent compared with the previous week. The Refinance Index decreased 2.0 percent from the previous week. The seasonally adjusted Purchase Index increased 2.1 percent from one week earlier. The unadjusted Purchase Index increased 14.7 percent compared with the previous week and was 7.8 percent lower than the same week one year ago. Last week’s results included an adjustment for the Presidents Day holiday.
The four week moving average for the seasonally adjusted Market Index is down 1.77 percent. The four week moving average is down 0.47 percent for the seasonally adjusted Purchase Index, while this average is down 2.04 percent for the Refinance Index.
The refinance share of mortgage activity decreased to 77.0 percent of total applications, the lowest since December 2011, from 77.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.4 percent from 5.0 percent of total applications from the previous week.
During the month of February, the investor share of applications for home purchase was at 6.1 percent, a decrease from 6.4 percent in January. This change was led by a decline in the New England region. In addition, the share of purchase mortgages for second homes decreased to 5.8 percent in February from 5.9 percent in January.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.06 percent from 4.07 percent, with points decreasing to 0.50 from 0.51 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.33 percent from 4.34 percent, with points remaining unchanged at 0.40 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.87 percent from 3.86 percent, with points decreasing to 0.70 from 0.80 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 3.36 percent, with points remaining unchanged at 0.38 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 5/1 ARMs remained unchanged at 2.78 percent, with points decreasing to 0.35 from 0.38 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
If you would like to purchase a subscription of MBA’s Weekly Applications Survey, please visit www.mortgagebankers.org/WeeklyApps, contact
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
or click here.
The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.
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Government Foreclosure to Rental Pilot Programs Not Needed in Most Markets - NAR (Washington DC)
Housing markets are complex and varied, and a government pilot program to turn bank-owned properties into rentals could be disruptive and counterproductive in some markets, according to the National Association of Realtors®.
NAR urges the Federal Housing Finance Agency (FHFA) to proceed cautiously with its Real Estate-Owned (REO) Initiative pilot program to sell homes repossessed by government agencies to private investors to convert into rental units.
“As the nation’s leading advocate for homeownership and housing issues, Realtors® support efforts to reduce the high inventories of foreclosures, but all real estate is local and we are concerned that REO-to-rental programs are not necessary in some areas and could even hinder the recovery,” said NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami. “In many communities REOs are already moving well through the normal processes, so we urge caution when proceeding with a rental program.”
According to a recent NAR analysis, while the overall visible inventory of foreclosures has been trending down across the country, there is a noticeable difference in foreclosure inventories in states that require judicial proceedings to foreclose on a property versus inventories in states that do not require the court’s intervention. Foreclosure inventories in judicial states are currently 2.5 times higher than non-judicial states. In addition, the disposition of foreclosure inventories is considerably faster in non-judicial states, where foreclosure sales rates are four times higher than in judicial states.
“Inventories of condos and single-family homes for sale continuously fell last year, suggesting that there is no significant oversupply of visible foreclosure inventory in the market,” said NAR Chief Economist Lawrence Yun. “Even the shadow inventories of distressed homes have fallen, though they remain elevated and are an ongoing concern. The government REO-to-rental plan could work in areas where buyers are not quickly absorbing the shadow inventory.”
To prevent further increases in foreclosure inventory, NAR has repeatedly called for improved lending to creditworthy home buyers and have urged lenders to make more loan modifications, mortgage refinancings, and short sales, which will help stabilize struggling housing markets.
“While REO-to-rental programs could be successful in a few communities, we believe that doing more to ensure mortgage availability for qualified home buyers and investors could be even more beneficial in helping absorb excess foreclosure inventories across the country,” said Veissi.
NAR urges that a national advisory board be created to ensure that current and future REO-to-rental pilot programs truly benefit the local community, minimize taxpayer losses and stabilize home values, and suggests substantial participation of local market experts, especially licensed real estate professionals, who have unparalleled knowledge of local market conditions.
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NAHB Remodelers applauds Inhofe Bill to Improve Lead Paing Rule and reduce regulatory burden - NAHB (Washington DC)
The National Association of Home Builders (NAHB) Remodelers commended Sen. James Inhofe (R-Okla.) for introducing the Lead Exposure Reduction Amendments Act of 2012 (S. 2148) to improve the lead paint rule for home owners and remodelers who must comply with the costly work practices and record keeping requirements of the rule. The bill was introduced with five original co-sponsors: Sens. Charles Grassley (R-Iowa), David Vitter (R-La.), Michael Enzi (R-Wyo.), Tom Coburn (R-Okla.) and Roy Blunt (R-Mo.).
“We applaud Sen. Inhofe and his colleagues for sponsoring this bill to make much-needed improvements to EPA’s lead paint rule during this busy time in Congress,” said 2012 NAHB Remodelers Chairman George “Geep” Moore Jr., GMB, CAPS, GMR, a remodeler from Elm Grove, La. “If this effort is successful, it will reduce the regulatory burden for remodelers facing costly penalties for first-time violations like misfiled paperwork and allow home owners to make the final decision about renovations in their homes.”
The Environmental Protection Agency’s Lead: Renovation, Repair and Painting (LRRP) rule applies to homes built before 1978 and requires renovator training and certification, adherence to lead-safe work practices, containing and cleaning dust and record keeping.
By removing the opt-out provision in July 2010, EPA more than doubled the number of homes subject to the LRRP rule, adding an estimated $336 million per year in compliance costs to the remodeling community – without making young children any safer.
“We need to concentrate our efforts on helping the families that this law was designed to protect,” said Moore. “We support the intent of the lead paint rule to prevent childhood lead poisoning and believe that the provisions in this bill will encourage greater compliance by home owners. Common sense exemptions for emergency renovations and online recertification training are necessary improvements for remodelers and home owners to fully comply with the rule.”
The bill would reinstate the opt-out provision to allow home owners without small children or pregnant women residing in the home- not the government, to decide whether to require LRRP compliance, allow remodelers to correct paperwork errors without facing full penalties and provide an exemption for emergency renovations. It would also eliminate the requirement that recertification training be “hands on,” preventing remodelers having to travel to training facilities out of their region.
The introduction of companion legislation is being sought in the House of Representatives.
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Mortgage Alpplications Decrease in Latest MBA Weekly Survey - MBA (Washington DC) Mortgage applications decreased 0.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 24, 2012. This week’s results are adjusted for the Presidents Day holiday.
The Market Composite Index, a measure of mortgage loan application volume, decreased 0.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 9.4 percent compared with the previous week. The Refinance Index decreased 2.2 percent from the previous week. The seasonally adjusted Purchase Index increased 8.2 percent from one week earlier. The unadjusted Purchase Index increased 0.9 percent compared with the previous week and was 4.3 percent lower than the same week one year ago.
The four week moving average for the seasonally adjusted Market Index is up 0.33 percent. The four week moving average is down 0.96 percent for the seasonally adjusted Purchase Index, while this average is up 0.64 percent for the Refinance Index.
The refinance share of mortgage activity decreased to 77.9 percent of total applications from 80.1 percent the previous week. This is the lowest refinance share since December 2, 2011, and the first time the measure has fallen below 80 percent since December 9, 2011. The adjustable-rate mortgage (ARM) share of activity decreased to 5.0 percent from 5.3 percent of total applications from the previous week.
“Mortgage rates remained near survey lows last week, but refinance volume fell slightly,” said Michael Fratantoni, Vice President of Research and Economics at the Mortgage Bankers Association. Fratantoni continued, “According to survey participants, more than 20 percent of refinance applications were for HARP loans. The HARP share of total refinance applications has increased over the past month. Purchase application volume increased over the week, but remains within the narrow and anemic range of activity we have seen since the expiration of the homebuyer tax credit in May 2010.”
In January 2012, among home purchase applications, 86.4 percent were for fixed-rate 30-year loans, 6.5 percent for 15-year fixed loans and 5.4 percent for ARMs. The share of purchase applications for “other” fixed-rate mortgages with amortization schedules other than 15 and 30-year terms was 1.7 percent of all purchase applications. The share of 15-year fixed and ARM decreased from the previous month while the 30-year fixed and “other” fixed category shares increased from last month.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.07 percent from 4.09 percent, with points decreasing to 0.51 from 0.53 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. This is the lowest 30-year fixed rate since February 3, 2012. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 4.34 percent from 4.32 percent , with points decreasing to 0.40 from 0.42 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.86 percent from 3.87 percent , with points increasing to 0.80 from 0.41 (including the origination fee) for 80 percent LTV loans. This is the lowest FHA rate of the year. The effective rate increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.36 percent from 3.38 percent, with points increasing to 0.38 from 0.37 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 5/1 ARMs decreased to 2.78 percent from 2.94 percent , with points decreasing to 0.38 from 0.44 (including the origination fee) for 80 percent LTV loans. This is the lowest 5/1 ARM rate since MBA began tracking the series in January 2011. The effective rate decreased from last week.
If you would like to purchase a subscription of MBA’s Weekly Applications Survey, please visit www.mortgagebankers.org/WeeklyApps, contact
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
or click here.
The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.
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