Market Studies

Distressed commercial real estate in the United States stood at $181.1 billion in June, according to the analysts at Delta Associates. That tally includes properties in default, in foreclosure, and lender REO. The firm says the amount of distress in the commercial real estate (CRE) sector has increased by $500 million since April but still remains on the low end of the plateau range. The level of distress began to plateau in spring 2010, according to Delta Associates, and has stayed between $175 billion and $190 billion since then.

The number of foreclosure filings for the second quarter of this year was the lowest reported since the fourth quarter of 2007, according to RealtyTrac's Midyear 2011 Foreclosure Market Report released Thursday. All categories of foreclosures showed decreases on both a quarterly and annual basis. June marked the ninth consecutive month in which foreclosure activity declined on a year-over-year basis.

Home prices have gotten a little bit of a boost in recent months thanks to a seasonal uptick in market activity. Most analysts, expect further declines to characterize the later part of the year and possibly extend into next year, largely because of the huge supply of foreclosures on the market. Mortgage insurer PMI says there's a 50 to 60 percent chance that home prices at the national level will be lower in March 2013 than they were in March 2011. PMI has put a figure on the likelihood that home prices will continue to depreciate over the next two years.

FICO's second-quarter survey of bank risk professionals reveals pessimism in regards to expected mortgage delinquencies in the second half of 2011. While 46 percent of respondents expected mortgage delinquencies to rise over the next six months, 18 percent expected them to decline. The numbers were similar in regards to delinquencies on home equity lines of credit, where 46 percent of respondents expected delinquencies to rise, while 22 percent expect them to decline. Bankers were somewhat optimistic about consumer credit.

The promise of a loan modification based on delinquency status induces some financially proficient borrowers to intentionally fall behind on their mortgage payments, according to a study commissioned by the National Bureau of Economic Research in Massachusetts and conducted by researchers at Columbia University. Led by Christopher Mayer, senior vice dean and professor of real estate at Columbia Business School, the research team examined the modification policies of Countrywide Financial.

There are a growing number of distressed commercial real estate assets trading as bank regulators put more pressure on lenders to deal with nonperforming loans, according to Price waterhouseCoopers LLP.

Putting struggling borrowers into mortgages with more manageable monthly payments via a loan modification is a key element of the industry's effort to cut the nation's foreclosure crisis short. A recent study by the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) took a look at loan performance post-modification. The regulators found that more recent modifications have performed better than earlier modifications, reflecting an increasing emphasis on lower monthly payments and sustainability.

Foreclosure sales declined for the second straight month, while foreclosure starts increased, according to HOPE NOW. Foreclosure sales nationwide decreased 7 percent from 73,000 in April to 68,000 in May.

As the second year of CMBS 2.0 begins, credit ratings agencies say they are taking stock of where credit quality stands and where it may be headed from here. With that assessment, conflicting views persist on the strength of the underwriting behind new commercial mortgage-backed securities (CMBS). While the real estate and financial crises invoked a tightening of credit and lending criteria, some say questionable practices, particularly related to appraisal assessments, have begun to make their way back into the picture.

During the second quarter of 2011, foreclosure actions plunged by 51 percent in the tri-county South Florida region compared to the same three-month period in 2010, according to a new report from CondoVultures.com. Lenders filed close to 7,200 notices of default between April and June in Miami-Dade, Broward, and Palm Beach counties. Nearly 14,800 were filed in the second quarter of 2010. At the current pace, foreclosure filings in 2011 would rank as the fewest number of actions since the South Florida real estate downturn began.