Secondary Market

Nationwide, one in every 200 residential loans funded last year, totaling $14 billion, involved fraud, according to First American CoreLogic. Despite what looks like an unsettling amount of shadiness lurking within the mortgage market, the company says the fraud rate has been steadily declining for the past three years and is now about 25 percent lower than when it peaked in the third quarter of 2007.

The Federal Home Loan Bank of San Francisco has filed suit against nine securities dealers - including some of the nation's biggest lenders - alleging they made untrue statements related to the federal bank's investments in private-label residential mortgage-backed securities.

With financing for both residential and commercial real estate mortgages still tight, and the securitization market all but stagnant by historical standards, policymakers have been pushing lenders to get the wheels of finance churning again. It's a fine line to walk with new regulatory compliance issues and constrained capital, but Rep. Scott Garrett thinks he has the answer - covered bonds. They represent a $3 trillion market and are a major source of mortgage liquidity among European nations.

For the first time in two years, commercial real estate investors are expressing a renewed sense of optimism about the future. Based on their responses to a quarterly survey conducted by PricewaterhouseCoopers, investors believe the worst has passed and a commercial real estate recovery is on the horizon. According to the survey findings, investors believe owners and lenders are finally coming to grips with what assets are truly worth, and as a result they expect sales activity in 2010 to be a marked improvement over 2009.

Driven by drops in commercial mortgage-backed securities (CMBS) and construction loans held by banks and thrifts, the level of commercial/multifamily mortgage debt outstanding in the fourth quarter of 2009 decreased on both a quarter-to-quarter and year-over-year basis, according to the Mortgage Bankers Association's (MBA) analysis of the Federal Reserve Board Flow of Funds data.

Since the peak of 2008, hotel revenue has declined almost 20 percent. Fitch Ratings says it's the largest decline among the major commercial mortgage-backed securities (CMBS) property types. Given the current capital restrictions, the agency predicts defaults on hotel loans held by CMBS investors will nearly double by 2012 - with delinquencies jumping from the current level of 16.6 percent to 30 percent.

The Federal Reserve offered the same guarded outlook and careful phrasing that the markets have been hearing for several months when its board members emerged from their meeting Tuesday. The committee voted to hold its benchmark federal funds interest rate at 0 to 0.25 percent. And although some analysts are growing uneasy with the Fed's pledge of indefinitely low rates, policymakers reasserted that ""economic conditions will warrant exceptionally low levels for an extended period."" The central bank also stuck by its plan to cease purchases of mortgage bonds at the end of this month.

The Five Star Institute (FSI) is carving out its place in the commercial real estate sector. FSI is hosting its first-ever Commercial Default 360 conference, from April 5-7 in Dallas, Texas. The conference provides a forum for mortgage default servicing professionals to collaborate with key asset stakeholders from the commercial real estate sector, to address the challenges the market faces in the wake of rising delinquencies, complex commercial mortgage restructurings, looming foreclosures, and swollen portfolios of repossessed assets.

The Government National Mortgage Association (Ginnie Mae) guaranteed more than $29.3 billion in mortgage-backed securities (MBS) in February, the association announced Monday. Total single-family issuance for February was more than $28 billion, Ginnie Mae's multifamily MBS issuance was more than $730 million.

The beleaguered Citigroup Inc., who has repeatedly assured administration officials that it is getting back to banking basics, has found a buyer for its real estate investment business. Private equity firm Apollo Management LP has agreed to purchase Citi Property Investors, a unit of the bank's Citi Alternative Investments group.