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Tag Archives: Fitch Ratings

Trepp, Fitch Report Drop in CMBS Delinquencies, Moody’s Sees Increase

Reports from three different agencies paint distinct pictures of the rate at which loans held in commercial mortgage-backed securities (CMBS) are going bad. Two tracked declines in the CMBS delinquency rate for during October - one says it's the first drop in over a year, the other says it's the first in nearly three years - and the third claims delinquencies are still rising on commercial mortgages. Hotels and multifamily complexes claim the highest delinquency rate among property types in all three reports.

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Fitch Says Outlook for Entire Residential Servicing Sector is ‘Negative’

Fitch Ratings has assigned a negative outlook to the entire U.S. residential mortgage servicer sector, citing concerns over procedural defects in the judicial foreclosure process. Fitch says robo-signing issues pose several risks for the servicers involved, including additional costs and resources to research and remediate errors, potential penalties, and flawed reputations. But the damage goes beyond just those servicers. Fitch says it's now an industry-wide issue that will place all servicers under increased scrutiny.

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Fitch Says 7M Homes in the Shadows Will Take 40 Months to Clear

Fitch Ratings puts the industry's shadow inventory - meaning loans that are seriously delinquent, in foreclosure, or REO - at 7 million homes. The agency says based on recent liquidation trends, it will take more than 40 months to clear this distressed inventory. While the volume of newly delinquent mortgages has begun to improve, liquidation rates have been constrained by weak demand and initiatives to modify loans. On top of that, Fitch says the recent discovery of defects in the foreclosure process is prolonging the housing correction.

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Default Not Always Imminent For CMBS Transfers to Special Servicing

While most loans held in commercial mortgage-backed securities (CMBS) that transfer to special servicing are driven by borrowers looking to prevent future defaults, some recent transfers are showing something else entirely - opportunistic borrowers looking to capitalize on current market conditions, according to Fitch Ratings. The majority of special servicing transfers are classified as imminent default, but this is a ""catch-all"" label. Fitch has been monitoring the market in light of this fact and says some of the results are surprising.

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Weak Job Market Strong Dynamic in Commercial Mortgage Performance

The nation's poor employment picture has become one of the biggest impediments to a perceptible recovery in the mortgage markets - both for residential and commercial real estate. Job loss is now the primary trigger of default among struggling homeowners, and two separate research reports have uncovered a clear correlation between state-specific delinquency rates for commercial mortgages and unemployment levels. Nevada and Michigan rank among the highest for both, according to Fitch and Moody's.

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Equifax Launches New Product for Loan Review Income Verification

The Work Number, an employment and income verification service of Equifax, recently launched a new product, Point In Time, which, according to the company, is a response to market demands for loan-level documentation to investigate repurchases and mortgage insurance rescissions. Designed to provide retro income verification services to validate and document a borrower's employment and income for loan funding, Point In Time was created to help lenders, insurers, and investors automate and streamline the quality assurance process.

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CMBS Delinquencies Moderate, but Rate Still Above 8%: Reports

Special servicers of commercial real estate loans are feverishly pursing workouts and liquidations. Their efforts have helped to moderate increases in past dues, but delinquency rates, nonetheless, continue to rise. Two industry reports released last week served to drive this point home. Fitch Ratings says the delinquency rate on loans held in its rated commercial mortgage-backed securities (CMBS) hit 8.48 percent in August. Moody's reported a similar increase to 8.10 percent.

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Fitch Upgrades BofA but Voices Concern over Mortgage Portfolio

Fitch Ratings has upgraded the individual and preferred stock ratings of Bank of America. But the agency says the upgrades are tempered by the bank's high level of nonperforming loans and the likelihood of large volumes of mortgage repurchase requests from the GSEs and other secondary market investors, largely because of the loans the bank inherited from its Countrywide acquisition. Fitch also expressed concern about BofA's exposure to home equity loans, especially those with loan-to-value ratios above 100 percent.

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Four Major Banks Could Be Hit with $180B in GSE Loan Buybacks: Fitch

About 50 percent of the loans held by Fannie Mae and Freddie Mac come from the nation's four largest banks - Bank of America, JPMorgan Chase, Wells Fargo, and Citi. Lately, the GSEs have become more aggressive in forcing originators to buy back bad loans. Based on Fannie and Freddie's current ""distressed"" numbers (a combined $354 billion in delinquent mortgages and REOs), Fitch Ratings estimates that the big four could be on the hook to repurchase as much as $180 billion in nonperforming assets.

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Fitch Says Maturing CMBS Loans Face Rocky Road Ahead

August is expected to be a challenging month for maturing commercial mortgage-backed securities (CMBS) loans. According to Fitch Ratings, eight U.S. CMBS loans with balances greater than $20 million that are scheduled to mature next month are likely to default. Two-thirds of these Fitch-rated loans were originated in 2005 and typically had five year terms, little to no amortization, and below market coupons, which will likely result in an increase in maturity defaults in today's higher mortgage rate environment with stricter underwriting standards, Fitch said.

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