According to the American Bankers Association (ABA), lenders wrote off $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows.
So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter. Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar.
“People got 90 cents for free,” says Christopher A. Combs, a real estate lawyer. “It rewards immorality, to some extent.”
The amount of bad home equity loan business during the boom is incalculable and in retrospect inexplicable, housing experts say. Most of the debt is still on the books of the lenders, which include Bank of America, Citigroup and JPMorgan Chase.
“No one had ever seen a national real estate bubble,” said Keith Leggett, a senior economist with the American Bankers Association. “We would love to change history so more conservative underwriting practices were put in place.”
The delinquency rate on home equity loans was 4.12% in the 1st quarter, down slightly from the fourth quarter of 2009, when it was the highest in 26 years of such record keeping.
Showing posts with label default rate. Show all posts
Showing posts with label default rate. Show all posts
Thursday, August 19, 2010
Thursday, June 3, 2010
Commercial Defaults Hit Record for Both Investors and Banks
Pressures continue to drive up commercial mortgage defaults.
The economic downturn has choked off demand for retail and office space, with vacancy rates rising and prospects of new occupants limited by the duress of today’s job market.
At the same time, commercial real estate (CRE) values have dropped more than -40% in some markets, pushing a growing number of property owners severely underwater.
According to new data from Real Capital Analytics, the default rate for commercial real estate loans owned by the nation’s FDIC-insured banks increased from 3.83% in the 4th quarter of 2009 to 4.17% in the 1st quarter of 2010.
Real Capital says this is the highest default rate reported since 1992, the first year for which data is available, when it was 4.55%.
Year-over-year, the default rate is up by 192 basis points. By contrast, at its cyclical low in the first half of 2006, the commercial mortgage default rate was only 0.58%.
As of the 1st quarter of this year, $45.5 billion of bank-held commercial mortgages were in default, according to Real Capital’s tally.
A separate study released this week by Trepp LLC shows that the share of past due loans held by investors in commercial mortgage-backed securities (CMBS), including those already in foreclosure and bank repossessed, jumped 40 basis points in May to 8.42% – the highest in the history of the CMBS industry.
To put the delinquent CMBS universe into perspective, Trepp says that just six months ago, the delinquency rate was 5.65%. One year ago, it was 2.77%.
The economic downturn has choked off demand for retail and office space, with vacancy rates rising and prospects of new occupants limited by the duress of today’s job market.
At the same time, commercial real estate (CRE) values have dropped more than -40% in some markets, pushing a growing number of property owners severely underwater.
According to new data from Real Capital Analytics, the default rate for commercial real estate loans owned by the nation’s FDIC-insured banks increased from 3.83% in the 4th quarter of 2009 to 4.17% in the 1st quarter of 2010.
Real Capital says this is the highest default rate reported since 1992, the first year for which data is available, when it was 4.55%.
Year-over-year, the default rate is up by 192 basis points. By contrast, at its cyclical low in the first half of 2006, the commercial mortgage default rate was only 0.58%.
As of the 1st quarter of this year, $45.5 billion of bank-held commercial mortgages were in default, according to Real Capital’s tally.
A separate study released this week by Trepp LLC shows that the share of past due loans held by investors in commercial mortgage-backed securities (CMBS), including those already in foreclosure and bank repossessed, jumped 40 basis points in May to 8.42% – the highest in the history of the CMBS industry.
To put the delinquent CMBS universe into perspective, Trepp says that just six months ago, the delinquency rate was 5.65%. One year ago, it was 2.77%.
Tuesday, December 1, 2009
The Next Shoe To Drop?: Commercial Real Estate Defaults Double
Real Estate Econometrics LLC says commercial mortgage default rate on loans held by U.S. banks more than doubled to 3.4% in the third quarter as vacancies rose and rents declined.
Defaults climbed from 1.37% a year earlier and from 2.88% in the second quarter, the New York-based property research firm said today in a report.
Default rates in the first three quarters of 2009 have been the highest since 1993, the firm said.
“Mortgages originated in 2006 and 2007 are experiencing the most significant shortfalls in current cash flow relative to current debt-service obligations,” Sam Chandan, chief economist of the firm, said in the report.
Federal Reserve Chairman Ben S. Bernanke said in a November 16 speech that “the fallout” for banks from commercial real estate could slow the nation’s economic recovery.
Defaults on bank-owned commercial property mortgages posted the biggest quarterly jump from the previous quarter in six years of FDIC data analyzed by Real Estate Econometrics.
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