Online Loans Centre

Germany’s multi-family housing market
is set to have the most deals in five years as investors
including private-equity firms are forced to sell almost 100,000
apartments to pay debt amassed in last decade’s buyout boom.

There were 2.9 billion euros ($3.7 billion) of apartment
property transactions in the first quarter alone, more than
three times the amount a year earlier, and the total this year
may exceed 6 billion euros, the most since 2007, according to
estimates by London-based real estate broker Savills Plc.

Fortress Investment Group LLC (FIG) and Guy Hands’s Terra Firma
Capital Partners Ltd. are among private-equity firms facing debt
maturities after buying thousands of German properties with the
easy credit available in the years before the financial crisis
hit in 2008. Loans for the deals were typically packaged and
sold as commercial mortgage-backed securities. A total of 10
billion euros of German multifamily CMBS is now set to mature by
the end of 2014, according to data compiled by Bloomberg.

“The main issue facing the larger players is purely
refinancing risk on maturity due to the size of their
outstanding debt,” said Nassar Hussain, founder of London-based
real estate debt adviser Brookland Partners LLP.

Concern about the scale of refinancing required has
depressed the values of senior German multi-family CMBS,
providing opportunities to bet on the outcome. Debt sold by
German Residential Asset Note Distributor Plc, backed by
Deutsche Annington Immobilien AG’s loans, trade at 92.1 cents on
the euro, according to data compiled by Bloomberg.

JPMorgan Trades

One active buyer of senior German multi-family CMBS has
been JPMorgan Chase Co. (JPM)’s $360 billion Chief Investment
Office, according to two people with knowledge of the matter,
who declined to be identified because the information is
private. The New York-based bank last week disclosed the CIO had
a $2 billion trading loss on synthetic credit derivatives.
JPMorgan spokesman Holger Ullrich declined to comment on the
CMBS investment.

Refinancing debt in Germany has become more challenging as
banks scale back lending as a result of stricter capital
standards, the sovereign-debt crisis and the continuing
stagnation of Europe’s CMBS market. Buyout firms and companies
that bought during the real-estate boom are being forced to
weigh alternatives including selling assets or pursuing an
initial public offering.

Gagfah Selling Apartments

Gagfah SA (GFJ), controlled by New York-based Fortress, said
earlier this month it may sell 38,000 apartments because 3.3
billion euros of mortgages backed by the properties are due to
mature next year. The company, Germany’s largest publicly traded
residential landlord with nearly 150,000 apartments, hired
investment bank Leonardo Co. to advise on the sale of its
properties in Dresden, which account for about a quarter of its
real estate.

Deutsche Annington, owned by funds managed by Terra Firma,
needs to refinance 4.46 billion euros of debt coming due in July
2013. The Bochum-based company owns and manages 215,000 homes
across Germany.

Vitus Immobilien Sarl, owner of 30,000 German homes, has
five loans maturing later this year. They totaled 580 million
euros at the end of 2011, according to notices to CMBS holders.
Vitus is owned by a group of funds managed by Blackstone Group
LP (BX), Round Hill Capital LLC, Deutsche Bank AG and Aviva Plc. (AV/)

The companies and their owners either declined to comment
or weren’t immediately available to comment on their refinancing
plans.

Limited Capacity

While there is some willingness among lenders and investors
to refinance the loans, banks and debt markets “cannot absorb
the level of capital needed,” Brookland’s Hussain said.

The success of buyout firms’ refinancing efforts depends on
how much debt financed their acquisitions and what they bought.
Some investor groups overpaid for inferior properties in eastern
Germany or depressed industrial regions. Others are struggling
to generate enough rental income to meet debts and some firms
face having to refinance substantial borrowings, according to
real estate advisers.

“In the heady days of 2005 to 2007, particularly,
international private equity paid increasingly large multiples
for German multi-family housing portfolios,” said Robin Priest,
a senior adviser with turnaround firm Alvarez Marsal’s
European real-estate advisory unit.

Some firms’ leveraged bets were based on unrealistic
assumptions about rental growth, valuations and operating costs,
according to Priest.

Surprised Germans

“The assumptions and capital structures that were deployed
served to turn a formerly mundane asset class into something
rather more exciting,” Priest said. “Germans looked on in
surprise and many of those same Germans are now looking to buy
back in at rather more comfortable multiples.”

The best properties in cities like Berlin, Hamburg and
Frankfurt generate gross rental income equivalent to about 5
percent of the purchase price, while a 10-year German government
bond yields a record-low 1.41 percent. Apartment-block values,
which investors gauge by multiples of annual net rental income,
vary from 19 times in Munich, the most desirable investment
location, to as low as 8.5 times in Gelsenkirchen, a former
coal-mining city, Savills said.

Property companies and real-estate funds are among those
looking to take advantage of the latest opportunities to invest
in German multi-family housing, according to Rolf Elgeti, chief
executive officer of TAG Immobilien AG (TEG), which in March agreed to
buy DKB Immobilien AG from Bayerische Landesbank for 960 million
euros including debt, more than doubling its portfolio to about
56,000 homes.

‘Real Money’

“People are going to look back at 2012 and say this was
the year that real money came back to invest in the big
residential portfolios in Germany,” Elgeti said in an
interview, referring to opportunity funds, pension funds,
insurance companies and public companies.

Cerberus Capital Management LP, the U.S. private-equity
firm led by Stephen Feinberg, agreed to buy 22,000 housing units
in a 985 million-euro debt restructuring from the liquidator of
Speymill Deutsche Immobilien Co., or SDIC, the New York-based
firm said in a May 16 statement. Benson Elliot Capital
Management LP in March acquired 3,000 apartments and commercial
units formerly owned by SDIC, which had defaulted on a 187
million-euro loan packaged into CMBS.

Since September, Blackstone Group has acquired about two-
thirds of the 21,000 apartments and 700 commercial properties
owned by Level One, which was placed in insolvency
administration in August 2008 owing creditors 1.5 billion euros.
Blackstone paid a total of around 450 million euros for the
assets.

Buyers Reconsidering

“Prices on smaller lots have gone up, but in the bigger
portfolios prices are not overheated,” said Thomas Zinnoecker,
chief executive officer of GSW Immobilien AG (GIB), which raised about
190 million euros earlier this month to buy properties. “People
who bought five to eight years ago are now asking themselves ‘Do
I still want to be here?”’

Borrowers will probably find it easier to refinance if debt
is less than two-thirds of the value of the real estate, Conor O’Toole, a London-based asset-backed securities analyst at
Deutsche Bank AG (DBK), said in an interview. Smaller U.S. buyout
firms or borrowers with little expertise in the German
residential market will have more difficulty, he said.

Accelerating asset sales “will be one of the key
strategies for mitigating refinancing risk,” O’Toole said in a
note to investors in March.

Preparing for IPO

GSW Immobilien refinanced more than 890 million euros of
CMBS in February 2011. The deal and cost cutting cleared the way
for Cerberus and funds managed by Goldman Sachs Group Inc. (GS) to
complete a 468 million-euro IPO of GSW in April 2011.

Deutsche Annington may be preparing for an IPO by
incorporating into a common-stock company to facilitate the
share sale. Chief Executive Officer Wijnand Donkers said in an
interview with Immobilien Zeitung this month that it was close
to completing its refinancing of some of its CMBS debt.

The amount of residential real estate on the market is
complicating buyout firms’ efforts to sell assets bought during
the boom. Germany’s government is looking to sell TLG Wohnen
GmbH and Bayerische Landesbank plans to dispose of GBW
Immobilien. Together, they own about 44,000 apartments. There
are also residential assets for sale owned by companies that
have defaulted or are insolvent.

Barclays Plc (BARC) is seeking to sell its Baubecon Immobilien
GmbH unit, which it values at 1 billion pounds ($1.6 billion).
GSW and Goldman Sachs-managed Whitehall Street Real Estate fund
have made an offer to acquire Baubecon, which has 21,000 housing
units. Deutsche Wohnen is also competing for Baubecon.

Patrizia Immobilien AG (P1Z) led a group of investors that
acquired 21,000-unit LBBW Immobilien GmbH for 1.4 billion euros
in February from Landesbank Baden-Wuerttemberg, Germany’s
biggest state-owned lender.

“The time for pure private-equity investment that we had
five or six years ago is over because investors simply cannot
get the leverage and returns they did before,” Klaus Schmitt,
the Augsburg-based real estate company’s chief operating
officer, said in an interview.

To contact the reporters on this story:
Simon Packard in London at
packard@bloomberg.net;
Neil Callanan in London at
ncallanan@bloomberg.net;
Dalia Fahmy in Berlin at
dfahmy1@bloomberg.net.

To contact the editors responsible for this story:
Andrew Blackman at ablackman@bloomberg.net;
Rob Urban in New York at
robprag@bloomberg.net.

• Facebook Share

• LinkedIn
• Google +1

• 
  COMMENTS

• Print

Please enable JavaScript to view the comments powered by Disqus.

Article source: http://www.bloomberg.com/news/2012-05-17/boom-era-debt-sparking-german-apartment-sales-mortgages.html

Enlarge image

Foreclosures Plunge to Five-Year Low

Joshua Lott/Bloomberg

A JL Berry Co. for sale sign hangs outside of a home that is in foreclosure in Phoenix, Arizona.

A JL Berry Co. for sale sign hangs outside of a home that is in foreclosure in Phoenix, Arizona. Photographer: Joshua Lott/Bloomberg

Foreclosure filings in the U.S. fell
to a five-year low last month as lenders sought to avoid seizing
property and a housing recovery showed signs of taking hold.

The number of default, auction and seizure notices sent to
homeowners in April totaled 188,780, down 14 percent from a year
earlier and 5 percent from the previous month, according to
RealtyTrac Inc. It was the lowest tally since July 2007, before
the onset of the biggest housing crash in seven decades, the
Irvine, California-based data seller said today in a report.

The “gradually rising foreclosure tide” forecast by
RealtyTrac after a February settlement by the nation’s biggest
mortgage servicers over faulty practices has yet to materialize,
limiting the number of properties on the market and propping up
prices. Banks are finding alternatives to home seizures, selling
distressed property for less than the amount owed on the
mortgage, known as a short sale, or modifying loans for
borrowers struggling to keep up payments while an improving
economy is helping to ease defaults.

“Things are getting better and the number of vulnerable
households is going down,” Paul Willen, senior economist at the
Federal Reserve Bank of Boston, said in a telephone interview.
“The pool of borrowers is much more stable than it was two or
three years ago.”

The U.S. mortgage delinquency rate fell in the first
quarter to 7.4 percent, the lowest level in more than three
years, the Mortgage Bankers Association said yesterday. The rate
peaked at 10.1 percent in the first quarter of 2010 and was last
lower in the third quarter of 2008, at 6.99 percent.

Tighter Inventories

Home prices in the U.S. rose 0.6 percent in March from the
previous month, the first sequential advance since July and the
third straight month-over-month gain excluding short sales and
foreclosure sales, said mortgage data company CoreLogic Inc.
Prices fell 0.6 percent from a year earlier, according to the
Santa Ana, California-based firm’s index of home values.

National home-price data belies improvements in many
markets where “tighter inventories are beginning to lift home
prices,” CoreLogic Chief Executive Officer Anand Nallathambi
said in a May 8 statement.

Short sales have been the preferred means for lenders to
dispose of distressed real estate in California, where they
totaled 11,397 in January, compared with 8,821 foreclosure deals
in that state, according to RealtyTrac. The tally in Arizona was
3,217 short sales to 2,776 foreclosures, while in Florida it was
5,014 to 3,959.

There were 35,816 short sales in the U.S. in January,
compared with 38,443 foreclosure deals, RealtyTrac said.

Vegas Short Sales

In the Las Vegas area, the share of short sales in April
rose to 30 percent of existing-home purchases from 27 percent in
March, while foreclosure deals fell to 37 percent from 41
percent, the Greater Las Vegas Association of Realtors said.

Ben Hirsh, owner of Hirsh Real Estate Specialists Inc. in
Atlanta, said he and his staff have completed nine short sales
this year. An additional 15 deals are in process, the same
number he did in all of 2011, as lenders reduce the time it
takes to close a short-sale transaction, he said.

“There’s more pressure on lenders to approve them,” Hirsh
said in a phone interview.

A drop in properties for sale may also be reducing
foreclosure deals, and helping to put a floor under prices. Home
listings in the U.S. fell 22 percent to 2.37 million in March
from a year earlier, a 6.3-month supply at the current sales
pace that’s considered a balanced market, National Association
of Realtors data show.

Miami Area

In the Miami area, March listings declined 34 percent from
a year earlier and prices rose for the fourth straight month,
with condos jumping 46 percent and single-family homes gaining
13 percent, according to the Miami Association of Realtors.

The $25 billion settlement over foreclosure practices
between the five largest mortgage servicers, including Bank of
America Corp. and JPMorgan Chase Co., and attorneys general
from 49 states has made servicers leery of incurring further
legal action, said Daren Blomquist, a RealtyTrac spokesman.

The share of home loans in the foreclosure process
increased to 4.39 percent in the first quarter from 4.38 percent
in the previous three months, indicating that lenders are
limiting repossessions, according to the Mortgage Bankers
Association data released yesterday.

No Rush

“Lenders are proceeding with caution and want to avoid
risk,” Blomquist said. “They’re not in a rush to foreclose
right away.”

The housing market may see “further gradual improvement”
as homeowners take advantage of current federal aid plans and
new policies are introduced, Elizabeth Duke, a governor of the
Federal Reserve, said May 15 in Washington. In markets such as
Miami and Phoenix, where foreclosure rates have been among the
highest in the U.S., price declines have halted, even with a
“steady supply” of new problem loans, she said.

“This calls into question the notion that housing prices
cannot stabilize until the foreclosure pipeline is worked off,”
Duke said in prepared remarks at a National Association of
Realtors meeting. “Mortgages that were originated using the
tight underwriting that has prevailed since 2008 would
presumably have lower delinquency rates, and recent vintage
loans now make up an increasing share of outstanding
mortgages.”

Housing Affordability

Affordability for homebuyers increased to the highest on
record in the first quarter, based on the combination of low
mortgage rates, low prices and improved incomes measured in a
Realtors index. A family earning a median income of about
$61,000 could afford to buy a $325,500 residence, more than
double the $158,100 median cost of an existing single-family
home in the U.S., the Chicago-based trade group said May 15.

Greater purchasing power by consumers has risen along with
builder confidence, which increased every month this year and
reached a five-year high in May, according to Barry Rutenberg,
chairman of the National Association of Home Builders and a
builder from Gainesville, Florida. That’s a harbinger of new
jobs for the construction industry, he said.

“Housing demand is slowly beginning to recover,”
according to Joseph LaVorgna, chief U.S. economist at Deutsche
Bank Securities Inc. in New York. “Banks are showing increasing
willingness to lend to consumers, which should bode positively
for the mortgage market. In turn, this would help shift the
housing recovery into a higher gear.”

Housing Starts

Housing starts increased by 2.6 percent to an annual pace
of 717,000 in April, beating economists’ estimates, the Commerce
Department data reported yesterday.

Foreclosure filings fell year-over-year in U.S. states
hard-hit by the housing crisis, and where steady investor
purchases have contributed to price rebounds or stabilization,
according to RealtyTrac. Short sales likely outnumbered sales of
bank-owned properties in the first quarter in California,
Arizona and 10 other states, the company said.

Among the 20 largest metropolitan areas, filings in April
fell 54 percent in Seattle; 44 percent in Phoenix; 34 percent in
San Francisco; 30 percent in Riverside-San Bernardino,
California; and 28 percent in Los Angeles.

Filings plunged year-over-year in the 24 states where
lenders record actions at the county level, without court
supervision, while they rose in the 26 so-called judicial states
that had “artificially low” filings during the national legal
probe of lender practices, Blomquist said.

Nonjudicial states and the District of Columbia saw filings
drop 29 percent from April 2011, with declines in Arizona,
California and Nevada accounting for much of the decrease, and
judicial states showing a 15 percent increase, RealtyTrac said.

To contact the reporter on this story:
Dan Levy in San Francisco at
dlevy13@bloomberg.net

To contact the editors responsible for this story:
Kara Wetzel at
kwetzel@bloomberg.net;
Rob Urban at
robprag@bloomberg.net;

• Facebook Share

• LinkedIn
• Google +1

• 
  COMMENTS

• Print

Please enable JavaScript to view the comments powered by Disqus.

Article source: http://www.bloomberg.com/news/2012-05-17/foreclosures-plunge-to-five-year-low-in-u-s-recovery-mortgages.html

Article source: http://www.marketwatch.com/story/another-record-low-for-fixed-rate-mortgages-2012-05-17?rss=1

Good news, bad news: New mortgage-delinquency problems are back to normal levels in Maryland, but the older cases — borrowers seriously behind on their loans — aren’t receding.

Worse news: The state has the nation’s 15th highest share of borrowers in the foreclosure process, awaiting auction, and second-highest percentage of borrowers not yet in foreclosure but at least 90 days behind on payments.

That’s as of March, the newest figures from the Mortgage Bankers Association.

There’s an argument brewing over why Maryland has a big backlog of pre-foreclosure and foreclosure cases — the so-called “shadow inventory” that, odds are, will eventually become short sales or hit the market as bank-owned deals. The mortgage bankers count 91,000 of these homes in Maryland, which doesn’t catch everything because the trade group’s survey covers roughly 88 percent of first-lien loans.

So why the backlog?

The Mortgage Bankers Association blames state rules. Maryland hasn’t made foreclosure a full court proceeding like, say, a criminal trial, where the defendant is entitled to go before a judge. But mortgage servicers must file with the court to get permission to foreclose, must participate in mediation before auction if the borrower requests it and must get auction sales ratified.

Before 2008, a servicer could have foreclosed in Maryland just 15 days after the first late payment — one of the fastest processes in the country, and without requiring proof of notification. (A Columbia man who wasn’t behind on his mortgage lost his home in 2005 and was never able to get it back, though he did eventually get a settlement.)

Now servicers must wait 90 days to start a foreclosure case, and the earliest point an auction could take place is 135 days after default (four-and-a-half months) — 185 days if the borrower asked for mediation.

But Maryland regulators say servicers have been delaying the start of foreclosure far beyond what’s required. Companies hit the brakes here and elsewhere after the robo-signing scandal erupted in late 2010.

In March, mortgage servicers gave the owners of 32,600 Maryland homes a warning that foreclosure proceedings could begin in a month and a half. On average, those borrowers were behind on their mortgages by more than a year — even though Maryland law specifies that the warnings can be sent as soon as borrowers are 45 days behind.

The number of March warnings was more than double the number of a year earlier. Whether the national mortgage settlement being announced the month before had anything to do with that, the state can’t say. (I called two big mortgage servicers, and neither could give me an answer Wednesday.)

Marceline White, executive director of the Maryland Consumer Rights Coalition, is concerned that Maryland foreclosure-warning notices are being mailed so much later than they could be. The farther behind a borrower gets, the less likely that any option but foreclosure is possible.

Such delays prompted a state law that will go into effect Oct. 1, giving borrowers and servicers the option — if both agree — to have a mediation session before the foreclosure case is started rather than after. State officials hope that will lead to more auction-block alternatives.

The new law is also intended to speed up foreclosure for homes certified as empty by the local government.

“Properties that are vacant should just flow through the process,” said Anne Balcer Norton, Maryland’s deputy commissioner of financial regulation.

Got a housing tip to share? (Or just want to tell me something?) Email me at jhopkins@baltsun.com.

Article source: http://www.baltimoresun.com/business/real-estate/wonk/bal-wonk-fewer-new-mortgage-problems-in-maryland-more-older-ones-20120516,0,4583123.story

Homeowners in Iowa and the rest of the country are catching up on their mortgages.

A survey released Wednesday showed that 4,169 fewer Iowa homeowners were past due on their monthly payments at the end of the first quarter, as delinquency fell to its lowest level since early 2008.

The number of past due mortgages in the state fell by more than a full percentage point — from 5.82 percent on Dec. 31 to 4.65 percent on March 31, according to a quarterly survey from the Mortgage Bankers Association.

Even though foreclosures fell only slightly in the quarter, falling delinquency is likely good news for the Iowa and U.S. economies. The figure — which predicts foreclosures a year or more in advance — also fell across the U.S. to its lowest level since 2008.

More people are finding jobs, refinance rates are historically low, and home prices have shown signs of bottoming out and even rising slightly, said Ed McGreen, executive vice president of chief capital markets for the Federal Home Loan Bank in Des Moines.

People can refinance into mortgages with lower payments, thanks to rates as low as 3.75 percent for a 30-year fixed mortgage. Someone who owns a home worth $150,000 whose interest rate is 6 percent can save $200 per month if he or she refinances into a 3.75 percent rate, which was possible in the first quarter of 2012. That has helped people stay in their homes and avoid falling behind on their payments, McGreen said.

“We saw a lot of refinancing in the first quarter,” he said.

“Another thing that’s probably helping out Iowa is we really haven’t seen the unemployment rates reach what they have nationally.”

Job market foretells how foreclosures go

Foreclosures are often the natural outcome of unemployment, with delinquency serving as the middle step in a process that works something like a domino effect.

People lose their jobs, they fall behind on their payments and then they’re foreclosed upon.

In Iowa, unemployment spiked to 6.1 percent in January 2009 and held roughly steady for about two years. Delinquency peaked a year later at 7.31 percent in December 2009. Iowa’s foreclosure inventory peaked nine months after that, in October 2010.

All three numbers have been falling gradually.

Iowa’s unemployment rate has fallen from 6.2 percent in December 2010 to 5.2 percent at the end of March.

Delinquency has fallen 2.6 percent since its December 2009 peak. Just over 351,000 homeowners in Iowa are paying mortgages now, the survey said, compared with 360,760 two years ago.

Wells Fargo, the largest mortgage servicer in the U.S. which has its mortgage headquarters in West Des Moines, reported its percentage of borrowers either in foreclosure or delinquency declined nationally in the first quarter to 6.89 percent, more than a full point’s drop from 7.96 percent at the end of 2011.

Officials at the Mortgage Bankers Association said they couldn’t tell whether the national mortgage settlement brokered in part by Iowa Attorney General Tom Miller and Wells Fargo Home Mortgage President Mike Heid affected the numbers, and they declined to predict whether it will.

Instead they pointed to the jobs market as the chief factor.

“Bottom line is that we’re very much dependent on the overall economy,” said Jay Brinkmann, chief economist for the MBA.

“This improvement does reflect the generally improving jobs picture that we have seen over the last year, and that we would think will continue to improve barring a recession or a serious reversal in the jobs market.”

Homeowners use refund to catch up

McGreen said improving home prices are a further reason more homeowners are able to refinance, or sell their home to avoid foreclosure.

“Home prices have begun to start to stabilize across the nation,” McGreen said.

“The Federal Housing Agency’s home price index was actually up slightly in February, and the January number was relatively flat.”

Minneapolis, the city in the Case-Shiller index that’s easiest to compare with Iowa, saw home price gains in January and February, McGreen said.

“We’ve seen a pretty steady increase in the Case-Shiller Minneapolis survey since October of 2011,” he said.

Holly Olson, director of the Neighborhood Finance Corp. in Des Moines, said delinquency always drops in the first quarter because homeowners can use their tax refund to catch up. The mild winter has also helped, because folks have had to spend less on utilities, she said.

“In March and April, we find that our delinquency is down, because if people have been having trouble, they use their tax refund to catch up on their mortgages,” she said.

But her organization’s borrowers are less delinquent year-over-year as well, if only by a tenth of a percentage point.

Article source: http://www.desmoinesregister.com/article/20120517/BUSINESS/305170046/Fewer-Iowans-are-behind-on-their-mortgages?Frontpage