Thursday, December 31, 2009
Wednesday, December 23, 2009
Commercial Loan Compliance | Multifamily Record Vacancies
The Federal Deposit Insurance Corp. reported that the number of multifamily loans 90 days for more past due has doubled since last year and hit 3.6% in the third quarter — the highest since 1993.
The multifamily sector is experiencing record vacancy rates due to high unemployment and low household formation, according to Freddie Mac.
Freddie Mac and Fannie Mae are major investors in multifamily loans, and could experience greater delinquencies if the situation persists.
High jobless rates among teenagers (27%) and 20-24-year olds is forcing many to postpone household formation or a move back with family and friends, according to Freddie Mac chief economist Frank Nothaft.
In addition, the vacancy rates have moved up as federal tax credits for first-time homebuyers have encouraged renters to become homeowners. A Census Bureau report shows the vacancy rate on buildings with ten or more apartments is 13.5% as of Sept. 30.
For apartments built since the start of 2000, the vacancy rate is 23.2%, "reflecting in part the slow rental rate of newly built dwellings," Mr. Nothaft says in a paper on housing trends. "As a result of rising vacancies and lack of opportunity to increase rents, multifamily property values are falling and delinquency rates on multifamily mortgages are rising,” said Nothaft.
The Freddie economist points out that the National Council of Real Estate Fiduciaries has reported that multifamily property values have declined 29% from their mid-2008 peak.
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The multifamily sector is experiencing record vacancy rates due to high unemployment and low household formation, according to Freddie Mac.
Freddie Mac and Fannie Mae are major investors in multifamily loans, and could experience greater delinquencies if the situation persists.
High jobless rates among teenagers (27%) and 20-24-year olds is forcing many to postpone household formation or a move back with family and friends, according to Freddie Mac chief economist Frank Nothaft.
In addition, the vacancy rates have moved up as federal tax credits for first-time homebuyers have encouraged renters to become homeowners. A Census Bureau report shows the vacancy rate on buildings with ten or more apartments is 13.5% as of Sept. 30.
For apartments built since the start of 2000, the vacancy rate is 23.2%, "reflecting in part the slow rental rate of newly built dwellings," Mr. Nothaft says in a paper on housing trends. "As a result of rising vacancies and lack of opportunity to increase rents, multifamily property values are falling and delinquency rates on multifamily mortgages are rising,” said Nothaft.
The Freddie economist points out that the National Council of Real Estate Fiduciaries has reported that multifamily property values have declined 29% from their mid-2008 peak.
_______________________
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Tuesday, December 22, 2009
Mortgage Loan Compliance | Delinquent Prime Loans Double
According to the Office of the Comptroller of the Currency and Office of Thrift Supervision the delinquency rate on prime loans has doubled over the past year.
The delinquency rate is up 20% from the second quarter to 3.6% in the third quarter.
The third quarter report also shows continued deterioration in the performance of payment-option adjustable rate mortgages. Only 67.7% of options ARMs are performing, 16% are seriously delinquent and 11.9% are in the process of foreclosure. In the second quarter, 15.2% were seriously delinquent and 10% were in the process of foreclosure.
The national bank and thrift servicers completed more than 130,000 loan modifications in the third quarter. In total, more than 680,000 home loan modifications and payment plans, including those done on a trial basis, were implemented during the period. Despite the growth of loan modifications, more than half of all modifications are 60-days or more past due after six months.
In cases where the monthly principal and interest payment is reduced by at least 20%, the re-default rate is only 26.7%. After 12 months, the re-default rate is 38.6%, compared to 66% where the modification leaves the borrower's payment unchanged.
Overall, 87% of the loans in the servicing portfolios of large banks and thrifts are performing and 6.2% are 60-days or more past due, according to the OCC/OTS quarterly Mortgage Metrics Report.
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The delinquency rate is up 20% from the second quarter to 3.6% in the third quarter.
The third quarter report also shows continued deterioration in the performance of payment-option adjustable rate mortgages. Only 67.7% of options ARMs are performing, 16% are seriously delinquent and 11.9% are in the process of foreclosure. In the second quarter, 15.2% were seriously delinquent and 10% were in the process of foreclosure.
The national bank and thrift servicers completed more than 130,000 loan modifications in the third quarter. In total, more than 680,000 home loan modifications and payment plans, including those done on a trial basis, were implemented during the period. Despite the growth of loan modifications, more than half of all modifications are 60-days or more past due after six months.
In cases where the monthly principal and interest payment is reduced by at least 20%, the re-default rate is only 26.7%. After 12 months, the re-default rate is 38.6%, compared to 66% where the modification leaves the borrower's payment unchanged.
Overall, 87% of the loans in the servicing portfolios of large banks and thrifts are performing and 6.2% are 60-days or more past due, according to the OCC/OTS quarterly Mortgage Metrics Report.
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Monday, December 21, 2009
Mortgage Loan Compliance | Ohio AG Sues HomEq For Unfair Mods
Richard Cordray, Ohio Attorney General, has filed a lawsuit that alleges unfair loan modification agreements and faulty customer service against Barclays Capital Real Estate dba HomEq Servicing.
Filed in Montgomery County Common Pleas Court, the lawsuit alleges that at-risk homeowners "were forced to enter into one-sided agreements," that released HomEq of all liabilities requiring borrowers to waive their defense rights and pay additional fees.
"In Ohio we have zero tolerance for any more excuses," Mr. Cordray said, while stating that "many servicers" are aggravating the crisis through noncompliance and excuses.
The Attorney General has so far filed at least two similar lawsuits against other companies.
A HomEq spokesperson told reporters the lawsuit is "a meritless complaint" and that HomEq will vigorously defend itself against it. "HomEq is committed to quality customer service and to working with financially distressed borrowers to help them remain in their homes," he said.
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Filed in Montgomery County Common Pleas Court, the lawsuit alleges that at-risk homeowners "were forced to enter into one-sided agreements," that released HomEq of all liabilities requiring borrowers to waive their defense rights and pay additional fees.
"In Ohio we have zero tolerance for any more excuses," Mr. Cordray said, while stating that "many servicers" are aggravating the crisis through noncompliance and excuses.
The Attorney General has so far filed at least two similar lawsuits against other companies.
A HomEq spokesperson told reporters the lawsuit is "a meritless complaint" and that HomEq will vigorously defend itself against it. "HomEq is committed to quality customer service and to working with financially distressed borrowers to help them remain in their homes," he said.
_______________________
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Friday, December 18, 2009
Commercial Loan Compliance | Hawaiian Bank CRE Business Slump
Central Pacific Bank, Honolulu, will close its four California commercial real estate loan offices and wind down its West Coast operations by 2012. The offices are in Newport Beach, Pasadena, Rossville and San Diego.
In the third quarter, its parent company Central Pacific Financial Corp. lost nearly $72 million.
"We have not made a loan in California in more than 18 months and have been diligent in reducing our loan portfolio there," said Ronald K. Migita, chairman, president and chief executive.
"By the end of the third quarter, we've reduced our total loans and leases by $622.6 million, or 15.3% from a year ago, many of which were in California. Our mainland team continues to reduce our exposure in California as we shift gears to fully concentrate on the Hawaii market”, Migita added.
Central Pacific has accelerated its efforts to reduce credit risk by pursuing loan sales, including potential bulk sales, in addition to loan restructuring and pay downs. As of the end of September 2009, the bank's mainland construction and commercial real estate loans totaled $865.8 million.
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In the third quarter, its parent company Central Pacific Financial Corp. lost nearly $72 million.
"We have not made a loan in California in more than 18 months and have been diligent in reducing our loan portfolio there," said Ronald K. Migita, chairman, president and chief executive.
"By the end of the third quarter, we've reduced our total loans and leases by $622.6 million, or 15.3% from a year ago, many of which were in California. Our mainland team continues to reduce our exposure in California as we shift gears to fully concentrate on the Hawaii market”, Migita added.
Central Pacific has accelerated its efforts to reduce credit risk by pursuing loan sales, including potential bulk sales, in addition to loan restructuring and pay downs. As of the end of September 2009, the bank's mainland construction and commercial real estate loans totaled $865.8 million.
_______________________
Commercial Loan Compliance® | A Certified Forensic Audit Company
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Wednesday, December 16, 2009
Mortgage Loan Compliance | Rescue and Fraud Schemes
The U.S. Attorney for Eastern District of Pennsylvania has indicted five people for a $14.6 million mortgage fraud scheme that resulted in at least 35 fraudulent loans.
According to the indictment, the defendants targeted financially distressed homeowners facing foreclosure, falsely promised them help in saving their homes, engaged in real estate transactions with straw purchasers, and obtained dozens of fraudulent mortgages. The defendants allegedly took whatever equity the homeowner had left, funneled it through various shell corporations they controlled, used some of it to pay the new mortgages, and put the rest of the equity into their own bank accounts.
Named in the 15-count indictment are Edward McCusker and John Alford Bariana, owners of Axxium Mortgage Inc.; McCusker's wife, Jacqueline; and Jeffrey Bennett and Stephen Doherty, owners of the Doylestown law firm Bennett & Doherty, P.C. They are charged with conspiracy to commit mail fraud, wire fraud, and money laundering. Mr. Doherty is also charged with bankruptcy fraud.
Edward McCusker and Bariana, along with Jacqueline McCusker allegedly obtained the mortgages by submitting false documents to lenders and making false claims about the straw purchasers' finances, the indictment said.
Doherty allegedly used fraudulent bankruptcy filings for some borrowers to delay foreclosure until McCusker had obtained an investor and a mortgage.
Bennett allegedly handled the closings for the real estate transfers.
Edward and Jacqueline McCusker, Jeffrey Bennett, and John Bariana face maximum sentences of 240 years imprisonment, $3.25 million in fines, three years supervised release, and a $1,200 special assessment. Stephen Doherty faces 385 years imprisonment, $4 million in fines, three years supervised release, and a $1,500 special assessment.
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According to the indictment, the defendants targeted financially distressed homeowners facing foreclosure, falsely promised them help in saving their homes, engaged in real estate transactions with straw purchasers, and obtained dozens of fraudulent mortgages. The defendants allegedly took whatever equity the homeowner had left, funneled it through various shell corporations they controlled, used some of it to pay the new mortgages, and put the rest of the equity into their own bank accounts.
Named in the 15-count indictment are Edward McCusker and John Alford Bariana, owners of Axxium Mortgage Inc.; McCusker's wife, Jacqueline; and Jeffrey Bennett and Stephen Doherty, owners of the Doylestown law firm Bennett & Doherty, P.C. They are charged with conspiracy to commit mail fraud, wire fraud, and money laundering. Mr. Doherty is also charged with bankruptcy fraud.
Edward McCusker and Bariana, along with Jacqueline McCusker allegedly obtained the mortgages by submitting false documents to lenders and making false claims about the straw purchasers' finances, the indictment said.
Doherty allegedly used fraudulent bankruptcy filings for some borrowers to delay foreclosure until McCusker had obtained an investor and a mortgage.
Bennett allegedly handled the closings for the real estate transfers.
Edward and Jacqueline McCusker, Jeffrey Bennett, and John Bariana face maximum sentences of 240 years imprisonment, $3.25 million in fines, three years supervised release, and a $1,200 special assessment. Stephen Doherty faces 385 years imprisonment, $4 million in fines, three years supervised release, and a $1,500 special assessment.
_______________________
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Mortgage Loan Compliance | Rescue and Fraud Schemes
The U.S. Attorney for Eastern District of Pennsylvania has indicted five people for a $14.6 million mortgage fraud scheme that resulted in at least 35 fraudulent loans.
According to the indictment, the defendants targeted financially distressed homeowners facing foreclosure, falsely promised them help in saving their homes, engaged in real estate transactions with straw purchasers, and obtained dozens of fraudulent mortgages. The defendants allegedly took whatever equity the homeowner had left, funneled it through various shell corporations they controlled, used some of it to pay the new mortgages, and put the rest of the equity into their own bank accounts.
Named in the 15-count indictment are Edward McCusker and John Alford Bariana, owners of Axxium Mortgage Inc.; McCusker's wife, Jacqueline; and Jeffrey Bennett and Stephen Doherty, owners of the Doylestown law firm Bennett & Doherty, P.C. They are charged with conspiracy to commit mail fraud, wire fraud, and money laundering. Mr. Doherty is also charged with bankruptcy fraud.
Edward McCusker and Bariana, along with Jacqueline McCusker allegedly obtained the mortgages by submitting false documents to lenders and making false claims about the straw purchasers' finances, the indictment said.
Doherty allegedly used fraudulent bankruptcy filings for some borrowers to delay foreclosure until McCusker had obtained an investor and a mortgage.
Bennett allegedly handled the closings for the real estate transfers.
Edward and Jacqueline McCusker, Jeffrey Bennett, and John Bariana face maximum sentences of 240 years imprisonment, $3.25 million in fines, three years supervised release, and a $1,200 special assessment. Stephen Doherty faces 385 years imprisonment, $4 million in fines, three years supervised release, and a $1,500 special assessment.
_______________________
Mortgage Loan Compliance® | A Certified Forensic Audit Company
Get The Facts on Your Loan and Protect Your Rights! | $59 Rapid Report Forensic Audits and $295 Certified Forensic Compliance Audits
Call 1-866-966-6615 or visit www.ml-compliance.com
According to the indictment, the defendants targeted financially distressed homeowners facing foreclosure, falsely promised them help in saving their homes, engaged in real estate transactions with straw purchasers, and obtained dozens of fraudulent mortgages. The defendants allegedly took whatever equity the homeowner had left, funneled it through various shell corporations they controlled, used some of it to pay the new mortgages, and put the rest of the equity into their own bank accounts.
Named in the 15-count indictment are Edward McCusker and John Alford Bariana, owners of Axxium Mortgage Inc.; McCusker's wife, Jacqueline; and Jeffrey Bennett and Stephen Doherty, owners of the Doylestown law firm Bennett & Doherty, P.C. They are charged with conspiracy to commit mail fraud, wire fraud, and money laundering. Mr. Doherty is also charged with bankruptcy fraud.
Edward McCusker and Bariana, along with Jacqueline McCusker allegedly obtained the mortgages by submitting false documents to lenders and making false claims about the straw purchasers' finances, the indictment said.
Doherty allegedly used fraudulent bankruptcy filings for some borrowers to delay foreclosure until McCusker had obtained an investor and a mortgage.
Bennett allegedly handled the closings for the real estate transfers.
Edward and Jacqueline McCusker, Jeffrey Bennett, and John Bariana face maximum sentences of 240 years imprisonment, $3.25 million in fines, three years supervised release, and a $1,200 special assessment. Stephen Doherty faces 385 years imprisonment, $4 million in fines, three years supervised release, and a $1,500 special assessment.
_______________________
Mortgage Loan Compliance® | A Certified Forensic Audit Company
Get The Facts on Your Loan and Protect Your Rights! | $59 Rapid Report Forensic Audits and $295 Certified Forensic Compliance Audits
Call 1-866-966-6615 or visit www.ml-compliance.com
Thursday, December 10, 2009
Mortgage Loan Compliance | New Century Subprime Fraud Charges
SEC Director of Enforcement Robert Khuzami said investors in the once publicly traded New Century "took a double-hit: The company's mortgage assets and business performance became increasingly impaired, and management manipulated its numbers and concealed its deteriorating performance."
At one time, New Century's shares traded for $50, New Century was a top-ranked subprime lender and at one point management was considering selling the company to Merrill Lynch. Then New Century filed for bankruptcy protection in April 2007.
Now the Securities and Exchange Commission has charged three former executives of now-defunct subprime mortgage giant New Century Financial with fraud for misleading investors as their business was "collapsing" in 2006.
Former top managers accused of fraud include Brad Morrice (Vice Chairman/President), Patti Dodge (EVP) and David Kenneally (SVP).
The complaint, filed in federal court in the Central District of California, seeks civil penalties and from Morrice and Dodge reimbursement of bonuses and other incentive or equity-based compensation. The agency is seeking a severe personal penalty against the three: a bar against ever again serving as officers or directors of a publicly traded company.
Josh Epstein, a spokesman for Proskauer, the law firm representing Mr. Morrice, told reporters that the SEC's charges against the former executive are "flatly false." He said, "Brad did all he could to save the company and to accurately report the company's numerous challenges to its shareholders. While his efforts failed, there was no fraud."
Morrice remained a large shareholder until the end, losing millions of dollars when New Century filed for bankruptcy in April 2007, Mr. Epstein said.
John Vandevelde, an attorney for Mr. Kenneally, said the former executive was never a top executive there but a new accountant who lost "every penny he ever invested" in the company he believed in. "Kenneally never signed any financial statements and relied on the outside auditors for accounting treatment now under question by the SEC," his lawyer said.
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At one time, New Century's shares traded for $50, New Century was a top-ranked subprime lender and at one point management was considering selling the company to Merrill Lynch. Then New Century filed for bankruptcy protection in April 2007.
Now the Securities and Exchange Commission has charged three former executives of now-defunct subprime mortgage giant New Century Financial with fraud for misleading investors as their business was "collapsing" in 2006.
Former top managers accused of fraud include Brad Morrice (Vice Chairman/President), Patti Dodge (EVP) and David Kenneally (SVP).
The complaint, filed in federal court in the Central District of California, seeks civil penalties and from Morrice and Dodge reimbursement of bonuses and other incentive or equity-based compensation. The agency is seeking a severe personal penalty against the three: a bar against ever again serving as officers or directors of a publicly traded company.
Josh Epstein, a spokesman for Proskauer, the law firm representing Mr. Morrice, told reporters that the SEC's charges against the former executive are "flatly false." He said, "Brad did all he could to save the company and to accurately report the company's numerous challenges to its shareholders. While his efforts failed, there was no fraud."
Morrice remained a large shareholder until the end, losing millions of dollars when New Century filed for bankruptcy in April 2007, Mr. Epstein said.
John Vandevelde, an attorney for Mr. Kenneally, said the former executive was never a top executive there but a new accountant who lost "every penny he ever invested" in the company he believed in. "Kenneally never signed any financial statements and relied on the outside auditors for accounting treatment now under question by the SEC," his lawyer said.
_______________________
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Friday, December 4, 2009
Mortgage Loan Compliance | Risk Retention Changes
The House Financial Services Committee completed action on the reform package yesterday when it approved a bill to set up a resolution process for "too big to fail" institutions.
The "systemic risk" bill also gives regulators the discretion to set risk retention requirements as high as 5% on Federal Housing Administration, Fannie Mae and Freddie Mac loans. The regulatory reform package also includes bills that create a Consumer Finance Protection Agency, regulates the trading of derivatives, and a bill (H.R. 1728) the House passed in May that curbs subprime lending practices.
The mortgage industry prefers the risk retention provisions in H.R. 1728, which totally exempts lenders and securitizers from retaining a portion of the credit risk on FHA and GSE loans.
Some industry lobbyists have been wondering how committee chairman Barney Frank, D-Mass., would deal with the different risk retention provisions. Rep. Frank told reporters he would drop the original provision in H.R. 1728. "The risk retention section of the subprime bill will conform to what we did in the systemic risk bill," the chairman said.
The House of Representatives is slated to debate and vote on a massive regulatory reform package next week that includes several bills addressing abusive mortgage lending practices and risk retention on sales and securitizations of mortgages.
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The "systemic risk" bill also gives regulators the discretion to set risk retention requirements as high as 5% on Federal Housing Administration, Fannie Mae and Freddie Mac loans. The regulatory reform package also includes bills that create a Consumer Finance Protection Agency, regulates the trading of derivatives, and a bill (H.R. 1728) the House passed in May that curbs subprime lending practices.
The mortgage industry prefers the risk retention provisions in H.R. 1728, which totally exempts lenders and securitizers from retaining a portion of the credit risk on FHA and GSE loans.
Some industry lobbyists have been wondering how committee chairman Barney Frank, D-Mass., would deal with the different risk retention provisions. Rep. Frank told reporters he would drop the original provision in H.R. 1728. "The risk retention section of the subprime bill will conform to what we did in the systemic risk bill," the chairman said.
The House of Representatives is slated to debate and vote on a massive regulatory reform package next week that includes several bills addressing abusive mortgage lending practices and risk retention on sales and securitizations of mortgages.
_______________________
Mortgage Loan Compliance® | A Certified Forensic Audit Company
Get The Facts on Your Loan and Protect Your Rights! | $59 Rapid Report Forensic Audits and $295 Certified Forensic Compliance Audits
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Wednesday, December 2, 2009
Mortgage Loan Compliance | Treasury Forcing The Loan Mod Issue
Starting Today, Treasury/Fannie teams will visit the eight largest servicers for three days to monitor their Home Affordable Modification Program efforts and troubleshoot any problems.
One-third of the 375,000 borrowers have submitted all the necessary documentation to qualify for a permanent loan modification and they "deserve" a timely decision from their servicer, said Treasury Assistance Secretary Michael Barr to reporters.
Meanwhile, 37% of the borrowers have submitted some documentation and more 20% have not submitted anything.
"Borrowers need to submit the necessary information or they could lose their eligibility for a permanent affordable modification," said Phyllis Caldwell, who joined Treasury in November to oversee the conversion campaign.
"We are also working with 300 outreach partners — including state, local and community officials as well as homeownership counselors and advocacy groups," Ms. Caldwell said. Several years ago she headed community development banking for Bank of America.
Servicers are expected to continue their outreach efforts while Treasury engages in a "robust" communications and outreach campaign to reach those borrowers.
In addition, each HAMP participating servicer will report to Treasury twice a day on their conversion progress during the month of December, according to Mr. Barr.
In a month-long campaign to convert 375,000 borrowers in payment trials into permanent loan modifications, Treasury Department and Fannie Mae staffers will be hounding servicers on a daily basis to achieve the highest conversion rate.
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One-third of the 375,000 borrowers have submitted all the necessary documentation to qualify for a permanent loan modification and they "deserve" a timely decision from their servicer, said Treasury Assistance Secretary Michael Barr to reporters.
Meanwhile, 37% of the borrowers have submitted some documentation and more 20% have not submitted anything.
"Borrowers need to submit the necessary information or they could lose their eligibility for a permanent affordable modification," said Phyllis Caldwell, who joined Treasury in November to oversee the conversion campaign.
"We are also working with 300 outreach partners — including state, local and community officials as well as homeownership counselors and advocacy groups," Ms. Caldwell said. Several years ago she headed community development banking for Bank of America.
Servicers are expected to continue their outreach efforts while Treasury engages in a "robust" communications and outreach campaign to reach those borrowers.
In addition, each HAMP participating servicer will report to Treasury twice a day on their conversion progress during the month of December, according to Mr. Barr.
In a month-long campaign to convert 375,000 borrowers in payment trials into permanent loan modifications, Treasury Department and Fannie Mae staffers will be hounding servicers on a daily basis to achieve the highest conversion rate.
_______________________
Mortgage Loan Compliance® | A Certified Forensic Audit Company
Get The Facts on Your Loan and Protect Your Rights! | $59 Rapid Report Forensic Audits and $295 Certified Forensic Compliance Audits
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Tuesday, December 1, 2009
Commercial Loan Compliance | Multifamily Origination Drops 40%
Over the past year multifamily loan defaults have been on the rise even though housing analysts believe there will be more renters because of a weak job market.
The origination of commercial mortgages backed by apartment buildings fell 40% in 2008 to $88 billion with a small cadre of lenders dominating the market, according to an analysis released by the Mortgage Bankers Association.
The trade group said 2,877 different lenders funded multifamily loans during the year with PNC Real Estate, Wachovia (now part of Wells Fargo), Wells Fargo, Capmark Financial and Deutsche Bank Commercial Real Estate having the largest market shares. (Capmark recently filed for bankruptcy protection.)
The Mortgage Bankers Association found that 26% of lenders that funded Multi-Family loans made just one mortgage on these properties in 2008. And two-third of originators made five or less.
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The origination of commercial mortgages backed by apartment buildings fell 40% in 2008 to $88 billion with a small cadre of lenders dominating the market, according to an analysis released by the Mortgage Bankers Association.
The trade group said 2,877 different lenders funded multifamily loans during the year with PNC Real Estate, Wachovia (now part of Wells Fargo), Wells Fargo, Capmark Financial and Deutsche Bank Commercial Real Estate having the largest market shares. (Capmark recently filed for bankruptcy protection.)
The Mortgage Bankers Association found that 26% of lenders that funded Multi-Family loans made just one mortgage on these properties in 2008. And two-third of originators made five or less.
_______________________
Commercial Loan Compliance® | A Mortgage Loan Compliance Company
Multi-Family and Commercial Audits | Get The Facts on Your Loan and Protect Your Rights! | Certified Forensic Compliance Audits Starting at $2495
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