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CMBS Delinquencies Hit New All-Time High
Overdue loans in pools of commercial mortgage-backed securities (CMBS) continue to mount. With each passing month, CMBS delinquency rates jump to another record high – and April held true to form. The delinquency rate for commercial real estate loans in CMBS climbed higher still last month, although the rate of increase slowed from March’s breakneck pace, the research firm Trepp LLC reported. According to Trepp’s monthly study, the percentage of CMBS loans 30 or more days delinquent, in foreclosure, or classified as REO jumped 41 basis points during April, putting the overall delinquency rate at 8.02 percent, the highest in CMBS history.
Last month, the market was taken by surprise when delinquencies shot up 89 basis points. About 40 basis points of that increase were due to the massive Stuyvesant Town loan turning delinquent. The firm’s study shows that multifamily was the only major property type to post a decrease in its delinquency rate, falling from 13.19 percent in March to 13.06 percent in April. Hotel delinquencies moved above 17 percent, again posting the highest rate among all property types. Office delinquencies, though, showed the largest increase during the month, up 64 basis points to 5.37 percent. According to Fitch’s market analysis, during the first three months of this year, 487 loans defaulted totaling $8.43 billion. As the firm’s analysts have forecasted, the trend in large loan defaults, meaning those over $50 million, is occurring at a greater pace.
Buying a foreclosure – Opportunities and Pitfalls
Buying a foreclosure comes with great opportunities, greater pressures and unknown pitfalls in the foreclosure market. First, you have to decide at what stage of foreclosure you want to buy. There are three options: 1. pre-foreclosure; 2. sheriff's auction; 3. repossession, called REO (for real estate owned by the bank). Pre-foreclosure: These homes are in the foreclosure process, but they have yet to be sent to auction. Potential buyers must negotiate a deal with the lender as well as the owner. That makes buying at this stage of foreclosure complicated and slow. But, you have the advantage of being able to inspect the home before purchase -- which isn't the case in other types of foreclosure sales, but the prices remain high. Sheriff's auction: These sales yield the lowest prices, but they are fraught with difficulties, like the house being unavailable for inspection and probable repairs which you were not prepared for. This stage is usually best left to the professionals, the contractors and investors who know what they're doing. Repossession: This occurs after the home has gone through a sheriff's auction but does not sell and the bank gains possession of the property.
Homebuyers may not get the best bargains during this stage, but they can nearly always perform a thorough inspection before closing, minimizing costly surprises. Plus, the property comes with a clear title. Even in this safer stage, though, homes are still usually sold in "as is" condition," but the process can be faster. The pitfalls to avoid are: Do not get caught up in a bidding frenzy, and do not underestimate repair costs. Not knowing what comparable properties cost, can mean that you must be prepared for eroding prices in high foreclosure areas. If you are buying for the short-term, the better bet would be is to buy the only foreclosed home in an otherwise stable community that will hold its value. Not having finance in place is as good as not being in the market, as banks often jump on the highest bid with the best financing already in place.
Voting Begins in U.S. Senate on Wall Street Reform
The U.S. Senate will cast its first votes on Tuesday on a sweeping Wall Street reform bill, with passage of a handful of uncontroversial amendments expected and a key procedural question still unsettled. Leadership has not yet determined as of late Monday whether amendments will need 50 or 60 votes to pass. The difference is important because Democrats control 59 votes in the 100-member chamber, versus the Republicans' 41 votes. When the process is over, likely in two to four weeks, final passage of the bill looks likely, given a surge in political momentum for it from the Goldman Sachs fraud case and the approach of November's elections, analysts said.
Wall Street reform is a top domestic policy objective of the current government, as it is meant to prevent a recurrence of the severe 2008-2009 financial crisis. The Boxer Amendment is to come first. Besides Boxer's measure, other early amendments to the bill will reflect the latest deal between Dodd, and Senator Richard Shelby, the top Republican on the banking committee. Analysts said Dodd has agreed, at the Republicans' insistence, to drop a proposal to create a $50 billion fund, paid into by large financial firms, that would help pay for liquidating one or another of them when they get in trouble. Dodd did not comment about the status of a controversial provision that would require banks to spin off their swap-trading desks as part of imposing new rules on the unpoliced, $450 trillion over-the-counter derivatives market. As the debate unfolds on the floor, the tax-writing Senate Finance Committee will be holding a hearing on Tuesday on the administration's bank tax proposal. It would impose a levy of 0.15 of a percentage point on the balance sheets of financial companies with assets exceeding $50 billion, raising as much as $117 billion, as originally proposed in January. Treasury Secretary Timothy Geithner will testify on the proposal, intended to reimburse taxpayers for the bailouts.
Diana Olick - Miami Housing Heats Up
“When I think of the Miami housing market, somehow scenes from Mad Max start creeping into my vision. A vast wasteland of empty condos and beleaguered investors with nothing but the shredded clothes on their backs and empty checkbook covers stuck to the bottom of their shoes. Well, maybe not so much anymore. MDA DataQuick reports sales in March rose 43 percent from February in Miami-Dade. That's the highest level since the peak of the housing boom. Sales in the Miami area have been rising for 13 straight months and prices are finally beginning to stabilize.
Condos are making a big comeback in sales, up 55 percent month to month and 62 percent from a year ago. That is the highest number of condo resales since March of 2006. You can thank all-cash foreign buyers for that. And they're hitting the high end as well, juicing the number of million dollar condo sales. Absentee buyers, often investors, accounted for more than one third of sales. Prices are still rock bottom, down by more than 56 percent from the peak. The median price of a Miami condo is now just $95,000, but the good news is that prices are holding steady. Is it all the tax credit? Probably not, since investors don't qualify.”
'Too Big To Fail' Plan debates failure
Though the Senate financial-reform package includes new federal powers to deal with the possible failure of giant firms, few agree with the bill’s authors that the measures are enough to succeed. On both sides of the political aisle, too big to fail appears to be a matter of too little to succeed. Some fear the bill will wind up giving preferential treatment to big firms, while others worry that the American taxpayer will remain on the hook, much in the way it happened with the near failure of AIG. Sen. Richard Shelby (R-Ala.) told colleagues on the floor that he wants to “reshape the bill so it actually ends bailouts,” because, as currently written, “it will help the big banks get bigger,” and “help the likes of Goldman Sachs. For many politicians, when it comes to the reform bill, as with the financial crisis of 2008-2209, it is the bailout concept that resonates most with their constituents. It is the big ticket item that stays with you.
The concern, however, is more than election-year politics and semantics. Even some in the banking industry don’t think the provisions make sense. “This is not a Democrat-Republican issue. Everyone seems to think this is a bad idea,” says Frank Sorrentino, chairman and CEO of North Jersey Community Bank, a state-chartered institution with $500 million in assets. “It won’t work. Who’s going to decide? Who’s going to pay if we do have a failure?” Supporters of the bill say it has all the right elements and addresses the right issues, from increased capital requirements and risk management plans to an early warning detection system to liquidation and break-up powers. For many skeptics, however, too big to fail in the future is not a matter of if but who and when. The proposed amendment to the bill, would impose a strict 10-percent cap on any bank-holding-company’s share of the nation’s total insured deposits, It would also limit the size of non-deposit liabilities and leverage ratios. Though the 10-percent limit currently exists, it can be waived by regulators. How far any of these measures get is unknown at this point. A bailout fund of any size, for instance, is probably off the table now, sources say.
Above Post Written by: Chris Mclaughlin with Short Sale Riches.com
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