The Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF) saw the sale of its first commercial mortgage bond this week. The $400 million in debt backed by 28 retail shopping centers was offered up by Developers Diversified Realty Corp. and underwritten by Goldman Sachs. It was the first commercial mortgage bond deal in more than a year and investor demand was strong for the new commercial offering. Market observers hope the sale will help jumpstart the stagnant secondary market and free up financing for the commercial real estate sector.
After a preliminary review of third quarter foreclosure prevention data, Citigroup Inc. announced this week that its efforts produced nearly three times the success rate in helping distressed homeowners avoid potential foreclosure in the Florida housing market. The company says its loss mitigation success in the Sunshine State outnumbered foreclosures completed by a ratio of almost 16 to one, compared to a six to one ratio during the same period last year.
The consensus is that commercial mortgages will be the next big problem for lenders, though not as devastating as the residential woes of the past two years. For the U.S. banking sector overall, and large banks in particular, commercial real estate (CRE) exposure remains "a sizable but generally manageable risk," Fitch Ratings said in a review released this week. Small and mid-size lenders, on the other hand, have much greater exposure to declines in CRE performance, as rents decline further and vacancies increase.
Homeowners in the United States were more optimistic about the future of the housing market last quarter than they have been in 18 months, according to the Zillow Q3 Homeowner Confidence Survey. The study shows that 41 percent believe their home's value will increase in the next six months, while another 43 percent say values will remain unchanged.
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