Private equity investment funds, in collaboration with the U.S. Treasury, have relieved the market of $10 billion in souring real estate assets, purchased through the federal government's Legacy Securities Public-Private Investment Program (PPIP). About 88 percent of the portfolio holdings, or $8.8 billion, are non-agency residential mortgage-backed securities (RMBS). Twelve percent, or $1.2 billion, are commercial mortgage-backed securities (CMBS). Of the RMBS assets, nearly half fall into the Alt-A loan category.
While some are already touting improvements in the commercial real estate sector, Fitch Ratings is expecting widespread deterioration in commercial mortgage performance to rear its ugly head. In a special report issued Wednesday, the ratings agency warned that loan defaults will continue to escalate for U.S. commercial mortgage-backed securities (CMBS). Fitch is projecting the default rate to rise another 4.4 percent in 2010, pushing the overall rate past 11 percent by the end of the year.
The latest market report card from John Burns Real Estate Consulting (JBRC) puts housing very near the bottom of the class, with an overall grade of D+. Several factors played a role in the sub-par score. JBRC noted that two important stimulus programs have run their course - the Fed is done buying mortgages from the GSEs and elected officials have decided there will be no more tax credit extension. On top of that, recent loan mod revamps have cleared the way for servicers to increase their foreclosure activity, which will result in more distressed sales.
In the first quarter of 2010, Wells Fargo earned $2.5 billion, or $0.45 per common share, according to the San Francisco-based bank's earnings report released Wednesday. Wells Fargo said all business segments contributed to the strong earnings results. The bank specifically pointed to improvements in home retention efforts and credit quality, which it described as having "turned the corner."
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