Posts Tagged ‘refinance’

Majority of UK Commercial Property Loans in Default

Wednesday, October 28th, 2009

The majority of commercial property loans in the United Kingdom are currently in default, according to a study by CB Richard Ellis.  Approximately £200 billion ($327 billion) is required to refinance existing loans secured against £450 billion of properties over the next five to seven years.  Only half of that amount is available, according to a CBRE estimate.Majority of UK Commercial Property Loans in Default

“Almost every senior, and every junior, loan is in technical default,” according to Robin Hubbard, a director of CBRE’s real estate finance group.  “There’s limited financing available for new loans or refinancing other people’s loans.”

Investors borrowed £360 billion to buy commercial properties in Britain, using just £90 billion of their own money.  As a result, they now owe more than the properties are worth.  Because of the global financial crisis, average property values have fallen 44 percent since the middle of 2007, notes Investment Property Databank Ltd.  Banks are extending approximately £45 billion of loans maturing this year, though for a brief period only.  This only postpones the ultimate defaults.

The major challenge is the leasing market, which “could be the straw that breaks the camel’s back,” Hubbard noted.  “Nobody’s going to throw money in to get things back, unless it’s for new, nice, prime kit.  There’s only so much magic dust you can sprinkle on the rubbish stuff.”

Las Vegas Underwater

Monday, June 1st, 2009

Las Vegas may be in the middle of a desert, but right now it’s underwater.  Fully two-thirds of the once fast-growing city’s housing stock is underwater,  meaning that the owners owe more on their mortgages vegasthan the home is worth.

According to www.zillow.com, borrowers who are underwater totaled 20.4 million at the end of the first quarter of this year, compared with 16.3 million at the end of last year.  This represents 21.9 percent of all homeowners.

The irony in these numbers is that falling prices are making homes more affordable for first-time buyers who previously were shut out of the housing market.  At the same time, the decline in home prices compounds problems for owners who get into financial trouble by making it harder for them to refinance and take advantage of the current low interest rates.

“What’s going on here is that you don’t have any markets that have turned around and you have new markets, like Dallas, that have joined the ranks of communities where home prices have fallen,” noted Stan Humphries, a Zillow.com vice president.

Zillow.com reports that the nation’s top 10 underwater cities are:

  • Las Vegas, NV                    67.2 percent
  • Stockton, CA                       51.1 percent
  • Modesto, CA                       50.8 percent
  • Reno, NV                             48.5 percent
  • Vallejo Fairfield, CA       46.5 percent
  • Merced, CA                         44.4 percent
  • Port St. Lucie, FL              43.5 percent
  • Riverside, CA                     42.8 percent
  • Phoenix, AZ                        41.7 percent
  • Orlando, FL                         41.7 percent

Wells Fargo Wagon Rolls onto Wall Street

Friday, April 10th, 2009

The Wells Fargo wagon delivered good news to Wall Street when the San Francisco-based bank announced a record first-quarter profit of approximately $3 billion, or 55 percent per common share.  Contrast these numbers with the fourth quarter of 2008, when Wells Fargo reported a $2.6 billion loss.

The news sent the Dow Jones Industrial Average soaring 3.1 percent to finish the day at 8,083.38, the highest closing since February 9.wellsfargo

Wells credited the outstanding results to healthy lending margins driven by low interest rates and the resulting boom in mortgage lending activity.  “Our business momentum is strong, and we expect our operating margins to remain at the top of our peer group,” said John Stumpf, Wells Fargo’s CEO.  Applications for mortgages surged during the first quarter; Wells reported $83 billion in applications for new and refinance home loans during March alone.

Wells is the nation’s largest mortgage servicer and a leading home loan originator, so it benefited from the refinancing boom driven by extremely low short-term interest rates and the government’s purchases of mortgage bonds.

Although this is evidence that the Obama administration’s efforts to jump-start the economy by freeing up credit are starting to work, it is only the hint of a beginning for banks with significant mortgage portfolios.  Wells and competitors such as Bank of America, Citigroup and JPMorgan Chase remain dangerously exposed to falling asset prices, especially for commercial and residential real estate.

Homeowners Rush to Refinance While Interest Rates Are Low

Wednesday, February 18th, 2009

What recession?

A recent conversation with a friend revealed the unexpected nugget that at least one segment of the credit industry is alive and extremely well. The friend’s mortgage broker daughter is taking a leave of absence from law school to concentrate her energies on processing all the refinance applications coming her way – a torrent so great that she is currently earning commissions well into the five-figure range every week.

The downside is that this window of opportunity does absolutely nothing for people who desperately need help keeping their homes. Something needs to be done for them, too.

new_american_gothicThis rush to refinance is thanks to the Federal Reserve’s commitment to buy large blocks of mortgage-backed securities and other debt from Fannie Mae and Freddie Mac in its efforts to restart the mortgage market. Because of the Fed’s cash infusion, the benchmark 30-year fixed-rate loan fell to below five percent recently, even as low as 4.89 percent. Mortgage rates haven’t been at levels like this since the 1950s. GMAC Mortgage reports that refinance applications soared more than 75 percent in January when compared with November.

Not surprisingly, the homeowners qualifying for refinance loans aren’t struggling; they are able to pay their mortgages and see a way to save some money. According to Scott Stern, chief executive of Lenders One, “The refinance boom is mostly impacting the people who need help the least. These are people who already have conforming fixed-rate loans or government financing.”