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Distress creates opportunity

(Credit: M&T Bank)

Distress

  • M&T Bank reported $530 million in loans that are 90 days or more past due for the quarter ending March 31, an increase of 117 percent from the end of 2019 –– primarily in residential real estate. Despite the jump in past-due loans, the bank’s multifamily customers were “pleasantly surprised” by healthy rent collections in April. In average rental buildings, rent collections were about 75 percent of their normal levels, while buildings with higher-end tenants collected 90 percent of their normal rent roll. (TRD)
  • More than 3 million borrowers have taken advantage of the mortgage forbearance program, which allows those with government-backed loans to delay up to a year’s worth of monthly mortgage payments. Mortgage servicers, however, the companies that collect the payments, were required to advance that money to bondholders for up to a year. Now, the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, has reduced that requirement to 4 months. The percentage of loans now in forbearance jumped from 3.74% of servicers’ portfolio volume in the prior week to 5.95% as of April 12. (CNBC)
  • The Federal Housing Finance Agency is weighing whether to allow Fannie Mae and Freddie Mac, the government-controlled mortgage-finance giants, to buy home loans that recently entered forbearance. That would help nonbank mortgage companies that lend to home buyers and then quickly sell the loans to Fannie and Freddie. Mortgage companies are facing a severe cash crunch because they must continue paying investors in the loans even if homeowners suspend their monthly payments as explained in the previous story. (WSJ)

Creates opportunity

Investors are pouring billions of dollars into new real-estate funds created to buy distressed debt backed by hotels, malls, office buildings, and other commercial properties suffering big losses of value during the coronavirus crisis. With property sales in the commercial-property market nearly inactive, these firms are focusing on real-estate debt getting dumped on the market by troubled real-estate lenders and others.

  • Dig Deeper: Most commercial property landlords who missed their April 1 debt payments have a 30-day grace period so aren’t technically in default. But early indications are that more than 11% of commercial mortgages that were converted into securities will be 30 days delinquent when that grace period elapses. That would surpass the highest level hit during the last financial crisis, 10.3%. (WSJ)

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