Servicing

Colony Capital LLC, Los Angeles, has acquired a commercial real estate-secured nonperforming loan portfolio from BAG Bakaktiengesellschaft, Hamm, Germany, with a face value of $90 million. "The transaction marks the first NPL acquisition in Europe for Colony during this new distressed cycle," the Los Angeles-based company said. Morgan Lewis was the legal and tax advisor for Colony on the transaction. Dilip Awtani, a managing director who heads Colony's distressed efforts in Europe, said he sees value in underlying real estate in Germany and other European countries that he believes Colony will be able to benefit from. The company seeks to realize this value by helping banks monetize illiquid assets and positioning itself to benefit from an eventual recovery.

More than 759,050 struggling borrowers have received temporary mortgage payment relief under the Obama Administration's loan modification effort but only 4.1% have succeeded in landing permanent modifications, according to a monthly progress report on the Home Affordable Modification Program. The Treasury Department report shows that 31,382 borrowers who made it through the three-month payment trials had received permanent modifications as of Nov. 30. It appears that HAMP servicers completed over 20,000 permanent mods in November. Treasury and HUD officials have been disappointed with the servicers' efforts to convert trial mods into permanent mods and they recently initiated a month-long effort to accelerate the conversion rate. "Our challenge now is to keep the pressure on," HUD senior advisor William Apgar said. The administration launched HAMP in April and so far the average homeowner placed in the three-month trials has benefited from a $550 reduction in their monthly payment. The first conversions to permanent mods occurred in July and 10,087 had been completed by the end of October, according to a congressional panel that oversees the Troubled Asset Relief Program.

Foreclosure filings in the U.S. will reach a record for the second consecutive year, with 3.9 million notices sent this year to homeowners in default, according to RealtyTrac Inc. This year's filings will surpass 2008's total of 3.2 million as high unemployment and home price declines continue to hammer the market, the company said. Foreclosure filings exceeded 300,000 for the ninth straight month in November, it said. RealtyTrac is based in Irvine, Calif.

The Federal Deposit Insurance Corp. is expected to rule on two matters Tuesday stemming from new accounting standards for off-balance-sheet assets. The agency is ready to complete an interagency rule bringing capital levels in line with a decision by the Financial Accounting Standards Board in June that required certain off-balance-sheet holdings, including securitizations, to be brought onto the balance sheet. As a result of the FASB change, the FDIC will also consider a proposal to restrict its safe harbor for securitized assets that are tied to failed institutions. Since securitizations have previously been separate from a bank's balance sheet, the FDIC has ordinarily not seized these assets when resolving failed institutions. But the FASB rule left investors and banks worried that the FDIC might change its policy. Last month, the FDIC said it would maintain the safe harbor until April but -- considering how securitizations contributed to the financial crisis -- propose conditions for use of the safe harbor in the longer term.

Countdown to Buy, Bethel, Conn., which operates an online real estate auction website, has lined up new investor commitments of more than $1.1 million, according to a source familiar with the matter. The official announcement on the capital raise is expected to come next week. Founded in 2008, Countdown hopes to expand from a regional online seller of real estate to a national player.

The Hope Now servicer alliance has launched a new web portal to expedite the collection of borrower documentation needed to approve permanent modifications under the government's Home Affordable Modification Program. HAMP appears to be floundering because of the document process. Housing advocates claim servicers are not set up to process origination documents and keep losing them -- forcing borrowers to send the same document multiple times. HAMP servicers are hoping the new portal will enable HUD-approved housing counselors to help homeowners in modification trials fill out the necessary forms and send in pay stubs and tax returns. "This new web portal will help homeowners get a faster answer, via their housing counselor, on whether or not they qualify for a HAMP loan," said Hope Now executive director Faith Schwartz. There are nearly 700,000 borrowers in trial modifications and only 31,382 borrowers received a permanently modified mortgage, according to the Treasury Department. Treasury estimates that 20% of borrowers have not submitted any documentation to their servicer while 37% have submitted incomplete documentation.

U.S. commercial mortgage-backed securities delinquencies jumped 43 basis points to 4.29% in November, according to a Fitch Ratings index. The rating agency said large hotel and multifamily loan delinquencies were responsible for the increase. But all loan types saw increases during the month. The hotel sector had the highest delinquency rate during the month, 8.07%; followed by multifamily, 7.03%; retail, 3.81%; industrial, 3.20%; and office, 2.50%. Large loans, defined as loans with balances of more than $100 million, continue to default each month, according to Fitch. Five additional large loans became delinquent in November.

The U.S. Attorney for Eastern District of Pennsylvania has indicted five people for a $14.6 million mortgage fraud scheme that resulted in at least 35 fraudulent loans. Named in the 15-count indictment are Edward McCusker and John Alford Bariana, owners of Axxium Mortgage Inc.; McCusker's wife, Jacqueline; and Jeffrey Bennett and Stephen Doherty, owners of the Doylestown law firm Bennett & Doherty, P.C. They are charged with conspiracy to commit mail fraud, wire fraud, and money laundering. Mr. Doherty is also charged with bankruptcy fraud. According to the indictment, the defendants targeted financially distressed homeowners facing foreclosure, falsely promised them help in saving their homes, engaged in real estate transactions with straw purchasers, and obtained dozens of fraudulent mortgages. The defendants allegedly took whatever equity the homeowner had left, funneled it through various shell corporations they controlled, used some of it to pay the new mortgages, and put the rest of the equity into their own bank accounts. Edward McCusker and Bariana, along with Jacqueline McCusker allegedly obtained the mortgages by submitting false documents to lenders and making false claims about the straw purchasers' finances, the indictment said. Doherty allegedly used fraudulent bankruptcy filings for some borrowers to delay foreclosure until McCusker had obtained an investor and a mortgage. Bennett allegedly handled the closings for the real estate transfers. Edward and Jacqueline McCusker, Jeffrey Bennett, and John Bariana face maximum sentences of 240 years imprisonment, $3.25 million in fines, three years supervised release, and a $1,200 special assessment. Stephen Doherty faces 385 years imprisonment, $4 million in fines, three years supervised release, and a $1,500 special assessment. Attempts to reach the defendants were unsuccessful by press time.

National quarterly housing price gains, tracked on a rolling monthly basis, were at a modest 1.4% at the end of November compared to 3.7% at the end of October and 6.3% in September, according to the Clear Capital Home Data Index Market Report. Meanwhile, at 14.1% Detroit surpassed all other U.S. markets including five-month leader Cleveland where quarterly price gains were 12.8%. Other micromarket analysis data show gains in markets like Atlanta where home price gains of 13.4% over the last two rolling quarters indicate this metropolitan statistical area may have bottomed out and is beginning to recover. Clear Capital analysts find sustainable stable price levels in a growing number of metropolitan statistical areas during the year "after the dramatic fall off in prices in the preceding three years" indicate signs of a price bottom and more hope for further market stabilization. Even returning "seasonal influences" and "a potential increase in REO saturation rates" are not expected to fade the price gain stabilizing effect, according to Clear Capital.

U.S. home prices stabilized (relatively) in 2009 after losing trillions of dollars in value during 2008, according to real estate website Zillow.com. Homes lost $489 billion in value during the first 11 months of 2009, significantly less than the $3.6 trillion lost during 2008, according to Zillow's real estate market reports. Forty-eight of the 154 markets tracked by Zillow showed gains in home values during 2009. The Boston metropolitan statistical area showed the largest gain of $23.3 billion, while the Providence, Rhode Island, MSA was second, with a gain of $12.4 billion. The stabilization in home values reduced rates of negative equity in the third quarter of the year. Twenty-one percent of single-family homeowners had mortgages under water compared with 23% in the second quarter. Most housing markets had a good summer, spurred largely by the government's tax credits for homebuyers, combined with very low mortgage rates, said Stan Humphries, Zillow chief economist. "Unfortunately, we believe that demand will come under downward pressure as mortgage rates creep back up after the first quarter and that housing supply will experience upward pressure as the volume of foreclosures continues to remain high," Mr. Humphries said. "Both these factors will challenge the recent stabilization of home prices." Zillow.com said the biggest home value losses, in terms of total dollars lost in 2009, were in the large MSAs of Los Angeles, down $60.8 billion; Chicago, down $49.6 billion; and New York, down $49 billion.