Origination

As the number of distressed hotel assets continues to rise — many with foreclosure eminent — an increasing number of hotel lenders will be transitioning to a more active ownership role, according to one management firm. Capital Hotel Management in Beverly, Mass., said it expects to see an exponential leap in demand for hotel asset management services from lenders as they look for qualified hotel receivers. "The lending community has reached the stage where they no longer can delay foreclosure issues," said Chad Crandell, president of CHM. "We certainly will see more foreclosures in 2010 than any year since the RTC days of the early '90s." The current lack of available financing, coupled with a continued decline in performance projected for at least the first half of 2010, could likely push the transaction window well into 2011 or 2012, according to the company. The company said the pressing decision for lenders will be to sell short or commit to a potentially longer hold period. In either case, special servicers and lending groups will need hotel-specific experts, the firm believes.

Cogent Road, San Diego, has launched a new tool designed to facilitate electronic communication between lenders and borrowers. Cogent said its new application, Roohmz Mortgage Enterprise, is an Internet-based workflow management system that manages the progression of loan applications from origination to closing, enforces compliance and provides a communication platform for all parties involved in the lending process. Through RME each loan file is digitized and rules are applied to its path to closing in order to guarantee that each compliance prerequisite is met before the program moves the loan to the next status. Once the status is attained, RME delivers the loan file to the next employee in the workflow, the company said.

Kuwaiti investors are backing a new public commercial real estate investment company in New York called Eastbridge Al Mal Holdings Ltd. The new company, which will have offices in Dubai and Kuwait as well as New York, will seek to invest in what it describes as high-quality income-producing properties in major U.S. cities. It plans to invest through local operating partners who requirement additional equity capital for direct real estate investments, debt and securities. Rick H. Singer is the company's chief executive officer in charge of all real estate entities and a founding partner. Mr. Singer was at one point the head of global real estate at Wall Street firm Salomon Brothers for 10 years and held senior leadership positions at several other investment firms. The company will initially be focused on the energy sector.

BB&T Corp., a growing player in residential financing, earned $142 million in mortgage-related revenue in the fourth quarter of 2009, an increase of nearly 87% over the same period in 2008. The Winston-Salem-based company said it is seeing strong production revenue from its residential mortgage banking business and an increase in mortgage servicing income due to the growth in its servicing rights portfolio. For the full year 2009, BB&T had record mortgage production of $28.2 billion, with $5.3 billion of that coming in the fourth quarter. During 2009, the company's mortgage servicing portfolio grew by nearly $13 billion to $73.6 billion. Nonperforming mortgage loans increased from $375 million at the end of 2008 to $767 million one year later. In the same timeframe, foreclosed real estate went from $538 million to almost $1.5 billion. For the fourth quarter, the company posted net income of $194 million, a decline from $307 million in the same period one-year prior. During 2009 BB&T acquired Colonial Bank in a Federal Deposit Insurance Corp. transaction.

The Department of Housing and Urban Development wants Mortgage Counseling Services of Georgia to indemnify it against potential losses on FHA loans it originated, citing the lender for quality control violations. In a newly released audit, HUD's Office of Inspector General said MCS "did not follow HUD requirements when underwriting eight of 16 FHA loans. HUD insured the eight loans that unnecessarily placed the FHA insurance fund at risk for more than $433,000." HUD said it is recommending that FHA take "appropriate action" against the company "for its noncompliance in closing two loans." A woman working at MCS said she could not comment and referred calls to company CEO Mary Ann White. Ms. White had not returned a telephone call as National Mortgage News went to press. HUD presented the lender with its final audit results in late November, noting that company officials generally disagreed with its findings.

Appraisers and lenders were denounced for hampering acceptance of environmentally friendly building products at the National Association of Home Builders' annual convention this past week. "Appraisers are out to lunch on this," said William Nolan, a housing industry consultant based in Orlando. Until lenders and appraisers learn to recognize the value of green innovation and the money it can save buyers of new homes, there is not enough incentive for widespread adoption, Mr. Nolan said. "We're having a huge fight on this. We can't get lenders to appreciate the value of the net costs, and if we can't get the values recognized, [manufacturers] can't justify moving these products forward." Ed Linder, a division director at the appliance maker Whirlpool Corp., said the appraisal issue is one reason Europe is far more advanced than the United States when it comes to green products. "Appraisers don't understand the value of sustainability," he said.

BB&T Corp., Winston-Salem, N.C., ranked first among all warehouse providers in terms of commitments for the period ending Sept. 30, thanks mostly to its acquisition of Colonial BancGroup of Alabama. BB&T had roughly $3 billion of commitments at the end of the period, but the figure is an estimate based on Colonial's lines at the time of its failure in August. The survey was conducted by National Mortgage News. Several firms, including JPMorgan Chase and Bank of America, declined to provide a commitment number. BB&T officials would not comment on its warehouse business or discuss the dollar volume of its lines. Executives familiar with BB&T's efforts in the space, say it is committed to providing credit to nonbank originators but is only making lines to lenders that operate in its bank footprint. The bank has 1,500 offices nationwide. Prior to buying Colonial, BB&T already had a small warehouse lending division. The Mortgage Bankers Association recently said the warehouse market is showing signs of improvement with many banks expanding credit to their mortgage banking customers. (On Monday the paper edition of NMN will publish its final ranking of warehouse lenders.)

Federal regulators have finalized a transition rule to cushion banks from the capital impact of consolidating mortgage securitizations on their balance sheets. The final rule provides a one-year transition period for the adoption of Financial Accounting Standards 166 and 167 which went into effect Jan. 1. "It provides an optional phase-in for four quarters," federal banking regulators said. Banks can exclude consolidated assets from risk-based capital calculations during the first two quarters of 2010. Over the third and fourth quarters, banks only have to count 50% of the consolidated assets for RBC purposes. Institutions that participated in the issuance of private-label residential and commercial mortgage-backed securities will be most affected by the FAS 166 and 167. On Jan. 1, Wells Fargo consolidated $10 billion in securitized assets on its balance sheet, including $5 billion in nonconforming residential mortgages. The company said it resulted in a 4 basis point decline in its total capital ratio.

All banks and thrifts are having problems with commercial real estate loans, not just small community banks, according to FDIC chairman Sheila Bair. "Despite what you may be hearing, CRE credit problems are affecting big and small banks alike," the Federal Deposit Insurance Corp. chairman said in a prepared speech delivered at a Commercial Mortgage Securities Association conference in Washington, D.C. As of Sept. 30, FDIC-insured institutions held $1.3 trillion CRE and multifamily mortgages — nearly 18% of total loans. And $44.8 billion are classified as noncurrent (90-days or more past due or considered uncollectible). Banks and thrifts hold another $500 million in construction and development loans and 15% of these are noncurrent. "The annualized net charge-off rate of 6% on C&D loans in the third quarter significantly exceeds the highest rate of the last crisis, which was about 4%," Ms. Bair said. FDIC expects delinquencies and charge-offs will move higher in the coming quarters.

Mortgage banking income at U.S. Bancorp, Minneapolis, increased by $195 million in the fourth quarter 2009 over the same period one-year prior, driven by mortgage loan production volume of $11.1 billion. For the full year, the company had mortgage loan production volume of $55.6 billion. The company reported fourth quarter 2009 mortgage banking revenue of $218 million, down from $276 million in the third quarter but up from just $23 million in the fourth quarter 2008. For the full year, mortgage banking income was over $1 billion, compared with $270 million for all of 2008. The fourth quarter year-over-year increase is due, U.S. Bancorp said, to the lower interest rate environment. This led to strong mortgage loan production and related production gains. In addition, the net change in the valuation of mortgage servicing rights and related economic hedging activities was favorable and servicing income increased compared with the same period in 2008. Residential mortgage loan net charge-offs were $153 million in the fourth quarter of 2009, an increase over $129 million in the third quarter of 2009 and $84 million in the fourth quarter of 2008. Commercial and commercial real estate loan net charge-offs increased to $457 million in the fourth quarter of 2009, compared with $433 million in the third quarter of 2009 and $216 million in the fourth quarter of 2008.