Liquidity for U.S. home builders is still “generally adequate,” despite little demand for housing, according to a new report from Fitch Ratings. “Fitch is not convinced that demand will collapse further,” the report says, cautioning, though, that home builders should take note that the tax refunds they have been taking advantage of in recent years can’t be counted on to bulk up their cash flows in 2011. “It is prudent for home builders to maintain or improve their liquidity positions,” said Robert Rulla, director of Fitch. “Housing activity is likely to stay at a slow trickle through the fall.” TRD

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A $1 billion increase in Manhattan loan delinquencies caused a surge in U.S. CMBS delinquencies, bringing the total to 7.97 percent in May, according to the latest index from Fitch Ratings. Fitch reports that there are currently a dozen loans totaling $3.5 billion that are delinquent in Manhattan. Four loans secured by New York City properties, totaling $30 million, were delinquent, representing 0.3 percent of delinquencies nationwide. Of that total, Stuyvesant Town and Peter Cooper Village accounts for $2.8 billion. The total city delinquencies represent 9.8 percent of all U.S. CMBS delinquencies, a sharp escalation from a year earlier. “As expected, office loan delinquencies have begun to increase and will continue to rise well into next year,” said Mary MacNeill, managing director at Fitch. “Landlords are facing tenant downsizing and in many cases must offer significant concessions and reduced rent to maintain their existing tenant bases.” The largest newly delinquent contributor to the index in May was the $380 million Columbia Center loan, the collateral for which is located in Seattle, Wa. “Continued underperformance among large office properties may prefigure a sizable spike in delinquencies.” MacNeill added. TRD

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The $80 million loan for a 600,000-square-foot downtown Manhattan office building at 40 Rector Street was transferred to a special servicer yesterday, according to Fitch Ratings, Crain’s reported. The owner of the property, Philips International, defaulted on the loan, which matured June 1. As a result, it was transferred to J.E. Robert Company, a Va.-based special servicer that works out troubled loans. The Rector Street loan is secured by a 440,000-square-foot office property that Philips owns elsewhere in the Financial District, according to a recent Fitch Ratings U.S. CMBS focus performance
report. The report noted that many leases were up for renewal. Nine separate New York City agencies lease nearly half of the actual rentable space in the building, which is located between Washington and West streets. All of those leases are scheduled to expire next month. The lease of the third largest tenant in the 19-story building, Merrill Lynch, also expires next month. Manhattan-based Philips International owns and operates more than 3 million square feet of retail properties, 1.3 million feet of office space and two hotels throughout the East Coast. The company is also the co-developer of a new rental building, the Corner, at 200 West 72nd Street at the southwest corner of Broadway. [Crain's]

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At age 68, longtime private detective Jules Kroll is breaking into the credit-rating business with an eye toward besting his besieged competitors with old-fashioned investigative techniques. While Moody’s Investor Service and Standard & Poor’s have seen their reputations tarnished by the inflated junk mortgage ratings that contributed to the housing bust — last week, news broke that Attorney General Andrew Cuomo was investigating the relationships between ratings agencies and eight big Wall Street banks — Kroll’s upstart agency plans to capitalize on their fall from power. According to Crain’s, Kroll Bond Ratings, set to launch in July, plans to knock on doors to see if people are still living in their homes, rather than rely on financial models or reports from loan servicers.
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Howard Milstein, head of Milstein Properties

Howard Milstein, head of Milstein PropertiesEmigrant Savings Bank, the struggling Milstein-owned institution and the lone major city holdout in the federal government’s Troubled Asset Relief Program, received $30 million in capital infusions from the Milsteins during the fourth quarter of 2009, according to a recent report to the Federal Reserve. The Milsteins’ fourth-quarter contribution brings the total to $200 million injected into the unprofitable bank over the past three years. With a junk credit rating and a “negative” outlook from Fitch Ratings, Emigrant continues to post losses on real estate and business lending and failed private equity investments. Its parent company, New York Private Bank & Trust Corp., posted a net $256 million loss last year and took $267 million in federal bailout money. Still, Eric Newell, a debt analyst at Fitch Ratings, said “the bank’s capital position seems to improving.” But it may need even more donations from the storied Milstein dynasty, back on the radar with the impeding sales launch of two condo towers in Batter Park City, in order to absorb future losses. Emigrant has only 3 percent of tangible capital, compared with the 5.6 percent average of its peer group. [Crain’s]  

Delinquencies on so-called jumbo mortgages are on the rise, and not just in the epicenters of the housing market crash. In states like New York, New Jersey and Florida, wealthy people with good credit histories are increasingly defaulting on their mortgages — Fitch Ratings reported that jumbo mortgage delinquencies rose to 9.6 percent in January — and that’s leading some analysts to believe many of these are strategic defaults. “These are all states where many of the mortgage holders are educated people and it is easy to connect the dots and conclude that these people are deciding it is no longer worth paying a mortgage if they are underwater,” said Ivy Zelman, a housing market analyst, who is predicting another 10 percent drop in housing prices nationwide. Negative equity appears to be one driving force: it’s directly correlated with default rates. Almost 40 percent of homeowners with no equity are delinquent on their loans, twice the rate of those with a stake in their homes. Strategic defaults have become so common that legal consulting companies like You Walk Away have sprouted up to help people through the process. The company charges a flat fee of approximately $1,000 to analyze how much time clients can get away with not making mortgage payments before they’ll be evicted. [Financial Times]

From left: Leon Charney, owner of L.H. Charney, Peter Duncan, president of George Comfort, and 119 West 40th Street (Building photo source: PropertyShark)

Just weeks after negotiating an agreement to rescue 119 West 40th Street from a mezzanine loan default, George Comfort & Sons and L.H. Charney Associates are facing foreclosure on a $160 million senior mortgage at the site.

CW Capital Asset Management, which is servicing the senior loan on behalf of Bank of America, filed suit in New York State Supreme Court Dec. 14 to foreclose on the property.

George Comfort and Charney originally borrowed $160 million from Wachovia Bank and Greenwich Capital Financial Partners in April 2007, according to the lawsuit, with half coming from each bank. The loan was later sold to GS Mortgage Securities Corp. II, as part of a July 1, 2007, loan purchase deal signed between Greenwich and GS.

In July 2009, Fitch Ratings warned that the 119 West 40th Street loan was performing below expectations. Fitch said the loan was underwritten based on the expectation of resigning below-market leases at higher rents; however, the building fell behind schedule and was transferred to the special servicer in June 2009 with the expectation of imminent default.  More

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U.S. commercial mortgage-backed securities saw another monthly jump in the rate of delinquencies in October, according to data from Fitch Ratings, with Larry Gluck’s $225 million loan, collateralized by the Riverton Apartments in Harlem, clocking in as the largest newly delinquent loan, even though it was transferred to a special servicer over a year ago. Gluck, however was not alone. Late-pays on all CMBS jumped 3.86 percent since September. Office properties saw the biggest jump in delinquencies out of the different types of commercial properties tracked, with 19.4 percent more recorded in October than the month before. Overall, hotel properties saw the greatest percentage of mortgage defaults, with 6.81 percent of hotel property loans going into default, according to the report. TRD
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Homeowners who fall behind on their mortgage payments are much less
likely to catch up now than they once were, according to a report from
Fitch Ratings. The “cure rate,” or percentage of delinquent loans that
go back to current payment status in any given month, fell to 6.6
percent in July for prime loans, down from an average of 45 percent
between 2000 and 2006. For subprime loans, the cure rate dropped to 5.3
percent in July from 19.4 percent. If borrowers can’t catch up on
mortgage payments, the foreclosure crisis is likely to continue. But
because the foreclosure process is so backlogged, borrowers who fall
behind on payments may be able to stay in their homes for a year or
longer before being evicted. [more]