A $1.5 billion commercial mortgage bond sale between Goldman Sachs and Citigroup has been scrapped, the companies said, because Standard and Poor’s would not rate the notes. According to Bloomberg News, the deal had been slated to close today but was delayed because S&P is reviewing its criteria for rating commercial mortgage-backed securities.

“Ratings are a condition precedent to closing and settlement,” Goldman Sachs and Citigroup said in the statement to Business Wire. “Standard & Poor’s had previously informed Goldman and Citi that they were prepared to rate” the transaction, they said.

The risk assessor explained the change in a separate statement.

S&P ’’is reviewing the application of our conduit/fusion CMBS criteria in relation to the calculation of debt service coverage ratios,” it said yesterday. [more]

As part of a new national strategy to deal with foreclosed and abandoned houses it can’t sell, Bank of America will donate 100 foreclosed houses in the Cleveland area for demolition in partnership with a local agency that manages blighted property, Bloomberg News reported. The bank is planning similar strategies in Detroit and Chicago, with more cities to come, it said.

Getting rid of repossessed properties is one of the biggest issues facing lenders nationally; in the U.S. 1,679,125 houses, or one in every 77, were in some stage of foreclosure as of June, Realty Trac said. If these properties were to flood the market, it would negatively affect prices and discourage buyers.

“There is way too much supply,” said Gus Frangos, president of the Cleveland-based Cuyahoga County Land Reutilization, which works alongside lenders, government officials and homeowners to save vacant homes. [more]

Shares of real estate listings website Zillow.com have opened on the NASDAQ at $60 per share, technology blog TechCrunch.com reported, giving the company a $1.6 billion valuation. Zillow priced its initial public offering at $20 per share yesterday, after increasing the pricing of its IPO to $16 to $18 per share. The company raised $69 million in the offering.
Zillow is the third most visited real estate-related site in the U.S., according to Experian Hitwise, and received 5.36 percent of all real estate traffic in March, up 53 percent from March 2010. However, the company has been seeing losses in net income over the past three years, TechCrunch said.
In the three months ending March 31, Zillow generated revenue of $11.3 million, an increase of 111 percent from the same period in 2010. [more]

In a sign of Wall Street’s recovering interest in commercial property, banks such as Deutsche Bank AG, Goldman Sachs and JPMorgan Chase are weighing bids for parts of Anglo Irish Bank’s $9.5 billion U.S. real-estate portfolio, according to the Wall Street Journal.
The portfolio, the largest since the start of the recession, offers a relatively low risk opportunity to jump back into commercial property, the Journal said, as the majority of debt is concentrated in large cities such as New York, California and Chicago. There are around 250 properties in total.
“It’s the first foreign bank to sell its entire U.S. loan portfolio, and it will be a good test of the market,” said Robert Ivanhoe, head of the global real estate practice for the law firm Greenberg Traurig. [more]

U.S. regulators are barring certain law firms from assisting in eliminating foreclosure abuses, citing potential conflicts of interest, the Wall Street Journal reported.
In one case, the Federal Reserve rejecedt a GMAC mortgage proposal that Alabama-based attorney Bradley Cummings would assist with an independent, U.S.-mandated review of past home seizures, given that his firm had previously defended GMAC is a foreclosure-related lawsuit.
This is just the latest hurdle in a long-fought battle by U.S. bank regulators to have banks rectify shoddy foreclosure practices. [more]

U.S. bank regulators have extended the deadline for 14 financial institutions to submit plans to rectify problems with home-foreclosure practices by 30 days, according to the Wall Street Journal. Instructions issued in April gave the institutions, including Bank of America, Wells Fargo & Co. and Citigroup, until mid-June to instigate plans after widespread problems with bank foreclosure processing operations became public last fall.
As per the instructions, the banks were required to hire independent consultants to evaluate all foreclosure proceedings from 2009 and 2010 to establish whether they improperly foreclosed on any homeowners. [more]

A coalition of federal agencies and state attorneys general investigating banks’ foreclosure practices have proposed a “binding legal requirement” for handling home foreclosures, according to Bloomberg News. The proposal came in the form of a 27-page document submitted to mortgage servicers last week, and, along with yet-to-be-determined fines and penalties, is the result of a probe launched in October into reports that banks were using faulty documents to foreclose on homes. New regulations for loan modifications may also result from the settlement. While it’s unclear which companies received proposals from the government officials, Bank of America, JPMorgan and Citigroup were expected to be among them. [Bloomberg]

Home insurer Allstate has sued Bank of America’s Merrill Lynch unit over claims it fraudulently sold the insurer about $167 million of residential mortgage-backed securities, Crain’s reported. In a complaint filed yesterday in New York Supreme Court, Allstate asked for damages, including the lost market value of the securities and principal and interest payments. “Because of the systemic abandonment of underwriting standards and the resulting inclusion of toxic, highly risky mortgage loans to back the certificates, most of Allstate’s certificates have been downgraded from the highest possible ratings to junk-bond ratings,” Allstate said in the complaint. Allstate filed a similar lawsuit against Credit Suisse Monday over more than $231 million of the securities. Allstate, based in Northbrook, Ill., has sued a string of other banks for similar claims. Last month, it sued JPMorgan Chase over $700 million of mortgage-backed securities the bank sold the insurer; Citigroup over more than $200 million; and Deutsche Bank over about $185 million. Allstate said the banks misrepresented underwriting standards, owner occupancy data and loan-to-value ratios. [Crain’s]

David Stern, the Broward County attorney whose law firm handles
one-fifth of all foreclosure cases against Florida homeowners, has been
hit with a lawsuit from two Ohio investors who claim Stern “materially
misled” them about the firm’s expected earnings following a decline in
foreclosure cases in Florida. Among the major clients of the law firm
are Bank of America, Wells Fargo and Citigroup. According to the suit,
DJSP Enterprises, a Plantation-based public company that does most of
its business with Stern’s law firm and which bought Stern’s non-legal
operations for $58 million in January, lost 29 percent of its stock
value in a single day because of a “substantial decrease” in
foreclosure cases during the months of April and May. Stern is also the
chairman and CEO of DJSP. The complaint alleges that Stern and DJSP
were purposefully slow to disclose the decline in their caseload. [Sun Sentinel]

[more]

Hallmark office building Las Olas Centre in Fort Lauderdale has been repossessed after losing a foreclosure action by Wells Fargo. The bank filed a suit against BF Las Olas, the building’s owner, and BentleyForbes Holdings in August. The foreclosure action related to a $166 million first mortgage. Wells Fargo said in an e-mail that it now owned the two buildings at 350 and 450 Las Olas Centre, which total nearly 470,000 square feet. Las Olas Centre was sold three years ago for $230.9 million, which was, at the time, a South Florida record at $492 per square foot. Notable tenants in the complex include Wachovia Bank and Citigroup. [SFBJ]