The Federal Deposit Insurance Corp. has made its first foray into the commercial mortgage-backed securities market, the Wall Street Journal reported, by selling off about $400 million worth of commercial loans divided into bonds. Real estate investor LNR Property scooped up the riskiest layers of the bonds, originally collected from 13 failed banks. Traditionally the FDIC sold loans mostly in the form of distressed mortgages but with increasing demands for CMBS the agency wants to get into the act. The federal government actually pioneered the CMBS market in the early 1990s when the Resolution Trust Corp. sold off commercial mortgage bonds in an effort to get rid of its portfolio. [WSJ]

The Sterling Bank of Lantana became the 18th Florida bank to be shuttered and sold when it was closed by regulators Friday. Sterling, which had six branches and $407.9 million in assets as of March 31, will reopen as Iberiabank of Lafayette, La., which has assumed operations. The Federal Deposit Insurance Corp. acted as receiver in the deal and will share $244.3 million in loan losses. Florida has had the most bank failures of any state in 2010. [Sun Sentinel] 

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Miami-based builder Lennar has completed a series of
transactions with the Federal Deposit Insurance Corp. to help resolve thousands of distressed real estate loans. A subsidiary
of Lennar, Rialto Capital Advisors, will take over the management and
resolution of two distressed loan portfolios with about 5,500 such
faltering loans, under an arrangement with the FDIC. The
deals will give Lennar a 40 percent stake in the loans, which carry an
unpaid balance of $3.05 million. The FDIC will retain a 6 stake and
provide $627 million in supporting financing at zero percent interest
for a seven-year term. Stuart Miller, Lennar President and CEO, said his
company has done well with loan workouts in the past; that activity
helped its bottom line in the early 1990s, the last major real estate
slide. [AP via ABC News]

The trustee overseeing Residences at the Falls, a foreclosed condo conversion project at 13888 S.W. 90th Avenue in Kendall, has filed a motion to put the remaining 333 units up for sale in bulk at a bankruptcy auction in February. The 628-unit property was acquired in 2005 by Lucky Chase II, part of Pittsburgh-based Deaktor Development, and was hit with a $28.9 million foreclosure suit in 2008 over the unsold units. The lender, AmTrust Bank, was shuttered by the Federal Deposit Insurance Corp. last month. Lucky Chase filed for Chapter 11 reorganization last April. A hearing on the motion is scheduled for Friday. Bidders at the auction would be asked for a $1 million escrow deposit, the motion said, and the winner would be confirmed at a bankruptcy court hearing the next day. [SFBJ]

Real estate that’s wound up in the possession of the federal government is selling for 10 percent to 20 percent below market value, impacting the already shaky South Florida market. Homes in possession of the Federal Deposit Insurance Corp., as well as Freddie Mac and Fannie Mae, which guarantee mortgages, now number at least 5,000 in Florida alone. The agencies sold about 140,000 nationwide this year. On its own, Fannie Mae is trying to sell 4,352 homes in Florida. It said 568 of them are in Broward County, 267 in Miami-Dade County and 190 in Palm Beach County. Louis Spagnuolo, vice president for mortgage banking at WCS Lending in Boca Raton, said the programs weren’t widely known and could be a boon to prospective buyers. [Sun Sentinel]

Commercial loans are defaulting at record-high rates, and many industry insiders believe the pace will only worsen, both in South Florida and nationwide. As revenues drop amid a severe recession, savvy commercial property owners in the region are working with banks — some more than others — to avoid default now before market conditions worsen.

According to a recent report from Real Estate Econometrics, the default rate of commercial real estate bank loans has reached its highest level in 15 years. And momentum is moving toward worsening default rates, which more than doubled nationally in the second quarter, up to 2.88 percent from 1.18 percent year-over-year, the report shows. And the company expects the default rate to rise to 4.1 percent by the end of the year, and to 5.2 percent by the end of 2010.

Rising vacancy rates, falling rents and increased operating expenses are contributing to the default surge. But the inability to refinance, sell or meet balloon payments also plays a part. Legal experts suggest commercial property owners looking to avoid default should get honest and aggressive about trying to find a middle ground.
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Federal bank regulators took control of the largest Florida-based bank
Thursday afternoon and oversaw BankUnited’s sale to a group of private
equity firms led by New York banker John Kanas. The Federal Deposit
Insurance Corp. guarantees deposits at BankUnited branches, and regular
business operations will continue without pause. It’s the third largest
bank failure in the current financial crisis after Washington Mutual
and IndyMac, and carries an estimated cost of $4.9 billion. CEO Ramiro
Ortiz will remain in place as the takeover progresses. [more]