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No Shortage of Secondary Investors

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Secondary mortgage transactions continue to be strong, though the government has a big role in some of the deals. In all, nearly $3 billion in residential transactions and more than $6 billion in commercial real estate transactions were recently tracked.

In recent months, the Federal Deposit Insurance Corp., as a receiver for failed banks, has closed on three sales of 40 percent equity in limited liability companies that were created to hold the assets of failed banks. The FDIC retained a 60 percent stake in the assets.

In one sale, Los Angeles-based Colony Capital Acquisitions LLC, with minority-owned Cogsville Group LLC of New York as its junior equity partner, invested in an unpaid principal balance of approximately $1.85 billion from 22 failed bank receiverships.

In another sale, a variety of investors paid par for the senior certificates that were part of a securitization backed by approximately $471.3 million of performing single-family mortgages from 16 failed banks.

The National Credit Union Administration announced on Oct. 28 the settlement of its offers of two series of senior notes, each backed by a separate pool of securitized residential loans that came from failed credit unions. More than 35 investors participated in the transactions, which met with strong investor demand and were oversubscribed, according to the Alexandria, Va.-based NCUA. Investors included credit unions, banks, broker-dealers, insurance companies, money management funds, pension funds and government agencies.

In other secondary activity, Tampa, Fla.-based Walter Investment Management Corp. purchased two pools of residential first lien mortgage loans utilizing some $20 million of proceeds from an equity offering. The pools consist of performing fixed and adjustable-rate mortgages on single-family, owner-occupied residences primarily located in the southeast.

In one of the largest commercial transactions, JPMorgan Chase & Co. purchased a $3.5 billion portfolio of approximately 3,800 multifamily and commercial real estate loans from Citibank, N.A. The purchase contained only performing loans on properties that have shown strong credit performance, according to Al Brooks, head of commercial term lending at JPMorgan.

A third FDIC sale involved a three-party consortium comprised of Milestone Asset Opportunity LLC, Toll Brothers Inc. and PMO Loan Acquisition Venture LLC, which is controlled by Oaktree Capital Management LP, invested in approximately $1.7 billion of primarily non-performing commercial acquisition, development and construction loan assets and REOs out of AmTrust Bank.

The aggregate value of commercial real estate loans that collateralize CMBS has been growing for most of this year, according to Boston-based loan sale advisors DebtX. This increase has occurred because of a falling yield curve and strong demand for product, according to DebtX CEO Kingsley Greenland.

DebtX itself will sell $1.1 billion in commercial and residential real estate loans in 10 separate transactions through early December, an Oct. 21 announcement indicated. The transactions, which include $784 million in commercial loans and $363 million in residential loans, are being executed on behalf of commercial banks, insurance companies and mortgage servicers, Greenland said.

A report Wednesday from DebtX said prices on securitized mortgages fell to 80.5 percent in September from 81.0 percent in August. The data were based on 56,992 loans for $667.5 billion that DebtX priced during September. Still, values were higher than 77.2 percent a year earlier.

In addition, DebtX in a joint venture with KEMA Advisors called KDX Ventures, sold a $234 million portfolio of loans, including 18 multi-family commercial real estate loans on behalf of the U.S. Department of Housing and Urban Development.

“The volume of loan sales reflects the heightened importance among financial institutions of entering 2011 with a stronger balance sheet,” Greenland said of all this activity. “Financial institutions are selling to take advantage of rising loan prices and the growing demand from investors around the world. Given the range of product being offered through early December, DebtX expects active bidding for both performing and non-performing loans.”

Charlotte, N.C.-based Mountain Real Estate Capital, the equity investment arm of the Mountain Real Estate Group, in another REO transaction, purchased from Columbus, Ga-based Synovus Bank a portfolio of 135 residential projects covering an estimated 1,300 acres in the greater Atlanta metropolitan area.

And Chicago-based Waterton Residential acquired $109.5 million of debt secured by four prime multifamily properties located in North Carolina and California.

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