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A buyer financed by the private investment firm of Michael S. Dell boosted its bid at the last minute to win the most valuable properties of bankrupt retailer Toys “R” Us Inc. in a court-managed sale, Bloomberg News reported. A joint venture between Saadia Group and Square Mile Capital used a $120 million loan from MSD Partners to convince a bankruptcy judge to accept its bid for two of Toys “R” Us’s distribution centers over a competing offer from Isaac Larian, the chief executive of toymaker MGA Entertainment. The Saadia venture will pay $177 million for the properties in California and New Jersey, which a Toys “R” Us lawyer called the most valuable real estate owned by the retailer’s U.S. business.

Lax and fraudulent lending on single-family homes played a role in inflating and popping the housing bubble a decade ago. The 2010 Dodd-Frank financial overhaul required home borrowers to document their income, and home lenders to verify it, but the rule doesn’t apply to multifamily housing, the Wall Street Journal reported. Lenders in that market review data submitted by borrowers to ensure the properties earn enough to repay loans, but they generally don’t examine every lease to check income. Neither do Fannie Mae and Freddie Mac, the government-sponsored mortgage giants that buy and securitize loans. Credit-rating firms that grade the securities for investors also generally don’t review loans for fraud. Owners of an apartment complex near Pittsburgh, who wanted to take out a mortgage on the buildings, allegedly made vacant units look occupied by turning on radios, placing shoes and mats outside doors and in one instance having a woman tell inspectors her boyfriend was asleep inside. The owners obtained a $45.8 million loan, which was wrapped into mortgage securities and sold to investors. Practices such as these — which were alleged in a federal search-warrant application — have sparked one of the largest mortgage-fraud investigations since the financial crisis. It focuses on whether income from commercial properties was falsified, a move that would enable owners to get larger mortgages and take out cash or expand their businesses faster. Still in its early stages, the investigation has so far yielded a fraud-conspiracy indictment against four real-estate executives in upstate New York. Loans that some or all of them were involved with totaled about $170 million, the indictment alleges.

The Trump administration wants to shift the way it enforces an aspect of fair housing around the U.S., pivoting away from efforts to integrate lower-income housing into wealthier neighborhoods in favor of promoting more housing development overall, the Wall Street Journal reported. The U.S. Department of Housing and Urban Development is set to announce the change today. HUD will begin holding stakeholder hearings on how to change the way it determines whether communities are enforcing the Fair Housing Act, which requires local governments to institute policies that help break down patterns of housing segregation. HUD stakeholders include nonprofit groups, academic researchers and private businesses. The Obama administration took steps to encourage the development of low-income housing in high-income neighborhoods. In an interview, HUD Secretary Ben Carson said he plans instead to focus on restrictive zoning codes. Stringent codes have limited home construction, thus driving up prices and making it more difficult for low-income families to afford homes, Carson said.

The mortgage giants Fannie Mae and Freddie Mac could require as much as $78 billion in bailout money in the event of a serious financial crisis, according to stress test results released on Tuesday by the Federal Housing Finance Agency, National Mortgage News reported. The government-sponsored enterprises would need to draw between $42.1 billion and $77.5 billion from the Treasury Department under the test's "severely adverse" economic scenario, depending on how the enterprises treat their deferred tax assets, the agency said in its report. Under the terms of the senior preferred stock purchase agreements, the GSEs would retain between $176.5 billion and $212 billion under their funding commitment from Treasury. The projected draw is lower than the estimate from last year, when regulators reported that the GSEs could need nearly $100 billion in a new crisis. In 2016, the agency said that they would need just under $126 billion. The Dodd-Frank Act requires federally regulated financial companies with total assets of more than $10 billion to conduct annual stress tests to assess their ability to withstand an economic crisis.

A hedge-fund manager known for wagering on the demise of the weakest American malls is raising the stakes, betting some of the hardest-hit shopping centers are in a death spiral, the Wall Street Journal reported. Eric Yip, chief investment officer of Alder Hill Management, has been buying a credit default swap index known as the CMBX. It tracks the values of mortgages backed by commercial property. Yip’s investment goes up in value when shopping centers, whose debt is reflected in the index, struggle to make payments or default on their loans. Alder Hill is betting against the riskiest loans to weaker malls with high debt and tepid prospects. The New York hedge fund disclosed this in a report in January 2017, though it didn’t disclose the amount of its bet. Read more. (Subscription required.)

Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store. 

Freddie Mac, the country’s largest backer of apartment loans, is rolling out a new program that will offer lower-cost financing to owners who agree to cap rent increases for the life of their loans, the Wall Street Journal reported. The initiative acts similar to rent control — which has been gaining traction in many parts of the country — by keeping units in private hands and controlling the rate of rent increases. But it comes with less political baggage because it is voluntary. “Maybe there’s a way we can help change incentives,” said David Brickman, an executive vice president at Freddie Mac and head of its multifamily division. “We can provide an economic basis for private, profit-oriented developers to pursue a strategy where they didn’t raise rents by quite as much.” The program, which is set to be announced today and begin immediately, will be available all over the country.