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Late payments on securitized commercial mortgages ticked higher again in July, for the same reason they did in June: a number of large loans fail to pay off at maturity, National Mortgage News reported yesterday. Commercial mortgages typically have 10-year terms during which borrowers pay mostly interest; the bulk of principal is repaid at maturity. So if the value of the property does not appreciate very much over the term, or if underwriting tightens, it may be difficult to refinancing. That's what is happening to a number of loans taken out during the frothy lending years of 2006 that are now coming due. The CMBS delinquency rate is now 4.76%, an increase of 16 basis points from June, according to research firm Trepp. The no-pay rate reached its multi-year low of 4.15 percent in February, and has been moving back up ever since. However, it is still 66 basis points lower than the year-ago level and 41 basis points lower since the beginning of the year.

The Consumer Financial Protection Bureau (CFPB) added its voice yesterday to a chorus of other regulators in calling for sustainable foreclosure relief when the Home Affordable Modification Program expires at year-end, National Mortgage News reported today. The CFPB released "guiding principles" for mortgage servicers and investors that were almost identical to those described in a white paper last week from the Treasury Department, the Department of Housing and Urban Development and the Federal Housing Finance Agency. Still, the bureau was careful in pointing out that its principles do not constitute a binding legal requirement for mortgage servicers or investors. Instead, the principles are intended to be part of the ongoing discussion about creating a universal loss mitigation program framework for the future. The CFPB is calling for mortgage lenders, housing finance agencies and investors to create affordable and sustainable loss mitigation programs that are accessible and transparent for borrowers.

The Consumer Financial Protection Bureau (CFPB) released a set of proposed updates to its “Know Before You Owe” mortgage disclosure rule after industry calls asked for greater clarity and certainty on the rule, HousingWire.com reported on Friday. However, despite the welcomed changes, the bureau failed to address one major concern the industry asked for clarity on: the secondary market. After the “Know Before You Owe” mortgage disclosure rule, also called the TILA-RESPA Integrated Disclosures (TRID) rule, went into effect on Oct. 3, 2015, there were initial hiccups and headaches centered on how long loans would take to close, potentially causing a lot of problems for consumers who are strapped for time. But a lot of these have passed, and once those problems subsided, the secondary market mainly was left to experience the biggest pain points from TRID at this point. Among the changes, the industry will be required to heed the original guidance the bureau put out that “examiners will be squarely focused on whether companies have made good faith efforts to come into compliance with the rule.”

Carlyle Group co-founder Bill Conway was in court on this small island last week recounting one of the most bruising episodes in his private-equity firm’s history: the 2008 collapse of mortgage-bond fund Carlyle Capital Corp., the Wall Street Journal reported today. Carlyle Capital Corp. (CCC) borrowed vast sums from banks to buy $23 billion in bonds. When a deteriorating U.S. housing market spooked CCC’s lenders, investors in the fund lost their entire $945 million in capital. Conway was summoned to Guernsey, where the fund was registered a decade ago, to testify in a $1 billion civil lawsuit by CCC’s liquidators. They allege that Conway and six other Carlyle and CCC officials acted recklessly and should have started selling the fund’s assets months before it failed. For six days this month, Conway answered questions from a lawyer of the liquidators about the fund’s business model, governance and funding problems. Among the specific allegations against him: that he refused to have CCC sell assets or restructure as loans dried up in the summer of 2007 because he didn’t want bad publicity from CCC to jeopardize an investment by an Abu Dhabi government fund in Carlyle Group. Conway denies that.

Late payments on securitized commercial mortgages moved noticeably higher in June, as several large loans failed to pay off at maturity, National Mortgage News reported yesterday. It was the fourth straight month that the rate has crept higher following two large decreases in January and February. The delinquency rate for U.S. commercial real estate loans in CMBS is now 4.6 percent, an increase of 25 basis points from May, according to analytics firm Trepp. The rate is still 85 basis points lower than it was a year earlier and 57 basis points lower than it was at the beginning of this year. The delinquency rate reached its multiyear low of 4.15 percent in February 2016. The all-time high was 10.34 percent in July 2012.

A top U.S. regulator has sounded a new alert over banks’ commercial real estate (CRE) lending, adding to concerns that bubbles may be forming in parts of the country’s property market, the Financial Times reported today. Thomas Curry, comptroller of the currency, used the watchdog’s twice-yearly report on financial risks published yesterday to warn about looser underwriting standards and concentrations in banks’ CRE portfolios. The remarks come after his office, together with regulators at the Federal Reserve and the Federal Deposit Insurance Corporation, said last year that they would “pay special attention” to banks’ commercial property lending. Yet banks have continued to expand in the area, helping to fund development of shopping centres, apartment blocks and other commercial projects. CRE loans originated by banks in the first quarter leapt by 44 per cent from the same period in 2015, according to Morgan Stanley. Banks’ share of CRE originations has risen from just over a third in 2014 to more than half in the first quarter of 2016 — a record. Mr. Curry suggested CRE was of even greater concern to regulators than both car loans — an area into which some banks have expanded aggressively — and lending to already-indebted companies. “While leveraged lending and auto lending remain concerns, CRE lending and concentration risk management has become an area of emphasis for regulators,” he said in a speech. “Our exams found looser underwriting standards with less-restrictive covenants, extended maturities, longer interest-only periods, limited guarantor requirements, and deficient-stress testing practices.”

When the housing crisis sent the American economy to the brink of disaster in 2008, millions of people lost their homes. New investors soon swept in — mainly private equity firms — promising to do better, but some of these new investors are repeating the mistakes that banks committed throughout the housing crisis, an investigation by the New York Times reported today. They are quickly foreclosing on homeowners, they are losing families’ mortgage paperwork, much as the banks did. And many of these practices were enabled by the federal government, which sold tens of thousands of discounted mortgages to private equity investors, while making few demands on how they treated struggling homeowners. The rising importance of private equity in the housing market is one of the most consequential transformations of the post-crisis American financial landscape. Private equity firms, and the mortgage companies they own, face less oversight than the banks. And yet they are the cleanup crew for the worst housing crisis since the Great Depression. Out of the more than a dozen private equity firms operating in the housing industry, the Times examined three of the largest to assess their impact on homeowners and renters. Lone Star Funds’ mortgage operation has aggressively pushed thousands of homeowners toward foreclosure, according to housing data, interviews with borrowers and records obtained through a Freedom of Information request. Lone Star ranks among the country’s biggest buyers of delinquent mortgages from the government and banks.