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Mortgage lenders and housing investors are squaring off in Nevada over a court decision that has allowed thousands of foreclosed homes to be sold for pennies on the dollar, in a case that could have big implications on an already-tight home-loan market across the country, the Wall Street Journal reported today. At issue are homeowners associations and the liens they put on properties when a homeowner stops paying dues. Homeowners associations enforce rules in a community and collect dues to maintain common areas and pay for repairs. Like lenders, homeowners associations can foreclose on homes to recoup delinquent payments, an option that many have taken after waiting years for lenders themselves to foreclose, a scenario that has left homes without dues-paying owners and some HOAs strapped for cash. Nevada and about 20 other states have laws that allow HOA liens to get priority over first mortgages. The result, according to a recent state court decision, is that homes can be put up for auction by HOAs—without the blessing of the mortgage lender—and sold, extinguishing the first mortgage and allowing the investor to get title to the home. Such sales often are for an amount equal to or slightly above the HOA dues in arrears. In a court filing yesterday, the Mortgage Bankers Association wrote that because of the decision, “mortgage lenders stand to lose millions—perhaps even billions—of dollars in security interests.” Lenders nationwide have argued that HOAs should have to foreclose through the court system and shouldn’t have the power to wipe away entire mortgages. But in a closely watched case in September involving Bank of America Corp. , the Nevada Supreme Court said that they can do so, and sent the case back to a lower court. Last week, Bank of America requested that the state Supreme Court reconsider.

The housing bust ended several years ago, but the big mortgage banks are still acting as if the home loan business were fraught with peril, the New York Times reported today. Executives from Wells Fargo, the nation’s biggest mortgage bank, said yesterday that important changes had to be made before they might consider increasing the flow of credit. In the third quarter, Wells Fargo’s mortgage banking income totaled $1.63 billion, a small rise from the $1.61 billion in the third quarter of 2013. Since the financial crisis led the Federal Reserve to cut interest rates, Wells Fargo has made billions of dollars in its mortgage unit, as mortgage borrowers rushed to the bank to refinance. Wells Fargo does not hold most of the mortgages it makes. Instead, it books a profit when it packages the loans into bonds and sells them to investors. An increase in the profitability of such sales is a reason Wells Fargo’s mortgage banking revenue went up in the third quarter even as the bank underwrote far fewer loans.

Residential Capital LLC for the most part must pursue lawsuits in federal court in Minnesota against lenders who sold it allegedly defective home mortgages, Bloomberg News reported yesterday. The former mortgage-servicing unit of Ally Financial Inc., which filed for chapter 11 protection in May 2012, won approval of a reorganization plan in December and started more than 80 lawsuits against so-called mortgage originators for breach of contract and other claims alleging that ResCap-purchased mortgages didn’t comply with advertised underwriting standards. More than 10 of those suits ended up before U.S. district judges in Manhattan. The remainder were in Minnesota. As a result of a series of decisions by different Manhattan judges beginning in July, it appears that most of the New York suits will be transferred to Minnesota, except where ResCap and the mortgage originator had agreed that suits could be filed in New York. The latest ruling was handed down on Oct. 10 by U.S. District Judge John G. Koeltl in New York in a case involving PHH Mortgage Corp., which sold ResCap almost $1 billion of mortgages. The mortgage-purchase agreements called for disputes to be litigated in courts in Minnesota.

A New York real estate lender has agreed to provide the financing Chicago Spire developer Garrett Kelleher needs to pull the failed condominium project out of bankruptcy, Crain’s Chicago Business reported yesterday. New York-based Stonebeck Capital LLC sent a commitment letter to provide a loan to the Irish developer's venture partner so it can pay off the Spire's creditors this month and exit chapter 11, according to the partner, Steven Ivankovich of Chicago-based Atlas Apartment Holdings LLC. The commitment letter and funding source was revealed at a confirmation hearing this morning for the Spire's bankruptcy plan, which a judge approved.

Purchases of new homes in the U.S. in May showed the highest increase in 22 years, indicating the industry is rebounding from a winter-induced lull at the start of the year, the Washington Post reported today. Sales surged 18.6 percent, the biggest one-month gain since January 1992, to a 504,000 annualized pace, figures from the Commerce Department showed Tuesday. The reading was the strongest since May 2008. The report, following data on Monday showing a pickup in existing-home sales, indicates that housing is gathering momentum as employment improves and borrowing costs stabilize. The median sales price rose 6.9 percent from May 2013 to reach $282,000, the report showed. Purchases climbed in all four regions, led by a 54.5 percent jump in the Northeast. The supply of homes at the current sales rate dropped to 4.5 months, the lowest since June 2013, from 5.3 months in April.

A record number of Americans are using that equity to pay cash for properties, avoiding a mortgage process that has become even more onerous in the wake of the 2007 housing collapse, Bloomberg News reported yesterday. In the first quarter, 29 percent of non-investment homebuyers used cash, the highest on record for the period, according to data compiled by Bloomberg. The majority of people making all-cash deals are baby boomers mostly because America’s largest-ever generation is beginning to retire, said Lawrence Yun, chief economist of the National Association of Realtors. In 2012, there were a record 61.8 million Americans over the age of 60, according to the Census. That compares with 46.6 million in 2000.

General Growth Properties Inc. swung to a first-quarter profit on stronger-than-expected funds from operations and revenue growth, Dow Jones Daily Bankruptcy Review reported today. The mall owner raised its 2014 projection for per-share funds from operations — a key profitability measure for real-estate investment trusts — to between $1.30 and $1.32 from its previous estimate for $1.27 to $1.31. General Growth, which owns and manages retail properties in shopping malls across the U.S., has sold and spun off assets in an effort to improve its business since exiting bankruptcy in 2010.

Six years after work to construct the tallest building in the western hemisphere came to a standstill, Chicago Spire developer Garrett Kelleher is back, this time with a partner, talking with potential buyers and making plans to find funding to restart the project, the Chicago Tribune reported today. Standing in a hallway just after a bankruptcy court hearing yesterday, during which a federal judge said that she would approve efforts to pay off creditors, Kelleher said that it had been quite a task to find a resolution to the bankruptcy case of his company. Now, he was ready to move forward with the project, possibly even this year. U.S. Bankruptcy Judge Janet Baer said yesterday that she would approve a bankruptcy settlement agreement that gives Kelleher and a new majority partner time to pay claims tied to the case and then proceed with the long-stalled project that would bring 1,194 condos and 1,420 parking spaces to the project.

MetLife Inc. and Prudential Financial Inc. are cutting Wall Street’s middlemen out of the resurgent market for loans backed by some of the nation’s most-prized commercial properties, Bloomberg News reported yesterday. Banks from Deutsche Bank AG to JPMorgan Chase & Co. — which originate loans and then sell them off as securities — risk losing out as rising borrowing costs prompt them to charge more to make money. Insurers are offering cheaper real estate loans because they don’t need to quickly sell the debt at a profit, pushing Wall Street firms to lower their standards just to get deals done. As a result, sales of commercial-mortgage backed bonds are falling short of predictions for the best year since 2007: Issuance slumped to $14.6 billion from $20 billion in the same period last year, according to data compiled by Bloomberg. Bank of America Corp. cut its forecast last week for deals tied to single loans, typically backed by the higher-quality properties that insurers target, as sales plunged 66 percent from last year’s record $9.1 billion.

The watchdog in charge of monitoring TARP recipients on Tuesday announced criminal charges against a former official of Anchor Bancorp Wisconsin Inc. for allegedly orchestrating a fraudulent real estate deal, the Wall Street Journal reported today. David Weimert was indicted in the U.S. District Court in Madison, Wis., on six counts of wire fraud relating to a real-estate development transaction he worked on as senior vice president of lending administration and as a president of an Anchor subsidiary that invested in real estate developments. The charges are the result of a probe conducted by the Federal Bureau of Investigation and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). Weimert faces a maximum penalty of 30 years’ imprisonment on each count of wire fraud. According to SIGTARP, Weimert used his position at Anchor to mislead his superiors into believing a sale of the Anchor subsidiary’s share of a Texas industrial park was contingent on him purchasing a minority interest in the park. The Anchor unit agreed to the deal, giving Weimert both a minority stake in the development as well as more than $300,000 in commission fees.