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BY JIM FREER
Special Correspondent
Several major banks that have not been household names around South Florida played big roles in a 31 percent jump in residential foreclosure filings in the region during this year’s first four months. Condo Vultures®’ database of court records shows 33,422 filings this year through April 30, up from 25,480 for the same period in 2008. Foreclosure filings have been increasing in 2009 even though several large banks suspended foreclosures in South Florida for several weeks in February and March.
JPMorgan Chase, Bank of America and Wells Fargo--all high on the South Florida list at the end of this story--were among banks that briefly suspended foreclosures. They did that after the Obama administration said it was preparing a program that would allow approximately four million homeowners to refinance into lower-rate mortgages. Features will include the government paying banks and other loan servicing companies incentives to permit refinancing for borrowers who are not delinquent on mortgages but are worried about becoming late on payments. As of late April, the U.S. Department of the Treasury had not released guidelines for its Homeowner Stability Initiative. Meanwhile, the foreclosure notices keep on coming. New York-based JP Morgan Chase and its affiliates lead in South Florida foreclosure filings with 4,072 through this year’s first four months (see chart below). Deutsche Bank, which is based in Germany and has large corporate operations in New York, is second with 3,415. San Francisco-based Wells Fargo is third with 2,503. According to analysis by Condo Vultures® and by housing expert Jack McCabe, the numbers back up a trend that is being observed in South Florida, as well as in some other markets that have high foreclosure rates for single-family homes and condominium units: Relatively few of the loans on South Florida homes that are being foreclosed were made and/or are held by locally based banks. The major players among plaintiffs in foreclosure filings are giant banks that, for the most part, have not had had branch offices in South Florida. They either made loans in South Florida through brokers and/or are investors in or servicers of payments on now-delinquent South Florida loans that were packaged into mortgage securities. Those mortgage securities, often with sub-prime loans and adjustable-rate loans with low “teaser” starting rates, are at the root of the international financial crisis. JPMorgan Chase’s companies did not make large numbers of sub-prime and teaser ARMs. Otherwise, the above description fits its recent foreclosure activity in South Florida, said Nancy Norris, a spokeswoman for the company’s Chase commercial bank subsidiary. Chase is second in U.S. bank deposits, behind Bank of America. But until last year, it had only several bank branches in Florida. Then, in September, it bought Seattle-based Washington Mutual, known as Wamu, with assistance from the Federal Deposit Insurance Corp. Wamu was third in South Florida bank deposits. It was suffering massive losses from defaults on ARMs, including payment option ARMs. The now-notorious option ARM permits a borrower to choose a different payment each month--thus deferring interest and principal and building up a loan balance. Those loans are basically extinct in the origination market but are still on some banks’ books. “Payment option ARMs have had some of the highest default rates, and they were popular with speculators,” said McCabe, president of McCabe Research and Consulting, a Deerfield Beach, Florida company that publishes reports on the condo markets in Florida and other states. Chase is still phasing Wamu into its operations and is keeping Wamu’s name on its branches for at least several more months. Condo Vultures® shows only 10 January to April Wamu foreclosures in South Florida. Loans Wamu made on properties are being foreclosed with Chase as a plaintiff, Norris said. Parent JP Morgan Chase is the plaintiff on many of those foreclosures. Those actions include loans that are part of mortgage pools in which the company is servicer, Norris said. Servicing companies usually are required to take the majority of any losses on loans in those securities. Amid recent years’ declining property values and other problems, some lenders and servicers have sought to speed up some foreclosures. “You have to follow rules of the investors [set up by a security’s packager],” Norris said. Starting this January, Chase has been working out more agreements to initiate foreclosures on loans it services. For its borrowers, Chase also had a voluntary foreclosure program for several weeks last fall. “We have no plans for another,” Norris said. “We are working more extensively to get loans cured to avoid foreclosure.”
That includes reducing interest rates or stretching out the duration of some loans. Last fall, Chase stopped using loan brokers to originate loans, Norris said. Among the country’s largest banks, Chase and Wells Fargo are generally regarded as two of the strongest. Wells Fargo, like Chase, is one the country’s large servicers of mortgages and mortgage pools. For more than a decade, Wells Fargo has had mortgage lending offices in Florida but did not have deposit-taking branches in the state. Wells Fargo last fall bought troubled Wachovia, which was first in South Florida in branches and deposits. Wells Fargo is phasing in a transition at Wachovia and is operating the bank under that name. Wachovia, based in Charlotte, N.C., was experiencing a high loss rate on option ARMs. That type of loan also was a major part of the problems at Countrywide Home Loans, which was the country’s largest independent mortgage banker. Charlotte-based Bank of America (B of A), which has South Florida’s second biggest branch network, bought Countrywide last year. In April, B of A changed the Countrywide unit’s name to Bank of America home loans. IndyMac, fifth on Condo Vultures®’ list, was taken over by federal bank regulators last year. A private investment group bought the Pasadena, Calif.-based bank in January. IndyMac has not had South Florida branches. It used brokers and an Internet operation to make loans, including sub-prime, in numerous states. “IndyMac made a lot of teaser rate ARMs, and some were payment option,” McCabe said. Minneapolis-based U.S. Bank, sixth on Condo Vultures®’ list, does not have South Florida branches. It has nationwide lending and servicing operations, and is regarded by analysts as one of the country’s strongest large banks. Bank of New York, HSBC and Citibank all have South Florida branch networks and have been major players in packaging and investing in mortgage securities. Aurora Loan Services is a lender and loan servicing company based in Littleton, Colo. Government-run mortgage buyers Freddie Mac and Fannie Mae, with just 75 and 16 foreclosures respectively in South Florida this year, have foreclosure moratoriums in place. With more than 33,000 residential foreclosures in four months, South Florida has already surpassed 2007’s full-year total of 32,396. For the full year 2008, the total was a record 75,730. McCabe expects that the early 2009 pace will continue at least through next year. “Moratoriums will only delay and spread the foreclosures over time,” he said. Moratoriums could actually “draw out housing downturn” by bringing some foreclosures onto the market in 2010 and thus hinder any upturn in prices next year McCabe is among those analysts who is not expecting prices to start recovering that quickly. He noted that a large number of ARMs with teaser starting rates will have their first adjustments this year, some with option features that will require payment of deferred interest. Unfortunately, he said, many of those loans were made to buyers of condos and houses that loom as potential foreclosures. Foreclosure Notices Filed in South Florida--By Plaintiff Jan. 1, 2009 to April 30, 2009 1. JP Morgan Chase: 4,072
2. Deutsche Bank: 3,415
3. Wells Fargo: 2,503
4. Countrywide Home Loans: 2,290
5. IndyMac Federal Bank: 2,109
6. U.S. Bank: 1,921
7. Bank of New York: 1,682
8. HSBC: 1,665
9. Citi: 1,454
10. Bank of America: 1,346
11. Aurora Loan Servicing: 1,272
12:Wachovia:916
Other Notables GMAC: 670
SunTrust: 473
BankUnited: 350
National City Bank: 327
AmTrust Bank: 214
Federal Home Loan Mortgage Corp.: 75
Regions Bank: 67
Federal National Mortgage Association: 16
Washington Mutual: 10 Note: Several names on the list, particularly JP Morgan Chase and Citi, include foreclosures filed by subsidiaries and affiliates. Jim Freer is a special correspondent for CondoVultures.com. He is a veteran banking reporter and a consultant to the finance industry in South Florida. |
