The firms, known as special servicers, are dealing with an influx of souring loans backed by commercial-mortgage-backed securities, or CMBS: a total of $90.9 billion as of the end of September, compared with $73.8 billion at the end of last year, according to credit-rating firm Fitch Ratings. But the pace at which those loans have been resolved has picked up at an even faster rate, with $27.9 billion recovered by special servicers from bad loans in the third quarter, compared with $8.9 billion in the first quarter, according to Fitch.

Many of those bad loans are simply getting modified and extended, pushing the borrower’s day of reckoning to a day into the future when, both sides hope, the market will improve to a point at which the property owner can refinance. But in other cases, servicers are trying more unusual methods to dispose of properties through sales or other means as they work through a volume of distressed loans that is testing the legal apparatus built up by Wall Street’s boom-time securitization binge.

Click here to read the entire article.

“From November 1, we’ve seen a resurgence of scratch-and-dent loans hitting the market,” said Dario. “It could be loan owners clearing balance sheet, maybe it’s robo-signing resolutions — none of the sellers are telling us the reason for it — but we are expecting a buying frenzy by December 31.”

There are dozens of non-performing loans for auction on BigBidder.com. Of course, there are re-performing and performing notes for auction as well. Whatever your investment strategy, BigBidder.com has the opportunities to match.

Take it away, Mr. Yoon:

Lawmakers, regulators and Wall Street are eager to get the so-called private label residential mortgage-backed securities market going again as a source of credit for a struggling U.S. housing market, and an alternative to programs of Fannie Mae and Freddie Mac that have cost taxpayers dearly. It is the last major securitization sector yet to resume significant issuance since the onset of the financial crisis….

Banks are making solid loans that could be in these securitizations, said Baron Silverstein, a managing director and head of mortgage finance at Bank of America Merrill Lynch. But securitizations, a form of funding, are still more expensive than other avenues like corporate bonds, he said.

“What it comes down to it is more expensive to do a securitization today than to sell corporate debt,” Silverstein told about 100 mortgage professionals assembled by the American Securitization Forum in New York.

The best news of the bunch? The decline in CMBS delinquencies.

CMBS delinquencies dropped 88 basis points (bps) to 7.78% due largely to the resolution of seven loans (totaling $5.2 billion), according to Fitch Ratings. The resolutions included the $4.1 billion Extended Stay America loan, collateralized by a portfolio of 682 hotel properties.

At the same time, only $304 million of hotel-backed loans became newly delinquent. This led to a large drop in hotel delinquencies to 14.14% from 21.31% in September, the largest drop recorded of any CMBS asset type by Fitch Ratings.

Click here to read the article in it’s entirety.

The author notes several optimistic trends as we approach 2011, “when the volume of new deals is projected to more than double from this year.”

The best news of the bunch? The decline in CMBS delinquincies:

CMBS delinquencies dropped 88 basis points (bps) to 7.78% due largely to the resolution of seven loans (totaling $5.2 billion), according to Fitch Ratings. The resolutions included the $4.1 billion Extended Stay America loan, collateralized by a portfolio of 682 hotel properties.

At the same time, only $304 million of hotel-backed loans became newly delinquent. This led to a large drop in hotel delinquencies to 14.14% from 21.31% in September, the largest drop recorded of any CMBS asset type by Fitch Ratings.

Click here to read more.

The conference is being put on by Mortgage Servicing News, and will be held at the  San Diego Westin. Shawn’s panel is scheduled for Wednesday, November 9 at 2:30pm. If you happen to be in town, stop by the Westin to hear some of the industry’s leading experts discuss the most pressing issues affecting the market today.

• Some delinquent loans have “cured,” either naturally or through loan modifications. Even unsuccessful loan modifications have stretched out the amount of time that it takes to move a loan through the foreclosure process.
• Banks are getting better about approving short sales, where a home is sold for less than the amount owed, even though the process is still far from seamless.
• And even when a foreclosure happens, more investors are buying the properties from banks at courthouse auctions, which means that the property won’t show up as REO, even though it could ultimately hit the market.

Click here to read the rest of the article.

A performing note is current, meaning the borrower has made all of their monthly payments on time. These types of notes are arguably the easiest to deal with; the note owner can simply enjoy the monthly mortgage payments made by the borrower.

The note owner will continue to receive monthly payments for the full term of the loan or until the borrower decides to pay off the loan either through a refinance or a sale of the home. When this happens, the note owner receives the remaining unpaid principal balance as a lump sum. Performing notes can also be re-sold to another investor at any time.

Next time, we’ll discuss an example of how to make a profit investing in performing notes.

To read up on previous posts in our Note Investing 101 series, click the links below.

Note Investing 101

1. What is a mortgage note?
2. Real Estate vs. Mortgage Notes
3. Who are the sellers?
4. Why invest in mortgage notes?
5. Different Classifications of Mortgage Notes

Mortgage notes are classified by their recent pay history. There are several different classifications of mortgage notes on BigBidder.com.

Performing: A performing note is a loan that is current, meaning the borrower has made all of their monthly mortgage payments on time.

Re-performing: A re-performing note indicates that the borrower has had repayment issues in the past, but has gotten back on track and made his monthly payments as agreed for at least the last six months.

Sub-performing: A sub-performing note means that the borrower is up to 60 days delinquent or has been delinquent three or more times in the last 12 months.

Non-performing: These are loans that are more than 90 days delinquent. The borrower has defaulted on the terms of the loan, often times resulting in foreclosure of the property.

Next week, we’ll go over how to make money from performing notes.

To read up on previous posts in our Note Investing 101 series, click the links below.

Note Investing 101

1. What is a mortgage note?
2. Real Estate vs. Mortgage Notes
3. Who are the sellers?
4. Why invest in mortgage notes?

Auction #230-1-9

Classification: Non-performing
Loan Type: ARM
Total Loan Amount: $477,570
Lien Position: First
Interest Rate: 7.4%
Minimum Bid: 73.29%
Bid Deadline: January 21, 2010

Auction #230-1-6

Classification: Non-performing
Loan Type: Fixed
Total Loan Amount: $328,903
Lien Position: First
Interest Rate: 5.4%
Minimum Bid: 54.73%
Bid Deadline: January 21, 2010

Auction #230-1-8

Classification: Non-performing
Loan Type: Fixed
Total Loan Amount: $159,491
Lien Position: First
Interest Rate: 5.5%
Minimum Bid: 31.35%
Bid Deadline: January 21, 2010