A report from National Mortgage Professional. "Fitch Ratings recently released a report detailing the looser credit underwriting standards that emerged in the second half of 2022, as mortgage demand fell throughout the year. Court Lake, a director in the US RMBS group at Fitch Ratings and one of the analysts who authored the report, says that as the market shifted from agency refinance to more of a focus on Non-QM, driven largely by worsening economics for borrowers, 'we saw the credit box of what we were seeing in our actual securitizations expand. That included lower FICOs, higher DTIs, and higher LTVs.' As a result, and the second key takeaway from the report, Lake says, 'you're now seeing higher delinquency rates for that same vintage of collateral.' The beginning of 2022 was when Lake began to see deterioration in Non-QM originations. 'The worst cohort of collateral was sort of the second, third quarter of 2022,' Lake says."

"Worsening economics for homebuyers drove Non-QM lenders to chase volume, thereby manufacturing demand, through looser underwriting. As borrowing costs spiked, mortgage demand fell, but lenders’ profitability fell even faster. Loosening credit standards helped create volume, but at the cost of loan performance. A similar pattern is emerging in the Prime Jumbo market, says Lake. 'I think Non-QM was a little bit more alarming in terms of how much the delinquency shot up, but if you actually look at the Prime 2023 vintage, that's also at an elevated delinquency rate relative to their 2022, 2021, and 2020 vintages.' This is also on account of looser underwriting in 2022."

"'We're seeing a lot of similar trends there. If you look at just the loans making their way into securitizations,' Lake says, 'the weighted average FICO is lower. You've got a higher weighted average DTI. You're seeing, in our view, what we think is more cash-out loans. We just view that as a selection bias and leaning toward kind of a worse borrower base. So, you're seeing some similar trends that we brought out in the Non-QM report in the prime space as well.'"

"Lake says that how they look at pools of loans over time changes, generally based on the collateral attributes, views on home prices, and macroeconomic headwinds and tailwinds. For the Non-QM market, Fitch has been adjusting their performance expectations to include an increased expectation of default because of the pools’ weaker collateral. What Fitch expected to happen, has happened. 'The average delinquency rate for a 2023 vintage transaction four months after issuance is 3.2%, which is almost twice as high as the 2022 vintage,' Fitch’s report reads."

The Scottsdale Progress in Arizona. "The average square-foot price of single-family homes in the Valley rose the most over the last two years in cities with the most luxury homes, according to the Cromford Report. Homes that sold for $2 million or less saw average per-square-foot prices drop between December 2022 and last month, according to the Cromford Report. That decline was the greatest among homes that sold for $350,000-$400,000, where the per-square-foot price dropped an average 7.7%. Declines in other price ranges were between 2.1% for homes selling between $700,000 and $800,000 to 5.9% for those selling between $300,000 and $350,000. 'The cheaper you go, the more 12-month average prices tend to have fallen,' the Cromford Report said."

"'We rarely see such a clear pattern, so I conclude that something is bolstering the luxury market,' it continued. 'It is not lack of supply, which is plentiful, although active listing counts are not excessive compared to the normal levels at these altitudes. It seems that luxury buyers have been less affected by the high interest rates which appear to have had a much more serious effect on first-time home buyers.'"

Newsweek on California. "The city of San Francisco continues to report some of the biggest price drops in the entire country, with condos downtown being sold for thousands of dollars less than they were purchased years ago, according to Zillow adverts. Home prices in the city have been plummeting since reaching a peak of $1,449,470 in May 2022, with the exception of September 2023, when they saw a modest month-on-month increase from $1,226,112 to $1,228,976, according to Zillow. Since then, they have continued falling consistently until the end of December, the latest data available."

"Vacation rental investor Rohin Dhar has been keeping track of what he described as 'aggressive price cuts' in San Francisco, sharing the advert pages of homes for sales on Zillow on X. In one such advert, a 2,012 sq ft home with four bedrooms and three bathrooms is now being sold for $1,095,000 after a price cut of $704,000 from when it was listed for sale on January 19. The last time the house was sold, according to Zillow, in late March 2004, it was priced at $600,000. Another advert shared by Dhar shows a condo in the Civic Center neighborhood in downtown San Francisco which was sold for $485,000 on January 30 after being purchased for $675,000 in 2018."

From Reuters. "Small, loosely-regulated lenders in Canada who rode a pandemic housing boom to offer mortgages at high interest rates are now showing signs of stress as a spike in living costs pushes some homeowners toward a default. For many Canadians unable to pass a rigorous test to qualify for a home loan, there has long been another option: private lenders who offer short-term mortgages at rates that are several percentage points higher than those charged by big banks. One subset of this group of lenders - Mortgage Investment Companies (MICs) - has mushroomed in the past three years, taking on riskier deals, when record low borrowing costs pushed up mortgage demand at the peak of a housing market boom in 2022."

"But as the real estate market softened in Canada over the past year while the cost of living and interest rates rose, consumers struggled to make their monthly payments, forcing many MICs to sell properties cheaply to recoup losses as homeowners defaulted and property prices declined. LandBank Advisors studied over 1,000 mortgages issued between 2020 and January 2024 and found that about 90% of home buyers who were forced to sell their homes because of default in the Greater Toronto Area, Canada's biggest real estate market, had taken out mortgages from private lenders. MICs generated more than half of the mortgages among the 90% pushed into fire sales."

"'Many MICs opened up three or four years ago. The problem is they opened up… when values were at their highest and when you look at their books, a lot of their books are underwater,' Jonathan Gibson at LandBank Advisors said. 'MICs are trapped or are becoming more and more picky.'"

From Soo Today in Canada. "A group of southern Ontario companies notorious for buying up dozens of properties in the Sault — and leaving a number of them vacant and boarded up — has filed for creditor protection, saying they owe tens of millions of dollars to lenders. The group includes a handful of corporations that own approximately 150 properties locally, including Happy Gilmore Inc., The Pink Flamingo Inc. and Balboa Inc., among others. Another company listed in the insolvency documents, DSPLN Inc., made headlines this past November when it was fined $140,000 in Provincial Offences Court after being found guilty of six Ontario Fire Code offences identified at a multi-residential building in the Sault’s west end."

"All told, the corporations are facing a 'severe liquidity crisis,' according to court filings: Each one of the corporations has less than $100,000 in cash on hand — and liabilities totalling more than $124 million between them all. The group of corporations believes that its current financial crisis, compounded by the potential for 'devastating effects of a bankruptcy, liquidation or uncoordinated enforcement efforts,' has left it with no other option but to seek creditor protection — for the good of the corporations, their hundreds of lenders and approximately 1,000 tenants throughout Ontario."

"As SooToday has previously reported, a property management company under the SID banner, RWC Management, has been causing headaches for tenants in Sault Ste. Marie who claim their rental units have fallen into disrepair since out-of-town landlords from other parts of Ontario began scooping up hundreds of properties locally during the COVID-19 pandemic."

"'Given prevailing interest rates and the concentration of the Properties within small secondary and tertiary markets in Ontario, any such liquidation would be value destructive, result in the sale of the properties at depressed prices and likely take more than two years to complete,' the group said in its application for creditor protection. Collectively, the companies own 405 residential properties containing 631 rental units — 424 of which are occupied by tenants — as well as a single non-operating golf course. According to an affidavit filed on behalf of SIDRWC Inc. President Robert Clark — who was a notable child actor in film and television prior to founding the SID group of companies and reinventing himself as an influencer on social media — the group of companies began exploring refinancing and sale opportunities in 2022 as it 'struggled to generate sufficient free cash flow.'"

From CNBC. "Swiss bank Julius Baer on Thursday reported hefty net credit losses tied to its exposure to real estate group Signa Holding, as it announced CEO Philipp Rickenbacher would step down and the company will cut 250 jobs. Group Chair Romeo Lacher said he and the board 'deeply regret' net credit losses of 606 million Swiss francs ($701 million), well above consensus expectations, which include a loan loss allowance of 586 million francs. This led to a slide in operating income of 16%, to 3.3 billion francs. Julius Baer in November announced its exposure to the struggling Austrian company, which has been hit by the higher interest rate environment. In January it said it intended to write off the exposure."

From Bloomberg. "If the lack of buyers for a prime office tower and a mansion in Hong Kong are any guide, China Evergrande Group’s liquidators are in for a long road ahead. Alvarez & Marsal, the company chosen this week to unwind the fallen Chinese property developer, is still trying to sell Evergrande’s $1.6 billion former Hong Kong headquarters building after it was seized in separate proceedings in 2022. That’s even after a rebranding and roadshows by agents in mainland China to attract investors. Residential distressed assets aren’t any easier to offload. A luxury house formerly owned by Evergrande’s founder Hui Ka Yan remains on the market following a foreclosure in 2022."

"The unwinding is taking place during one of Hong Kong’s worst property slumps, making it harder for creditors to get a decent price in any sale. Creditors 'will likely have to offer a discount,' said Kathy Lee, head of research at Colliers International Group Inc. The prolonged sale of Evergrande’s former flagship tower shows that they will have to adjust prices to meet expectations in a market where values are likely to keep falling, she added. Slumping office rents mean the return on rental income usually can’t cover the mortgage costs. Buyers are hard to come by even after prices tumbled 35% from their 2018 peak. The release of Evergrande’s assets in Hong Kong will add to the already increasing number of seized property sales in the city. 'The market this year will be dominated by distressed assets,' Lee said."