DS News

50 TWO YEARS IN, OVERALL PERFORMANCE OF SFR SECURITIZATIONS REMAINS STRONG e vacancy and delinquency rates generally remain low and stable across 22 single-family rental (SFR) securitizations through the end of October, Morningstar reportedCredit Ratings' November 2015 Performance Summary Covering All Morningstar-Related Securitizations. e low delinquency rates and vacancy rates suggest that the overall performance of SFR securitizations is strong two years after the first transaction, IH 2013-SFR1 (Invitation Homes), in the asset class closed, according to Morningstar. rough the end of October, only two of the 22 transactions in Morningstar's summary had a vacancy rate above 7 percent and only eight out of the 22 had a delinquency rate higher than 1 percent. In addition, the retention rates across the securitizations remained stable and within Morningstar's expectations during October. "e percentage of month-to-month tenants remains in line with recent history, but Morningstar notes that 16.7 percent of properties in TAH 2015-SFR1 (Tricon American Homes) are occupied by MTM (month-to-month) tenants," the report stated. "e TAH transaction has historically had the highest percentage among all deals, but this is an increase." For most transactions covered in the summary, vacancy rates remained under 6 percent in October. e highest vacancy rate for the month went to AH4R 2015-SFR1 (American Homes for Rent) with 8.3 percent, the same as it was in September. However, 60 percent of the 4,661 properties in that transaction had leases expire over the past five months; and properties that have more leases expiring in a given month will generally have a higher vacancy rate. One example of that is the PRD 2015-SFR2 (Progressive Residential), which experienced a vacancy rate increase for the fourth consecutive month in October. is transaction saw 20.1 percent of leases expire in September and October combined, which resulted in an increase in vacancy rate from 3.3 percent in August up to 4.6 percent in September and 6.3 percent in October. e vacancy rate for the ARP 2014-SFR1 (American Residential Properties) deal has also been on the rise, albeit at a slower rate than that of PRD 2015-SFR2. For ARP 2014-SFR1, the vacancy rate has jumped from 6.3 percent in August to 6.9 percent in September to 7.2 percent in October, the second-highest vacancy rate for the month among the 22 transactions behind only AH4R 2015-SFR1. e transaction with the lowest vacancy rate among the 22 securitizations in October was IH 2013-SFR1, which in October 2013 became the very first SFR securitization closed. In October, the vacancy rate for that deal was 3.1 percent. Morningstar's monthly summary has been developed to give SFR market participants detailed property level information for each securitization, given the limited amount of historical data available for the relatively new asset class. FORECLOSURE SALES ARE WAY DOWN—BUT SO ARE SOLUTIONS While the data released on foreclosure sales and starts for the third quarter indicated substantial declines as those totals move toward pre-crisis levels, the number of non-foreclosure workout solutions seems to be declining at nearly the same rate, according to data released by HOPE NOW. HOPE NOW reported that the mortgage industry assisted approximately 337,000 homeowners in Q 3 with non-foreclosure solutions that included both home retention and home forfeiture workout plans. By comparison, the industry completed 76,000 foreclosure sales during the quarter, which calculates to a ratio of 4.4 non-foreclosure solutions for every one foreclosure sale that was completed during the three-month period. While the number of foreclosure sales completed dropped significantly both over-the- quarter (15 percent, down from 89,000) and over-the-year (31 percent, down from 110,000) in Q 3 2015, the number of non-foreclosure solutions also declined at similar rates—18 percent over-the-quarter (down from 411,000) and 28 percent over-the-year (down from 469,000). "As loss mitigation efforts have slowed down overall, we are still very focused on markets where recovery has been slower, where unemployment rates remain high and where affordability gaps exist," HOPE NOW Executive Director Eric Selk said. "Our approach to housing has evolved over the years as the market has shifted from crisis to recovery and our members remain committed to achieving stability in the market." Out of the 337,000 non-foreclosure solutions completed by the industry in Q 3, approximately 98,000 were permanent loan modifications, 21,000 were short sales, and 218,000 included repayment plans, deeds-in-lieu-of-foreclosure agreements, or other retention plans, according to HOPE NOW. Within those 98,000 permanent loan modifications, approximately 69,000 homeowners completed proprietary loan modifications while approximately 29,000 completed modifications under the government's Home Affordable Modification Program (HAMP). Foreclosure starts also declined substantially in Q 3 both over-the-quarter down to 159,000 (9 percent, down from 176,000) and over-the-year (26 percent, down from 215,000), according to HOPE NOW. HOPE NOW, a voluntary, private sector alliance of mortgage servicers, investors, mortgage insurers and non-profit counselors, has hosted eight loss mitigation events in 2015 in areas hit hardest by the foreclosure crisis. "e data we have collected at our loss mitigation events in 2015 is painting a very clear picture of borrower profiles and what mortgage servicers are able to offer their at-risk customers," Selk said. "rough eight events this year, 81 percent of attendees are either delinquent on their mortgage or in imminent default and 36 percent are first time applicants for a loan modification. at shows a clear need for immediate attention. Of the borrowers on site, 64 percent are reviewed for some sort of long term retention option, with another 5 percent reviewed for a short term retention solution such as forbearance."

• Cover