Greg Hebner quoted in Debtwire
Greg Hebner, Managing Director of Arixa Capital was quoted in Debt Wire’s recent article.
Fix & flip RMBS diverge in performance
17 June 2020 | 14:12 EDT
Residential fix & flip loans have surprised some naysayers with better-than-expected performance through the COVID-19 pandemic, but some notable differences in the securitized debt are being laid bare in investor reports, according to reports reviewed by Debtwire ABS and two lenders.
Delinquencies on a pair of deals issued by Toorak Capital Partners are inching higher. Toorak’s TRK 2019-2 was 83.89% current as of the May remittance period, down from 86.79% in April reports, the reports show. Early stage delinquencies declined to 4.58% in the May period from 4.85%, while 3.73% of the loans were 61–90 days delinquent in the most recent period, up from 0.75%, the reports showed. Loans past due more than 121 days were 3.31% of the deal in the May period versus 2.98% a month earlier.
Similarly, the TRK 2018-1 deal was 78.9% current in the May remittance period, down from 84.23% in April. In that deal, the early stage, 31–60 day delinquencies rose by the greatest percentage, to 10.43% from 6.07%, the reports show. Delinquencies of 61–90, 91–120 and more than 121 days were up 2.83%, 1.07% and 6.14%, respectively, in the May remit, from 2.32%, 1.83% and 5.10%.
But in LendingHome’s LHOME 2019-RTL2, 95.24% of the deal was current as of the May remit, up from 95.13% in April’s report. Delinquencies in the 30–59, 60–89 and 90–119 day ranges edged lower to 0.84%, 0.72% and 0.97% from 1.43%, 1.16% and 1.72%, respectively, while climbing in the 120+ day bucket to 1.42% from 0.57%. The REO category climbed to 0.82% from zero.
In the LHOME 2019-RTL1, 94.70% of loans were current in May, compared with 94.69% in April, remits showed. Delinquencies in the 30–59 day bucket declined to 0.89% from 1.52%, while payments 60–89 days late increased to 1.01% from 0.62%, they showed. The more serious delinquency buckets of 90–119 days and more than 120 days were 0.46% and 2.66% in May versus 1.83% and 1.34%, respectively. REOs rose to 0.28% from zero.
LendingHome attributed its generally steady performance to its direct lending model and in-house “high-touch” servicing, as well as the technology behind its underwriting, a spokesperson said. Toorak didn’t directly address the delinquency trend but said in a statement that it was working hard to manage its portfolio “fairly” for its borrowers while also maximizing what it recovers from the loans. Toorak has capped its losses at about 1bps of loans across its USD 1.25bn in deals, it said.
Among differences in the fix & flip bonds is where the properties are located. Loans in the LHOME 2019-RTL2 deal are largely concentrated in California, Florida, Texas and North Carolina, the May remit shows. In TRK 2019-2, the largest single-state concentrations are New York, New Jersey, Florida and Texas, its latest remit shows.
That residential real estate markets in California, Florida and Texas were stronger than New York heading into the pandemic has likely supported borrowers in those states, said Greg Hebner, a managing director at Arixa Capital, a lender and investor, told Debtwire ABS.
“In Texas and Florida, they have re-opened their economies faster, making it just a better operating environment for fix & flip borrowers,” Hebner said. Outside of the Bay Area, California investors were also able to keep their projects going and have seen strong buyer demand, thanks in part to low interest rates, he added.
Fix & flip loans not yet in securitizations have recovered amid signs that the housing market has held up, helping fix & flip borrowers when they go to sell the properties, as reported. Hebner and Stephanie Casper, a vice president of sales at LendingHome, in a webinar earlier this month said borrowers were having little trouble with the flip side of their business and, in some cases, were getting multiple offers on their properties.
In California, investors keep funding projects as they see the “light at the end of the tunnel,” Hebner said in an email today.
In an April webinar, Toorak CEO John Beacham said his company was still funding construction draws to help borrowers complete their projects. Participants on the webinar underscored that lenders and servicers were relying on a range of relief strategies to help borrowers get through the period of economic shutdowns.
Trading in the four deals was limited as financial markets swooned and recovered, according to Finra’s Trace. Amid the flood of forced selling by REITs and other leveraged investors, TRK 2018-1 A-1s traded in pieces of greater than USD 10m at prices of 85 and 85.25 on 31 March, Trace data show.
by Al Yoon