Prudential Mortgage Capital Co. has long wanted to add Freddie Mac Program Plus capabilities to its quiver. A new strategic partnership with Johnson Capital makes that possible.

Prudential Johnson Apartment Capital Express will utilize Johnson Capital’s Program Plus affiliation to originate loans of $5 million and up in Arizona, California, Maryland, Washington, D.C., and Virginia. Johnson Capital also offers Freddie Mac Targeted Affordable Housing and Department of Housing and Urban Development programs, while Prudential contributes its Fannie Mae Delegated Underwriting & Servicing affiliation, Federal Housing Administration program, general account and other institutional investor business.

“We’ve wanted to get into that space for quite some time. We finally found the right partnership,” said David Twardock, president of Prudential Mortgage Capital, who noted that Johnson Capital was one of the first Pru Express lenders, dating back to the 1980s, resulting in a lot of trust and history between the two organizations.

The venture occurs within months of the 10-year anniversary of Prudential’s purchase of WMF Group Ltd., which launched it in the Fannie Mae DUS business, Twardock noted, and comes at a time when the multi-family sector is nearing bottom, the firm believes, with promise of a turnaround.

The venture will be headed by Dave Durning, who oversees agency business for Prudential, and Guy Johnson, who leads his namesake firm, and will utilize personnel from both firms. In fact, it is likely to lead to more hires, Twardock said, since the combination of the principal-oriented business and the intermediary opens doors for those with a background on one side that are interested in expanding into the other. Rather than work specifically for the venture, however, new individuals would work for one firm or the other.

Prudential Mortage Capital had $62.5 billion in assets under management and administration as of year-end 2009, with a similar-size loan servicing portfolio. In addition to investment banking services, Johnson Capital provides special servicing.

Major commercial real estate lender Capmark Financial Group Inc. and various subsidiaries have filed for Chapter 11 bankruptcy, which last month the company had warned was coming. The move will allow the Capmark to reorganize and, very likely, delay selling off some of its $20 billion-plus in assets at less-than-desirable prices.

“Capmark and its filing subsidiaries had in excess of $500 million of cash and cash equivalents… available to fund its operations,” the company said in a statement. Capmark recorded a loss of $1.6 billion in its most recent fiscal quarter.

The reorganization doesn’t bode well for the company’s owners, however. Capmark used to be GMAC’s commercial property arm until a group of investors—including Kohlberg Kravis Roberts & Co, Goldman Sachs Capital Partners and Five Mile Capital—bought about three-quarters of it in 2006 for $1.5 billion, presumably a bubble price.

Existing Home Sales Spike

Put together low prices (at least compared with the mid-2000s housing bubble) and an $8,000 tax credit that may or may not be extended past the end next month, and you get a steep rise in the number of existing homes sold in September compared with August. As it happens, the rise was 9.4 percent, according to the National Association of Realtors, the largest spike since that organization began tracking existing home sales in 1999.

Last month’s spike puts the annualized rate at 5.57 million units, which is the highest level since July 2007, a time when housing sales were already on the decline, though the magnitude of the bust wasn’t apparent. September 2009 sales were up 9.2 percent from the same month in 2008.

It’s no coincidence that the national median existing home price is now $174,900, down 8.5 percent from September 2008. That average masks regional variations, however, especially the fact that in the western states – led by California – home prices have dropped about 15 percent in the last year.

A Hundred-Plus Banks Washed Up, More to Come

Total 2009 bank failures shot 100 over the weekend with the closure of no fewer than seven banks, three in Florida and one each in Georgia, Illinois, Minnesota and Wisconsin. No one expects the closures to stop anytime soon, as banks reap that which they sowed by making commercial real estate loans under erroneous assumptions about ever-increasing real estate valuation in the mid-2000s.

The banking industry’s CRE troubles are no secret, either. “The most prominent area of risk for rising credit losses at FDIC-insured institutions during the next several quarters is in CRE lending,” Federal Deposit Insurance Corp. chairman Sheila Bair said last week to the Senate subcommittee on financial institutions.

Wall Street had a glum Friday, with the Dow Jones Industrial Average down 109.13 points, or 1.08 percent, down below 10,000 for the first time in recent days. The S&P 500 was down 1.22 percent, while the Nasdaq only lost 0.5 percent.

In testimony reminiscent of dogs getting credit-card applications approved back during the mid-2000s credit bubble, a Treasury Department inspector told Congress that kids as young as four years old have been able to receive $8,000 first-time homebuyer tax credits. “Some key controls were missing to prevent an individual from erroneously or fraudulently claiming the credit,” J. Russell George told the House Ways and Means Committee’s oversight panel on Thursday.

According to the Internal Revenue Service, there may be over 73,000 cases of individuals applying for the credit who might not actually be eligible. Using a little kid’s name on the application probably represents one kind of dodge to obtain the credit fraudulently, but not the only one.

Will the tax credit sunset at the end of November, as scheduled? Fraud or no fraud, that’s still an open question, but the administration may be leaning toward its extension. U.S. Housing and Urban Development Secretary Shaun Donovan told the Senate Banking Committee earlier this week that “the end of the tax credit would have some negative affect in the market.”

Stuyvesant Town Ruling Could Make NYC Landlords Suffer

A panel of judges has dealt a body blow to Tishman Speyer Properties and BlackRock by ruling that they improperly jacked up rents at the 110-building, 80-acre Stuyvesant Town and Peter Cooper Village complexes in Manhattan. After the owners’ purchase of the properties in 2006 for a bubble price of $5.4 billion, they determined that middle-class rents wouldn’t be enough to service their debt, and began raising rents precipitously.

Not so fast, cried many of those tenants, taking the matter to court. In a ruling on Thursday, the New York Court of Appeals, in a 4 to 2 vote, sided with the tenants. The owners, the court said, could not both raise rents in that way while receiving tax incentive benefits under the New York City’s J-51 program. Thus Tishman Speyer and BlackRock might have folk over $200 million or so in overcharges and damages to the complexes’ tenants.

The court also rejected the landlords’ argument that ruling against them would result in “dire circumstances,” not only for Tishman Speyer Properties and BlackRock, but for many NYC landlords. The judges replied: too bad. “If the statute imposes unacceptable burdens, defendants’ remedy is to seek legislative relief,” the ruling said.

“… you do not have to be gifted with powers of prophecy to foresee significant, if not severe, dislocations in the New York City residential real estate industry as a result of today’s decision,” the decision further stated. “This is inevitable because the Court has upended an understanding of the law upon which numerous and substantial business transactions and dealings have been predicated for over a decade.”

Upscale Communities Still Underway in Some Places

Are upscale lakefront and golf course-oriented development a thing of the bubble past? One might think so, but it turns out that some developers of those kinds of properties–generally associated with high net-worth buyers the likes of which are scarcer than they used to be–are plowing ahead, planning on better times ahead.

That was the rationale behind a recent groundbreaking in Texas, for example. Only last month, the new owners (SW Ownership L.L.C.) of a development called Skywater Over Horseshoe Bay in the Hill Country near Austin started work on a Jack Nicklaus Signature Golf Course that will be the centerpiece of the development, which will eventually feature about 1,200 single-family homes, villas and condominiums.

In addition to its on-site golf course and clubhouse, amenities at Skywater will include a private recreation center with a resort-style pool and fitness center, views of Lake LBJ and the Hill Country, and more than seven miles of hiking trails. Skywater lot owners will be offered full membership at no extra charge to the neighboring Horseshoe Bay Resort, which includes Robert Trent Jones Sr. golf courses, a fitness center, spa, yacht club and full-service marina, tennis facilities, a 349-room Marriott hotel, and a private airport.

“Obviously, timing is important, but we see Texas as having weathered the recent economic storm better than most,” Bill Cargill, a representative of SW Ownership L.L.C., told CPE. “With a dedicated ownership group that has the financial resources to see the vision through to completion, Skywater is poised to succeed as the economy continues to improve.”

Wall Street had a strong up day on Thursday, with the Dow Jones Industrial Average up 131.95 points, or 1.33 percent. The S&P 500 gained 1.06 percent and the Nasdaq went up 0.68 percent

The Federal Reserve’s most recent Summary of Commentary on Current Economic Conditions, better known as the Beige Book, wasn’t exactly cheerful about the state of the U.S. economy toward the end of annus horribilis 2009. But it wasn’t precisely pessimistic either.

Mostly the report seemed to shrug its shoulders to indicate that things could be worse. “Leading the more positive sector reports among Districts were residential real estate and manufacturing, both of which continued a pattern of improvement that emerged over the summer,” it noted. “Reports on consumer spending and nonfinancial services were mixed.”

Then there was that lagging indicator, the long-suffering commercial real estate sector. According to the Fed, “Commercial real estate was reported to be one of the weakest sectors… an inability to obtain credit was often cited as a problem for businesses that wanted to purchase or build space. High vacancy rates were noted as a key concern especially for landlords who were not offering concessions.”

The takeaway from that could be that landlords better get busy and start offering concessions to attract those few tenants looking to move or even expand.

The Curse of Block 37 Abides

The parcel of land in downtown Chicago known as Block 37 has a checkered history, to say the least. To say the most, the land seems positively cursed, resisting all development efforts for most of the last 20 years – either because of sudden turns in the economy, poorly thought-out development plans, or some ill-starred combination of the two. It’s not quite in the same league as the Curse of the Billy Goat, which has supposedly has kept the Cubs from playing a World Series game since 1945, but it’s close.

About two years ago, the curse of Block 37 was supposed to be over. Ground was broken and a mixed-used project started, with the first parts of the project to open in late 2009. The office space portion of the development did, in fact, open earlier this year.

Early this week, however, Bank of America and other lenders on the development moved to foreclose on its retail and transit portions. The banks say that developer Joseph Freed and Associates L.L.C. don’t have the money to keep servicing the loans. The developer says this is nonsense.

Legal wrangling could thus be protracted; there’s some danger that the stores might not open, or open late; and for real estate journalists, Block 37 continues to be the story that keeps on giving.

New Resorts Tough It Out

The recession has been particularly hard on the hospitality industry, especially because of the decline in business travel. Not only has that decline hurt standard hotel occupancies and revenues, but also those of resorts, who saw their income from meetings and events shrivel.

Yet the resort industry hasn’t given up the ghost. Instead, major players are making long-term plans in hopes of better years ahead. Some properties have opened since the meltdown and others are still under development, even as the economy remains more than a little sluggish.

“It has been a slow year, especially because business travel has slowed,” Valeriano Antonioli, managing director of InterContinental Montelucia Resort & Spa in Paradise Valley, Ariz., told CPE. The resort has been open about a year.

“Yet in the long run, a world-class resort offering the amenities that both business and pleasure travelers want will have staying power,” he continued. The 34-acre Montelucia includes 253 rooms and 40 suites–including two presidential suites, one of which has already seen President Obama as a guest—along with 34 detached, single-family villas, six restaurants and venues, a private wedding chapel, a 31,000-square foot spa and salon, five pools, and more than 27,000 square feet of meeting and event space.

It also helps to be more than a generic resort, Antonioli added. The Montelucia , for one, strives to distinguish itself through a number design elements, such as its restaurant Prado, which was inspired by Michelangelo’s Villa San Michele in Tuscany, and the wedding chapel, Castillo Lucena, which takes its cue from the ballroom at Hotel Cipriani in Venice. The resort also sports Spanish-inspired courtyards and antiquities from Spain.

Wall Street had an up day most of Wednesday, but took a sudden dive right before the end of the trading day. The Dow Jones Industrial Average dropped 92.12 points, or 0.92 percent; the S&P 500 lost 0.89 percent; and the Nasdaq saw a 0.59 percent downward movement.

U.S. housing starts posted a gain in September, but only a modest one, pointing to a still-modest rate of recovery for the overall economy. According to the U.S. Department of Commerce, the rate of new home started inched upward by 0.5 percent during the month to a seasonally adjusted rate of about 590,000 units. Ever-optimistic economists, it seems, were expecting more.

But maybe the builders knew it was coming. After all, they were reportedly a bit glummer in September than in August, with the National Association of Home Builders reporting last week that its confidence index in new-home sales dropped from 19 to 18. That probably meant homebuilders were biting their nails over the prospect of the expiration of the $8,000 first-timer tax credit.

There’s no word yet from the Obama administration as to whether it will support the extension of the credit. U.S. Housing Secretary Shaun Donovan told the Senate Banking Committee on Tuesday that the administration was trying figure out the cost of the credit more precisely before committing one way or the other on its extension.

Euro-Investment in CRE Accelerates

Investment in commercial real estate might be in the mother of all doldrums in the United States, but such activity spiked upward in the third quarter of this year in Europe. According to a report by Cushman & Wakefield, investment in Euro-property spiked 53 percent in 3Q09, up from €12.8 billion in the second quarter to €19.6 billion.

Those are better totals than previously this year, but still anemic when compared to the overwrought year 2007. During the first three quarters of 2009, there’s been €44 billion in investment in European commercial property. During the same three quarters of 2007, investors snapped up some €203 worth of Euro-properties.

The Cushman & Wakefield report, out on Tuesday, provided data to support recent anecdotal evidence of an acceleration in European property sales, such as Monday’s news that British Land Co. bought 39 Victoria St. in London’s West End for £40 million ($66 million), the company’s first investment since worldwide financial crisis started. The building has an anchor in the form of Bank of America, which is leasing its space until 2012.

One Optimistic Retail Report for the Holidays

On Tuesday, retail research company ShopperTrak predicted–contrary to most other forecasts–that U.S. retailers would actually see a small increase of 1.6 percent in sales for the holiday shopping season, which begins soon, compared with a year ago. Most everyone else sees a slight loss ahead, or a flat season at best.

In any case, the 2009 holiday season has the advantage of being compared with 2008, when consumers were feeling the panic instead of its tedious aftermath, which made them grip their wallets and purses very tightly. “Our data shows retail traffic has been slowly increasing, which indicates consumer sentiment could be rising heading into the season,” Bill Martin, co-founder of ShopperTrak, said in a statement.

Separately, the National Retail Federation’s 2009 Holiday Consumer Intentions and Actions Survey, conducted recently by BIGresearch, noted that fully 70 percent of surveyed consumers plan to spend time at discount stores when it comes to Christmas shopping. Shoppers plan to spend less on most categories of holiday goods this year than last, except for candy and food.

Wall Street saw a lackluster day on Tuesday, with the Dow Jones Industrial Average losing 50.71 points; at a little more than 10,000, that’s a loss of 0.5 percent. The S&P 500 was down 0.62 percent and the Nasdaq dropped 0.59 percent.

The U.S. housing market might not be quite as deathly ill as it was a year ago, but no one is suggesting–to stretch the health metaphor–that it will get up and run a marathon any time soon. In fact, the industry is wheezing and gasping a little at the thought of the looming expiration of the $8,000 first-timer tax credit, so plans have been hatched in Congress to keep the credit in place.

Thus far, about 1.8 million homebuyers have taken advantage of the credit, according estimates by the National Association of Realtors. Of that total, about 355,000 would not have otherwise bought a house this year, the NAR believes.

There are also moves to give the housing industry other kinds of medicine as well. On Monday, the Obama administration unveiled a plan to aid state and local housing finance agencies. “This initiative is critical to help working families maintain access to affordable rental housing and homeownership in tough economic times,” said Treasury Secretary Tim Geithner. He further promised that the latest efforts would be revenue neutral, but didn’t give specifics.

CRE Indices Down in August

The Moody’s/REAL Commercial Property Price Indices fell 3 percent in August compared with July, thus making the fall since the bubble peak (October 2007) clock in at 41 percent. Slack demand for office space, retail and apartments all contributed to the continued slide.

Moreover, the slide isn’t over yet. Separately, Goldman Sachs Group Inc. said in a report at the end of September that commercial real estate prices are forecast to fall additional 17 percent by the end of 2010.

The valuation contraction is taking its toll. In yet another recent report suffused with gloom, it was noted that payments on roughly $22 billion worth of commercial mortgages were at least two months late, according to Credit Suisse. Commercial delinquencies were 0.54 percent a year ago; now they’re 3.64 percent, with a bullet.

Green Retrofitting

Commercial real estate is well known as a lagging indicator, and lag is just about the best way to describe it at the moment. What’s an industrious real estate services company to do? Whatever it can, wherever it can.

Recently Atlanta-based Servidyne Systems L.L.C. started work on a lighting retrofit project at the U.S. Navy base on the remote Pacific island territory of Guam. The company is upgrading about 3 million square feet of the base’s facilities with new interior and exterior lighting systems as part of a comprehensive energy savings performance contract awarded to Johnson Controls Inc.

Servidyne will be upgrading the interior lighting systems at the base with energy efficient T-8 fixtures, among other things. So not only is there still work to be found in the current market, green retrofitting isn’t dead either. “Despite the challenging economic environment, we’re also seeing demand within the nongovernment sector from commercial real estate property owners and managers looking to cut energy and operating costs,” Todd Jarvis, president of Servidyne, told CPE.

“State and federal incentives, as well as significant utility rebates to employ energy saving measures, are only going to increase in the future,” he added. “Forward-thinking companies are employing the services of building performance efficiency companies to seek out these incentives and fulfill the requirements for them.”

Wall Street was back in a peppy mood on Monday, with the Dow Jones Industrial Average ending up 96.28 points, or 0.96 percent. The S&P 500 gained 0.94 percent and Nasdaq advanced 0.91 percent.

Which bank will be lucky 100th bank to fail in 2009? Or more fittingly, the unlucky 100th? The world will have to wait until next weekend.

Last weekend the Federal Deposit Insurance Corp. closed San Joaquin Bank in Bakersfield, Calif., which then became bank 99 to fail for the year. Ten of those, including this latest one, have been in California, a state hit hard by the popping of the real estate bubble.

Still, this year won’t be as epic in terms of bank failure as 1989, which saw 534 banks fail, nor even 1992, when 181 banks failed. But many more bank implosions are ahead: according to the FDIC, currently 416 banks are in its “at risk” category.

For obvious run-on-the-bank reasons, the agency doesn’t disclose exactly which banks those are. But it’s a safe bet that many of them are suffering from loans made during the “real estate always goes up” period of the mid-2000s.

Microsoft Hits the Mall This Week

The first-ever Microsoft retail location in Scottsdale, Ariz., is on the verge of opening – on October 22, according to various reports. In yet another example of “if Apple does it, we should too,” the retail opening is timed to coincide more or less with the launch of the new Windows 7 operating system. What the retail equivalent of the Windows 7 security patches—which are sure to be released soon after the operating system is released—be like? It remains to be seen.

Microsoft devotees are also waiting to see the exact configuration of the store, and how much space will be devoted to the software behemoth’s brands. Besides Windows 7 and other software, mostly that includes Xbox, a popular gaming system, and Zune. (Zune is a not-so-popular digital audio player, not a fictional planet in the Doctor Who series.)

The stores will also have an equivalent of Apple’s Genius Bar in-store customer-service feature to offer help to vexed Microsoft customers. It’s unlikely, however, that the Microsoft geniuses will recommend that harried PC users switch to Macs for their fewer errors, relative lack of viruses and cooler design.

Was the Bear Looking for Hamm’s?

In an unusual bit of retail news, a 125-lb. black bear entered a grocery store in northern Wisconsin late last week, repaired to the cool reaches of the beer cave and hung out until officials from the Wisconsin Department of Natural Resources tranquilized the animal. Beer caves have been an increasingly popular feature for the retail sale of beer in recent years, but this is the first time they’ve been known to attract a literal party animal. Reportedly, however, the bear didn’t consume any of the alcohol, which leaves it an open question as whether he was smarter than the average bear.

Wall Street slipped below the milestone 10,000 on Friday, but not by much. The Dow Jones Industrial Average lost 67.03 points, or 0.67 percent, to end at 9995.91. The S&P 500 dropped 0.81 percent and the Nasdaq was down 0.76 percent.

More than 925,000 U.S. homeowners received a foreclosure notice of some kind — a default notice, scheduled auction or bank repossession — during the third quarter of 2009, according to RealtyTrac, a figure that represents a 5 percent increase over the second quarter and a 23 percent increase over 3Q08. One in every 136 U.S. housing units received a foreclosure filing during the quarter, which was the highest quarterly foreclosure rate since the company began issuing its report in the first quarter of 2005 — though admittedly, that was during the run up to the bubble peak.

“[Bank repossessions] increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan modification efforts and high volumes of distressed properties,” noted James J. Saccacio, CEO of Realty Trac, in a statement.

Nevada continues to be the poster child for repossession, with one in 23 housing units receiving a foreclosure filing during 3Q09, an increase of almost 10 percent from the second quarter. Other high-repo states during 3Q09 include the usual suspects–California, Arizona, Florida and Michigan—as well as a few lesser-known foci of housing misery, such as Idaho, Utah, Georgia and Colorado.

Inflation Turns in Wimpy Numbers

According to the U.S. Department of Labor on Thursday, consumer prices were up a measly 0.2 percent in September, compared with a 0.4 percent rise in August, which itself was no great shakes. As of September, prices have fallen 1.3 percent year-over-year; as of August, the decline was 1.5 percent. It looks like neither deflation nor inflation (or its ’70s cousin, stagflation) will be vexing an already sorely vexed economy for the time being at least.

Energy prices were up, some 0.6 percent. mostly on account of gasoline, which is always a wild card in the CPI. But a lot of other goods, such as food, were down. Even rents jumped on the deflation bandwagon for the first time in 17 years as renters double up with friends, move back in with their parents or in unfortunate cases, join the newly homeless.

Business inventors are near record lows as well, the result of businesses being leery when it comes to stocking goods that consumers might not buy. During September, business inventories dropped 1.5 percent, the largest decline since the U.S. Department of Commerce started tracking that kind of data 17 years ago. Then again, cash-for-clunkers was part of that drop, as buyers drove away with subsidized auto purchases, thus reducing car-dealer inventories.

After scaling the heights of 10,000, Wall Street had a tepid day on Thursday, eventually turning in modest gains. The Dow Jones Industrial Average gained 47.08 points, or 0.47 percent, while the S&P 500 was up 0.42 percent and the Nasdaq eked out a 0.05 percent gain.

The heads of the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Office of Thrift Supervision were all before the U.S. Senate Subcommittee on Financial Institutions on Wednesday sounding a warning about bad commercial real estate loans and their threat to the health of the banking system, none of which is news, but all of which is troubling.

“The most prominent area of risk for rising credit losses at FDIC-insured institutions during the next several quarters is in CRE lending,” FDIC Chairman Sheila Bair told the solons.

Already nearly 100 U.S. banks have failed this year, putting stress on the FDIC, and boatloads of sour commercial real estate debt have been the culprits most of the time. Bair added that federal regulators will soon publish guidelines on reworking commercial real estate loans, but she didn’t offer any particulars.

The thorniest knot for CRE lenders will be construction and development loans, since many such projects are in the deep freeze, and not offering much in the way of returns to keep current on the debt. According to a Deutsche Bank estimate, commercial real estate loan losses for banks in the coming years could reach $300 billion.

Bruce Wasserstein Passes Away

Bruce Wasserstein, chairman and CEO of the investment bank Lazard, died Wednesday at age 61. The company had previously announced that Wasserstein had been hospitalized for a heart murmur, but a cause of death hasn’t been determined. Though best known as a master-of-the-universe M&A specialist in the 1980s, lately Wasserstein has received some attention for the relative strength of Lazard throughout the financial meltdown on Wall Street.

Wasserstein is survived by his wife of 10 months, Angela Chao, seven children from previous marriages, and the daughter of his late sister Wendy, whom he adopted.

Financial Derivatives to be Regulated

The House Financial Services Committee is expected to vote Thursday on a bill regulating financial derivatives. If it passes, the measure will be the first major bill aimed at overhauling financial regulations to actually make it into law. The absence of such reforms was widely noted in September on the occasion of the first anniversary of the collapse of Lehman Bros., and sometimes characterized as a lost opportunity.

Under the legislation, firms trading derivatives would be required to meet certain capital and reporting requirements, and many of the deals would have to go through clearinghouses, which would provide data about market. Currently, derivatives are essentially unregulated, a situation that allowed, for example, credit-default swaps to rise like the Creature from the Black Lagoon and get its fingers around the throat of American International Group.

The Financial Services Committee is also expected to vote on a proposal to create a Consumer Financial Protection Agency, though its fate is considerably less certain than the derivatives bill, which is considered likely to pass.

Wall Street reach a psychological milestone on Wednesday when the Dow Jones Industrial Average closed above 10,000 for the first time since late last year, when all the indices were in a downward spiral. Since the spring, they’ve been in an up mode. A new bubble? Could be.

In any case, on Wednesday, the Dow gained 144.80 points to achieve that milestone (10,015.86), or 1.47 percent. The S&P 500 was up 1.75 percent and the Nasdaq gained 1.47 percent.

Federal Housing Finance Agency acting director Edward J. DeMarco told Congress on Thursday that it ain’t over till it’s over when it comes to the problems caused by U.S. housing mortgage delinquencies. And for Freddie Mac and Fannie Mae especially, it’s not nearly over.

What DeMarco said to the Senate Banking Committee was a little more formal than a Yogism: “We remain concerned and recognize the risk associated with increasing numbers of seriously delinquent loans.”

He then backed up that concern with some statistics: the rate of seriously delinquent mortgages at Fannie and Freddie total 4.2 percent and 3.1 percent, respectively. What the government plans to do about Fannie and Freddie, now that they have been de facto government agencies for about a year, is still an open question, though reportedly it will be addressed in the Obama administration’s proposed 2011 federal budget, which will be released in February.

Home Not-So-Sweet Home

The Obama administration is asserting that half a million troubled mortgages have been put into trial mortgage modifications by their loan servicing companies, as a result of government prodding. An estimated 16 percent of borrowers who are eligible—they have to be at least 60 days late on their payments—have been seen their mortgages modified on a preliminary basis as of the end of September, up from 12 percent at the end of August.

The government plan, unveiled earlier this year, puts borrowers into three-month trial modifications pending permanent modifications. The government has been leaning on loan services to put more borrowers into the plan in recent months, after a lackluster start earlier this year.

There are no firm figures yet, however, on how many of the loan modifications actually will involve reduction of principal balances, since there seems to be a strong correlation between that and successful modifications. Loan servicers have thus far been reluctant to do so. Some estimates put the re-default rates of modified mortgages at higher than 50 percent, but government efforts to press for modifications are still so new that their re-default rates haven’t been tracked yet.

The Prognosis for Hotels

Will an expanding economy at the end of 2009 and into 2010 be good for the hospitality businesses, which has taken it on the chin since the recession got under way in earnest? Maybe, but Marriott International Inc. executives told investors not to hold their breaths during a conference call on Thursday.

“Despite improvement, occupancy rates will remain at relatively low absolute levels and pricing will continue to be pressured by a significant amount of price-sensitive, leisure, transient business,” said president and COO Arne M. Sorenson—that is, those non-business cheapskates who are actually spending their own money, and thus a bit harder for hotels to profit from.

Moreover, the industry will also suffer because of the new hotels coming out of the pipeline in 2010, whose genesis goes back before the recession. “And while supply additions are slowing dramatically, the increase in new hotel supply expected in 2010 will still provide headwinds to near-term improvement in business fundamentals, especially in the upscale segment,” noted Sorenson.

For the quarter ended September 11, Marriott recorded a loss of $466 million, compared with a profit of $94 million during the same period a year earlier. RevPAR (revenue per available room), an important metric in the hotel business, was down 22 percent compared with the same quarter last year.

Wall Street got back on the 10,000-or-bust wagon on Thursday, with the Dow Jones Industrial Average up 61.29 points, or 0.63 percent. The S&P 500 gained 0.75 percent and the Nasdaq rose 0.64 percent.