The delinquent unpaid balance for commercial mortgage-backed securities (CMBS) in January increased 326% from a year ago to $45.9bn, according to the research firm Realpoint. Despite the flagging performance, and general uncertainties in the market, Bank of America (BAC: 7.29 -0.14%)/Merrill Lynch reports that spreads are showing signs of leveling out.

Realpoint reviewed more than $797bn in CMBS pools for the January report. The firm calculated a 5.76% delinquency rate for the pools reviewed, up from 5.22% in December. The rate jumped by more than four times the rate in January 2009, when 1.2% of the reviewed loans fell delinquent. June 2007 held the lowest delinquency rate recorded by Realpoint, at 0.2%.

After analyzing the trends, Realpoint researchers predict a 6-to-7% delinquency rate through Q110 and could pass 9% in the middle of the year.

Foreclosed, repossessed and commercial loans delinquent by 90 or more days increased for the 25th straight month in January – up 28% from the month before and 508% from a year ago.

Default risk grows from older CMBS transactions as borrowers became unable to pay off the loans as scheduled. Most collateral properties that usually generate cash flow were not able to refinance the balloon payment at maturity as credit dried up, according to the report.

“Declined commercial real estate values and diminished equity in collateral properties may prompt more struggling borrowers with marginal collateral performance to walk away from properties,” researchers wrote.

A report from Bank of America Merrill Lynch showed CMBS spreads stabilizing to modestly tighter levels for triple-A paper, during the past week as anxieties eased on large-scale credit issues such as the ability of Greece to pay back its debt:

A Moody’s report showed a 4.1% rise in commercial real estate (CRE) prices through December. But Moody’s analysts said it’s uncertain whether CRE prices reached the bottom or just evidence of the “volatility of a market in transition.”

While the commercial market searches for answers in the dark, analytics firms could be benefitting more than ever with their answers, just as foreclosure data providers such as RealtyTrac and ForeclosureRadar gained market share through the current credit crisis. Recently, the CMBS researcher Trepp purchased Foresight Analytics for an undisclosed amount.

Write to Jon Prior.

Luxury homebuilder Toll Brothers (TOL: 22.47 +1.81%) posted a $40.8m, or $0.25 per share, loss for its fiscal year first quarter that ended January 31, 2010.

The results reflect narrowed loss for the builder, in a quarter marked by a 129% increased in the value of its net contracts signed and a more than 30% drop in cancellation rate, compared to the year-ago quarter.

The FY Q110 results include $33.4m in pre-tax write-downs. Toll Brothers said $22.8m of the write-downs was attributable to operating communities, $9m to owned land and $1.6m to land controlled for future communities.

That compares to an $88.9m, or $0.55 per share, loss in FY Q109, when the Pennsylvania-based builder had $156.6m in pre-tax write-downs. Without the write-downs, Toll Brothers said its quarterly loss would have been $23.4m, compared to pre-tax earnings of $100,000 last year.

“A year ago at this time we feared for the stability of the nation's economic system. That worry seems to be behind us,” said chairman and CEO Robert Toll. “The housing market took several years to recover following the downturn of the late 1980's and early 1990's. We expect this recovery to follow a similar pattern.”

Like many other public builders, Toll Brothers benefited from a temporary change in tax law that allowed the company additional time to collect a tax refund from profitable years due to its current losses. The so-called net operating loss (NOL) carryback provision netted Toll Brothers a $16m tax refund attributable to the quarter.

Q110 revenue was $326.7m, down 20% from Q109’s revenue of $409m. Toll Brothers delivered 596 units in the quarter, down 10% from 665 units in the year-ago quarter.

But despite having 26% fewer communities than a year ago, net signed contracts in the quarter totaled 526 units valued at $292.1m, a 98% increase from 266 units and a 129% increase from $127.8m in dollar value, both compared to Q109. The average price per unit of gross contracts signed in Q110 was $555,000, compared to $562,000 in Q409 and $574,000 in Q109. The cancellation rate also dropped from the year-ago quarter to 6.7%, compared to 37.1%.

“This quarter's total net signed contracts were up significantly compared to 2009's first quarter, but last year's results were posted in the midst of the financial crisis,” Toll said. “Our per-community net signed contracts exceeded both 2009's and 2008's first-quarter per-community average; however, our results were approximately half the average of all previous first quarters dating back to 1990.”

Write to Austin Kilgore.

The author held no relevant investments.

Federal Reserve Chairman Ben Bernanke outlined to Congress a series of policy changes that he said reflect the lessons learned from the financial crisis.

In prepared testimony before the House Financial Services Committee, Bernanke said the Fed supports Congressional efforts at financial reform. The testimony came at the Fed chief’s semiannual testimony on monetary policy.

“The Federal Reserve strongly supports the Congress's ongoing efforts to achieve comprehensive financial reform,” he said. “In the meantime, to strengthen the Federal Reserve's oversight of banking organizations, we have been conducting an intensive self-examination of our regulatory and supervisory responsibilities and have been actively implementing improvements.”

One such change Bernanke supports is publicly naming firms that participated in special lending programs, but added such disclosures should come “after an appropriate delay.”

“It is important that the release occur after a lag that is sufficiently long that investors will not view an institution's use of one of the facilities as a possible indication of ongoing financial problems, thereby undermining market confidence in the institution or discouraging use of any future facility that might become necessary to protect the U.S. economy,” Bernanke said.

He added a lag time would also allow firms adequate time to inform investors through annual reports and other public documents of their use of Federal Reserve facilities. Some have criticized the Fed for not disclosing the names of financial institutions that borrow through the special programs established during the financial crisis, while the central bank has argued disclosures would make the programs less effective because of the potential negative connotation attached to participation.

While noting a number of steps to enhance the Fed’s transparency Bernanke said he would support a Government Accountability Office (GAO) review of the Fed’s management of all facilities created under emergency authorities.

“In particular, we would support legislation authorizing the GAO to audit the operational integrity, collateral policies, use of third-party contractors, accounting, financial reporting, and internal controls of these special credit and liquidity facilities,” Bernanke said.

Bernanke’s seemingly conciliatory tone comes as Congress considers a variety of options for financial reform, including changes that would diminish the Fed’s authority.

The House passed The Wall Street Reform and Consumer Protection Act of 2009 in December and the Senate is currently considering reform options.

In his overview of the state of the economy, Bernanke said the economy expanded at a annual rate of 4% during the second half of 2009, but noted the job market remains weak. And while many large firms have been able to issue corporate bonds or new equity and do not seem to be hampered by a lack of credit, Bernanke said bank lending continues to contract, reflecting both tightened lending standards and weak demand for credit amid uncertain economic prospects.

Write to Austin Kilgore.

Bankrupt retail real estate investment trust (REIT) General Growth Properties (GGP: 15.96 +0.19%) will get a $2.63bn infusion in cash from Toronto-based real estate firm Brookfield Asset Management (BAM: 30.40 -0.59%), enabling the shopping mall developer to exit bankruptcy.

The GGP-Brookfield alliance comes just one week after Simon Property Group (SPG: 136.69 +0.12%), a retail REIT and the largest real estate company in the US, announced its unsolicited $10bn offer for GGP. GGP rejected the Simon offer, resulting in a public back-and-forth between the two shopping mall rivals.

The deal with Brookfield will create a new company, General Growth Opportunities (GGO), which will own certain GGP non-core assets, such as all of the company's master planned communities and landmark developments like South Street Seaport and others, Chicago-based GGP said.

In addition, GGP’s unsecured creditors will be paid at par — the debt’s face value — plus accrued interest.

Brookfield will invest $2.5bn in cash in GGP in exchange for GGP common stock, thereby providing sufficient liquidity to fund GGP's bankruptcy emergence needs, GGP said in a release Wednesday afternoon. Under the terms of the plan, GGP shareholders will receive one share of new GGP common stock initially valued at $10 per share, and one share of General Growth Opportunities (GGO) with an initial value of $5 per share. Brookfield will invest $2.5bn at $10 per share for new GGP common stock and up to $125m at $5 per share for GGO common stock.

The deal is not subject to due diligence or financing conditions “and is expected to create a floor value for the purpose of raising additional equity” for GGP. However, the deal must be approved by the bankruptcy court overseeing GGP’s restructuring.

“This proposed plan offers significant value for all of our stakeholders,” said GGP CEO Adam Metz. “It is designed to allow GGP to deliver a minimum of $15 per share in value to our existing common shareholders, while providing our unsecured creditors with par plus accrued interest.”

In consideration for the investment, Brookfield will be granted seven-year warrants to purchase 60m shares of existing GGP common stock at $15 per share. The warrants are intended to provide compensation to Brookfield for its financial commitment, GGP said, adding Brookfield will not receive any other consideration or bid protection, including any break-up fee, expense reimbursement, commitment fee, underwriting discount or any other fees.

“The Brookfield-sponsored recapitalization — coupled with the more than $13bn of restructured debt, our compelling scale as the second-largest regional mall owner, our fortress assets and a business plan that focuses on further deleveraging the balance sheet and building liquidity — provides a strong financial foundation for the future,” Metz added.

Until the court approves the warrants, Pershing Square Capital Management is providing “interim protection” to Brookfield. GGP said if the Brookfield deal doesn’t go through and it completes a transaction with another party at a per share value above $12.75, Pershing Square will be obligated to pay Brookfield 25 percent of its profits from its investment in GGP above $12.75 per share. However, GGP will not be required to reimburse Pershing Square for any amounts paid pursuant to this agreement.

Write to Austin Kilgore.