The bulletins, number 03-15 and number 03-30 , were issued by the New Jersey Department of Banking and Insurance, and S&P received an opinion letter from the Attorney General of the State of New Jersey relating to the bulletins. S&P said it relied on the “interpretive bulletins” as clarification to the act, rather than using them in opposition to the legislation.

But Anne Canfield, executive director of the Consumer Mortgage Coalition, said that the bulletins sent out by H. Robert Tillman, director of the division of banking within the New Jersey Department of Banking and Insurance (DOBI) provided informal guidance on the legislation’s ambiguity showing that DOBI recognizes a problem by addressing the ambiguity and that the department has no authority to issue advice in the bulletins. Canfield said that DOBI does not create a legal rule or set forth one in the bulletins.

“This is especially troubling due to the importance of higher LTV loans to low- and moderate-income borrowers, and the importance of continued residential mortgage lending to the economy’s recovery,” Canfield said.

The AG's letter to the division of banking, however, pointed out that S&P could rely on the courts to uphold the “interpretive bulletins,” said Adam Tempkin, an S&P spokesman.

“That was the last thing we needed to receive,” Tempkin said, “comfort that the damages would be capped on these types of loans. That’s why we decided to admit them.”

S&P concluded that it would rate structured finance transactions that include additional New Jersey loans governed by the new legislation, such as home loans, covered home loans, home improvement loans and manufactured loans. However, it would not rate high-cost home loans, as defined by the legislation.

The “interpretive bulletins,” according to S&P, would allow borrowers with less than perfect credit histories to have options to refinance their home loans, and borrowers with stronger credit to take cash out of their home equity to pay for home improvements, college tuition, or medical expenses.

But some industry analysts say that S&P’s repositioning creates more problems for lenders because mortgage bankers would still pay higher costs to produce subprime loans, larger lenders might not be willing to accept the loans and if the mortgage bankers do not produce subprime loans for segments holding poor credit, then consumer groups and officials might accuse the mortgage bankers of “redlining” violations under the Home Mortgage Disclosure Act.

E. Robert Levy, executive director and counsel of the New Jersey Mortgage Bankers Association, said S&P’s original opinion on cash-out refinances was a misreading of the statute that led lenders to pull out of the market. However, the change in the ratings agency’s position went farther than he expected with changes made for the home loans, covered loans, home improvement loans and manufactured home loans.

“The revised opinion will certainly enable some of the lenders to be able to go back into the cash-out refi market and, therefore, enable loan correspondents and brokers to broker those loans,” Levy said. “I can’t honestly say that it’s negative. It has to be looked at as a positive result. While not resolving all of the problems that the law has created, it certainly has resolved one of the major problems that S&P created.”

In October, Levy and New Jersey representatives from key mortgage lenders in the state met and drafted a bill to amend A75 and provide a more comprehensive revision of the Act. The bill was submitted to a staff member of the New Jersey Senate Democrats who submitted it to the state Senate. Discussions took place last week as to the sponsor of the bill and its likelihood of success.

Levy said the result of the final draft might not resolve all lender issues in the legislation, but Levy considers it to be a good starting point.

“It’s a starting point but it’s an approach that those legislators that have looked at the bill have decided to propose because they were uncomfortable going forward at this point with the full, comprehensive bill,” Levy said.

The final draft of the bill would provide regulatory authority of the banking department to “promulgate regulations that would have the force of law,” Levy said, and would allow the department to correct any misreadings or misinterpretation of the statute. He pointed out that the bill is more specific than the New Jersey Department of Banking and Insurance’s “interpretive bulletins.”

“It would correct the problem with fees to affiliated companies,” Levy said. “[Fees] would no longer be included automatically. It would take care of the broker fee problem and eliminate some of the broker fees from the calculation of points and fees. And, it would correct a major problem we’ve had with the statutory damage definition with a material violation of the law.”

The Mortgage Bankers Association and the New Jersey MBA expect to have the bill heard during the “lame duck” session of the New Jersey state legislature, between December and January, and seek to expand more comprehensive legislation in 2004. 

“From a ‘lame duck’ standpoint, I think we’ll resolve some of the problems but not all of them,” Levy said.

Mortgage lenders from the 1,150 member New Jersey Coalition to Save N.J. Loans said that borrowers with less than perfect credit histories will have “few, if any, options to refinance their home loans” and homeowners with strong credit will find it “difficult to take cash out of their home equity to pay for home improvements, college tuition or medical expenses” under A-75 of “The New Jersey Homeownership Act of 2002.”

Regina Ross of Assured Lending Corp. met on behalf of the Coalition with New Jersey Governor James McGreevey (D) to explain the negative impact A75 would have on New Jersey mortgage professionals and homeowners. 

McGreevey promised to push for amendments to A75 if the coalition produced a 1,000 signature petition from mortgage industry professionals impacted by the new law. 4,200 “messages” were sent to 120 legislators and 840 petitions were sent to the Governor’s office, said one member of the coalition. Meanwhile, three homeowners with “decent credit” who could not refinance because of the pending legislation sent in letters.

Meanwhile, S&P said it would continue to rely on the representation and warranty that the loan pool was originated in compliance with all applicable laws, including anti-predatory and abusive lending laws. But issuers would need to demonstrate that the existing compliance procedures do not violate the new legislation and that the loans constitute the applicable loans under the new legislation.

On November 17 at a symposium of mortgage bankers in Trenton, Tillman expressed his dissatisfaction with S&P for its refusal to rate all cash-out transactions, because the ratings agency could not determine whether those transactions fell below the triggers or whether there were home improvement contractors involved with the loan. Tillman said there were methods to identify the contractors.

One source close to the situation said that S&P received pressure from DOBI's banking division to the revise its stance on the legislation. But Tempkin said that there was no pressure put on the ratings agency to revise its position.

“We simply thought there were some ambiguities in the original act and the ambiguities have been clarified from the bulletins and the attorney general’s opinion,” Tempkin said. “But there was no negotiation, no compromise, nothing like that. We were simply basing [the revision] on what came out publicly in terms of those bulletins and the AG’s opinion.”

S&P still requires the seller of loans into the securitization structure to provide a representation and warranty that the loans in the rated pools are not high-cost home loans. Also, the seller needs to provide compliance and exclusion representation from an “entity” that could demonstrate that existing procedures are effective to identify and exclude high-cost home loans under the act, including compliance with the act's safe harbor provisions.

S&P said that a “creditworthy entity with sufficient financial strength to repurchase loans” that might be in breach of compliance and exclusion representations would need to provide these representations. Also, the repurchase of any loans would be at a purchase price to make the securitization issuer whole, and include “any costs and damages incurred by the issuer in connection with such loan,” S&P officials said.

“Our concerns throughout the whole [issue] are creditworthiness of the loans that go into the mortgage pools,” Tempkin said. “That’s really where our concerns begin and end because we’re a debt rating agency and that’s what we limit it to.”
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The new release could track lender-required policy characteristics and send deficiency letters when these requirements are missing, said Ron Wiser, president of Loan Protector. The EasyNOR system could also send notification letters to agents as well as borrowers. Notifications could also be daily or spread over time, depending on the size or requirements of the lender, he said.

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The American Mortgage Network (AmNet) , San Diego, Calif., announced opening of a regional center in Dallas, Texas to serve mortgage brokers in the Dallas/Fort Worth MetroPlex and East Texas, including Tyler, Longview, Lufkin and Palestine; and West Texas which includes Lubbock, Midland/Odessa, San Angelo, El Paso, and Amarillo. AmNet has also opened a regional center in Houston.

John Robbins, chief executive officer of AmNet, said that Dallas holds "considerable opportunity," while housing remains the "cornerstone of the local economy."

"Builders are constructing record numbers of new homes and existing home sales are on the rise,” Robbins said.
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Also, delinquencies in office property remain low but the trend is up, prompting lenders to maintain a 50 to 75 bp spread between low- and high-risk transactions. Spreads for high-quality deals (70 percent LTV, 1.30 debt-service coverage) were quoted between 160 and 190 bp for most of 2003, the report said.

Demand for construction loans remains negligible with spreads for heavily pre-leased deals backed by experienced developers quoted at 300 bp to 400 bp over London interbank offered rate (LIBOR).

But industry participants are already setting the stage for the upswing in the office market, according to Marcus & Millichap. Supply has come to a virtual halt, with 2004 completions expected to amount to less than 1 percent of inventory. The majority of it is being delivered to markets that can best absorb it. The 19 highest-vacancy markets will experience average inventory growth of 0.7 percent in 2004, while the 10 lowest-vacancy markets’ office inventories will grow by 1.4 percent.

Owners have also been quick to adjust rents that were necessary to clear the market, the report said. The adjustments have been important to markets such as San Francisco, Boston and Seattle, where rents were artificially inflated by short-lived dot-com tenants. With rents returning to normalized levels, more stable tenants who had been shut out of the markets could resume expansion, the report said.

Leasing activity is already on the rise in numerous markets, an early indicator of future net absorption, the report said. The economy is expected to begin generating jobs in the first half of 2004, but office demand typically takes six to 12 months to respond, which suggests a meaningful improvement in fundamentals might not occur until 2005.

The National Office Index report is a snapshot analysis that ranks 38 office markets based on a series of 12-month forward-looking supply and demand indicators. Marcus & Millichap rank the markets according to their cumulative weighted average scores for various indicators including forecast employment and rent growth, vacancy, construction and absorption.

Washington, D.C. landed the top position in the country, benefiting from increased defense spending.

San Diego occupies the number two position with the highest effective rent growth forecast. And, Riverside-San Bernardino (No. 3), also in California, registered the lowest vacancy rate, as well as the highest ratio of absorption to inventory.
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Equipped with parking facilities of about 640 and 750 spaced, the developers plan to include large scale distribution retailers on average surfaced of 1,000 to 1,500 square meters, as well as food courts, in the properties.

Tunisie Park Services already announced that the first center will consist of two average surfaces and a vast food court of 3,000 square meters, while the second is thought of as the "future reference" of luxury shopping.
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Typically, Hispanic workers have no credit, or a thin credit file, because many are reluctant to accumulate debt and/or are unfamiliar with the role of credit in the marketplace, said NCLR President and CEO Raul Yzaguirre.

“This study is long overdue,” Yzaguirre said. “[Hispanics] have lower credit scores that adversely affect their access to affordable credit. It is our hope that this study will explain why these discrepancies in credit scores exist so that we may work to improve the creditworthiness of [Hispanic] families.”

The bill would ostensibly protect consumers from identity theft and provide greater federal oversight of credit report accuracy while enhancing consumer access to credit reports and scores. The Mortgage Bankers Association worked with Congress in getting the bill passed.

The study provision requires the Federal Trade Commission (FTC) to do the following:

• Consult with Federal Reserve Board and HUD to analyze the impacts of credit scoring on the availability and affordability of financial products.
• Determine whether the credit scoring system has a negative impact on certain groups of consumers, including ethnic minorities, and make subsequent assessments as to why these negative impacts exist.
• Seek the output of community and civil rights groups regarding research design and methodology prior to conducting the study.

Historically, legislative efforts on credit and other financial matters have not been considered a major priority for the Hispanic community, but Hispanic purchasing power continues to rise at an extraordinary rate while growing numbers of Hispanic workers seek to purchase their own homes, save and build wealth and financial security, NCLR said.
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