The action comes in response to OCC’s issuance last week of two rules (http://www.occ.treas.gov/newrules.htm) addressing RMBS transactions involving national banks. The first rule codifies a series of court decisions and OCC interpretations, and establishes symmetry with federal thrifts under the Office of Thrift Supervision regarding the types of state laws that apply to national banks, and includes a strong anti-predatory lending standard. The second rule clarifies the scope of the OCC's “visitorial authority” under federal law, i.e., its right to examine and review the books and records of national banks and their operating subsidiaries.

In a statement issued yesterday, Fitch said it was aware that the OCC rules could be subject to legal challenge and that it would rate RMBS transactions under OCC jurisdictions that change accordingly.

“Fitch is aware that some jurisdictions may seek to challenge the preemption determinations of the Office of Thrift Supervision (OTS) and OCC and will monitor those actions and, in the event of a successful action, respond accordingly,” Fitch said.

OCC and OTS have aggressively carved out their territory in the debate over predatory lending, asserting last year that several state predatory lending laws, notably in Georgia, do not apply to their member institutions. Comptroller of the Currency John Hawke Jr. said the new regulations enhance the ability of national banks to plan their activities with predictability and to operate efficiently, subject to “effective and efficient supervision.”

“When national banks are unable to operate under uniform, consistent and predictable standards, their business suffers and so does the safety and soundness of the national banking system,” Hawke said. “The application of multiple and often unpredictable state laws interferes with their ability to plan and manage their business, as well as their ability to serve the people, the communities and the economy of the United States.”

The Mortgage Bankers Association has also called for a national standard for predatory lending practices, arguing that a patchwork of state and local laws and ordinances with varying degrees of prohibitions and penalties make it difficult for lenders to operate effectively.

Fitch also announced that it had revised its criteria for rating RMBS transactions in jurisdictions with predatory lending laws that allow for unlimited assignee liability. Fitch revised its criteria so that the number of loans to be reviewed in the random sample would be the greater of a) five loans from each such jurisdiction with unlimited liability and b) 10 percent of the loans in the pool from each such jurisdiction with unlimited liability.

Previously, Fitch said that to rate an RMBS transaction containing any loans from such jurisdiction, it expected receipt of a certification from a third party unaffiliated with the originators of the relevant loans that such third party conducted due diligence on a random sample in the range of 10 percent to 25 percent of the loans from such jurisdiction and that no high cost home loans were uncovered in the sample.

Fitch said thus far the criteria applies to just two states with unlimited assignee liability—New Jersey and Kentucky. Georgia previously had an unlimited assignee liability provision in its predatory lending law, but changed the law last year under heavy pressure from lenders and the major ratings agencies.
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More than 4,000 participants are expected at CREF, which takes place at the Walt Disney World Dolphin Hotel.

On February 2, the “Future of the Mortgage Banker" explores new business models and processes for the commercial mortgage banker moving into 2004 and beyond. James Murphy, chairman and CEO of New England Realty Resources, Boston, Mass., will moderate the session. Panelists include Guy Johnson, president of Johnson Capital, Irvine, Calif.; Michael Berman, president of CWCapital, Atlanta, Ga.; Jeffrey Covill, senior vice president and managing director at GMAC Commercial Holding Corp., Horsham, Pa.; and Jody Thornton, executive managing director at Holliday Fenoglio Fowler, Boston, Mass.

Dana Ostenson, managing director of the equity investment banking group at Johnson Capital, will moderate a panel session on “Innovative Structures.” The panel will explore the use of creative financing structures to manage interest exposure within challenging situations that might not meet the usual underwriting parameters.

Panelists for "Innovative Structures" include Joseph Green, president and chief financial officer, Winston Hotels, Inc., Raleigh, N.C.; Martin Lanigan, president and CEO at MEZZ CAP, Short Hills, N.J.; Daniel Smith, vice president at GE Real Estate, New York; and Michael Szwajkowski, managing director at Capital Source, Chevy Chase, Md.

While “Innovative Structures” explores deals to accommodate the non-traditional borrower, property, tenant or legal structure, a “Prelude to the Future” panel will include multifamily and commercial members providing an in-depth outlook at property and commercial mortgage market developments.

“Prelude to the Future” includes perspectives from Anthony Pierson, managing director of strategy and research at CIGNA Realty Investors, Hartford, Conn.; Ray Torto, principal of Torto Wheaton Research, Boston, Mass.; Sally Gordon, vice president and senior credit officer at Moody’s Investors Service, New York; and David Jacob, managing director and head of international research at Nomura International Securities, Inc., New York. The panelists will provide an economic landscape and its relation to the future of commercial mortgage finance and multifamily housing. Douglas Duncan, senior vice president and chief economist at MBA, will moderate the panel.

Go to http://www.mortgagebankers.org/cref/ for more information about the activities and initiatives of the Commercial/Multifamily group at MBA.
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Anchorage is home to nearly half of the state’s population, Related Capital Co. said, but the Low Income Housing Coalition ranks it among the top ten least affordable states in the country for rental housing.

“There is a growing disparity between what residents can afford to pay for rents in Anchorage, and what they are asked to pay,” said Ronne Thielen, executive vice president and west coast regional director of Related Capital Co. Thielen said that fair market rents in Anchorage are 50 percent higher than the affordable rents would be at Tyonek Terrace. Rents on a two bedroom apartment would be $885 per month versus $589 per month at the new complex.

Carol Gore, president and chief executive officer of CIHA, noted that Tyonek Terrace “marks the continuation of our mission to provide quality, affordable housing that promotes independence, healthy communities and economic development.”

CIHA, started in 1974, owns and manages 380 multifamily units including seven senior housing facilities. CIHA offers housing programs that include an affordable second loan purchase program, an emergency repair and accessibility grant program, and a tenant-based rental assistance program.

After its construction, Tyonek Terrace, in northeast Anchorage, would consist of a single, four-story building with one and two bedroom apartments ranging from 585 square feet to 980 square feet.

The majority of units will target residents earning 60 percent or less of the area median income (AMI) with rents starting at $450 per month. 50 percent of the units would be restricted to residents earning 50 percent or less of the AMI. 10 percent of the units would be “market rate” (unrestricted) units.

The property would be part of a senior campus with five other senior housing facilities. The site would have a skilled nursing home and bus stops located in front of each property on the campus. Chugash State Forest, one of Alaska’s two national forests, would be adjacent to the campus, and three major medical centers would be near the campus.

Amenities for the complex include ceiling fans, a frost-free refrigerator, and a self-cleaning oven inside the units, and a playroom for grandchildren and a TV/game room within the building. On the outside, plans show heated sidewalks, car block heaters, and access to community garden plots. Security plans include an intercom/phone/video entry, an after-hours security patrol, and hallway grab bars for indoor safety.
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Since its inception in 1998, this program has grown to 73 companies including 17 firms in a separate Subprime survey initiated in 2001. Participating companies represent over 40% of the national residential mortgage banking market. The program is widely recognized as the most timely and accurate source of benchmarking data in the country.  In addition, our participants derive unparalleled value from the dialogue at our roundtable meetings.

Here is how the process works.  We collect loan production and servicing data via the web and generate a 44 page databook that displays financial and operating metrics for each individual company within a given peer group.  For our prime company sample, each book also summarizes simple and weighted average aggregate totals for all other peer groups.  

Data are thoroughly reviewed by MBA and STRATMOR personnel based on a set of definitions that that have been developed to maximize consistency. Once the data have been "scrubbed" and adjustments have been made, we provide meeting books to participants generally one to two weeks before the roundtable meetings.

Our roundtable meetings are conducted offsite and last a day and a half. Our discussions focus on business strategies, models used, best practices, industry trends, hot buttons, technologies employed, etc. The MBA and STRATMOR prepare a detailed presentation which summarizes the results and provides extensive analysis across all groups and across various reporting periods.

Our current timeline for next cycle is as follows:

January  15: Web site opens for data entry
February 15: Data due for mega lenders and large lenders
March 1: Data due for small/medium lenders; subprime lenders; and thrift institutions
March 23-24: Large Lender peer group roundtable in Ft. Lauderdale
March 25-26: Mega Lender peer group roundtable in Ft. Lauderdale
April 27-28: Small/Medium Lender peer group roundtable in Phoenix
April 29-30: Subprime peer group roundtable in Phoenix
May 6-7: Thrift Institution peer group roundtable in Chicago

Additionally, MBA/STRATMOR recently expanded its meeting format with the introduction of optional operations "Focus Groups," limited to companies participating in our regular peer group program. The purpose of the Focus Groups is to provide a forum for production channel management and operations staff  to discuss business strategies and issues, with the agenda derived from a web survey we conduct in advance of the meetings. MBA/STRATMOR currently offer Focus Group meetings for Retail, Direct Lending and 3rd Party (Broker Wholesale and Correspondent). The next focus groups will take place in May.

Please feel free to visit our web site at www.mbastratmor.com to view sample outputs, articles, and a list of this year's participants in the study. To register or obtain additional information, please contact Marina Walsh (MBA Research) at 202/557-2817 or Jim Cameron (STRATMOR Group) at 770/632-4445.
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Take advantage of this hands-on opportunity to represent the real estate finance industry and make a difference in its ability to thrive. Hear directly from lawmakers, Washington insiders and pundits. Visit with your Congressional representatives. Shape key legislation such as the reauthorization of the Terrorism Reinsurance Act, predatory lending, regulation of the government-sponsored enterprises (GSEs) and revitalization of the Federal Housing Administration.

MBA is sending the message to Congress that the real estate finance industry invests in America's communities to reflect the hard work and commitment MBA members have to building and strengthening neighborhoods and communities nationwide. It's this message the policymakers need to hear. And it's this message MBA members are carrying to Capitol Hill in March.

To be effective, you must be prepared. Get valuable tools and advice from MBA's government affairs lobbyists. Hear from experts to get the most up-to-date information on critical issues. Confirmed speakers include:

• Rep. Barney Frank, D-Mass., ranking member of the House Financial Services Committee
• Tucker Carlson and Paul Begala, co-hosts of CNN's Crossfire
• Charlie Cook, editor and publisher of The Cook Political Report

MBA has refashioned the conference so all employees of MBA member companies who want to play an active role in the political process can do so through this unique, hands-on opportunity. Hotel accommodations are through the Washington Court Hotel on Capitol Hill; the hotel cut-off date is February 13.

Join MBA in Washington, DC, during the upcoming election year, one of the most exciting times to be in the nation's capital. For more information, go to http://www.mortgagebankers.org/conferences/2004/2401292_reg.pdf
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Stephen Rotella, executive vice president and CEO of Chase Home Finance, Edison, N.J., would take on the responsibility for the firm’s mortgage division. 

While J.P. Morgan Chase holds a large mortgage servicing portfolio that includes residential and subprime loans, as well as commercial securitizations, analysts said that Bank One moved away from mortgage servicing based on the volatility of the asset and is primarily a Midwestern retail banking chain.

J.P. Morgan Chase purchased Advanta in 2001 and acquired one of the largest non-prime servicing portfolios in country.

Consumer banking and lending, mortgage, auto, small business and middle market departments at J.P. Morgan Chase & Co. make up 33 percent of the business, while 39 percent of its mix is in investment banking.  

“We haven’t drilled down to the lines of business yet,” said a spokesperson at J.P. Morgan Chase when asked about the effect of the merger on the mortgage division of the combined companies.

Industry analysts say that J.P. Morgan Chase's earnings increased 43 percent, to $1.4 billion, in the first quarter of 2003 from a year ago, based on its strong mortgage business and bond trading. For the first nine months of 2003, JP Morgan Chase reported net income of $4.86 billion, or 137 percent above reported results of $2.05 billion in 2002, and operating results were 83 percent higher in 2003 compared to its operating results of $2.65 billion after nine months in 2002.

However, JP Morgan Chase also lost $20 million in net income from the second quarter of 2003 to the third quarter of 2003, falling from $1.83 billion to $1.63 billion. J.P. Morgan Chase will release its fourth quarter 2003 results on January 21.

The combined company would have assets of $1.1 trillion, a strong capital base, 2,300 branches in seventeen states and top-tier positions in retail banking and lending, credit cards, investment banking, asset management, private banking, treasury and securities services, middle-market, and private equity.

“We will have a trillion-dollar-plus asset base, one of the broadest and deepest product mixes globally and a dynamic, talented management team,” said William Harrison, executive vice president and chief executive officer of J.P. Morgan Chase. “In addition, with our balance of consumer and wholesale business, the combined company will achieve greater earnings consistency."

Harrison will lead the company as chairman and CEO, and James Dimon will hold the title of president and COO, but the plans are that Dimon succeed Harrison as CEO in 2006, and Harrison would then continue to serve as chairman.

J.P. Morgan Chase said it would continue its wholesale business, but the combined company would use both brands in their respective markets and products. Meanwhile, the firm plans to conduct research for a long-term retail brand strategy.

"We will be a major provider of both consumer and commercial banking services in the United States…with a strong balance sheet and an intense focus on performance and execution,” said James Dimon, chairman and chief executive officer of Bank One. “Our retail and wholesale businesses and our geographies complement each other, and our respective earnings contributions provide near-perfect balance.”

Corporate officials expect pre-tax cost savings of $2.2 billion over a three-year period with merger-related costs at $3 billion before taxes.

The combined company also plans to expand upon JPMorgan Chase's and Bank One's best practices and programs on community development and increase its Community Reinvestment Act ratings.

The merger is subject to the approval of the shareholders of both institutions as well as U.S. federal and state and foreign regulatory authorities. Completion of the transaction is expected to occur in mid-2004.
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