A HUD spokesperson told MBA NewsLink that Allard's comments were not so much about the proposed rule as much as about the process.

“Acting [HUD] Secretary Jackson very much appreciates the concerns raised by Senator Allard and looks forward to a continuing dialogue with him and other members of Congress,” the spokesperson said.

The Mortgage Bankers Association supports RESPA reform, but continues to express concern that HUD’s proposed reforms could complicate the process, rather than simplify it.

“[RESPA] reform needs to be done right,” MBA officials said in a recent statement.

MBA and other real estate industry groups also called for the rule to be re-proposed and said that the housing sector is too important to the national economy to risk a “massive overhaul” at this time. But HUD sent the final proposal into the Office of Management and Budget (OMB) in January for a 90-day review and could release the final rule as early as March 16.

Earlier this year, MBA said that if HUD imposes such a dramatic change on housing operations, it could have “serious economic consequences.”

In testimony before Congress in January MBA said it was "concerned that HUD may issue a rule that undermines the core objectives of mortgage simplification. The enormous impact of the rule on consumers and the industry calls for HUD to re-propose the rule.”
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The ordinance defines a "predatory loan" as a loan secured by owner-occupied residential real property located within the city of Cleveland on which there is a dwelling for not more than four families. Also, the ordinance definition includes a condominium unit, or a cooperative unit in which the loan equals or exceeds the annual percentage rate threshold set in the ordinance and originates under circumstances that involve certain acts, practices or terms set forth in the ordinance.

Home loan counseling and payment requirements to home improvement contractors apply to a set of loans with separate definitions from predatory loans, containing different annual percentage rate and/or points and fee thresholds.

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Rocky Hill, Conn.-based Integrated Loan Services (ILS) completed a custom plug-in for a la mode's Mercury Desktop product, Oklahoma City, Okla. Appraisers prepare their reports with the form filling software of their choice, and then transmit them back to ILS, which converts a report to its mortgage lending client's format and transmits it to that client.

Mercury Desktop connects appraisers to a la mode's Mercury Network, a server hub that draws appraisers, their lender and vendor manager clients together. The Mercury Network 3.0 provides loan officers, brokers and vendor management organizations with appraisal assignment status updates, quality assurance and compliance review, and report delivery.

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ABN AMRO Mortgage Group Inc. (AAMG), Ann Arbor, Mich., released production numbers for January of $3.4 billion with more than 19,800 total loans funded.

AAMG's top producing division for the month was InterFirst Wholesale Mortgage Lending with January production totaling $2.7 billion.

Mike Maher, AAMG group senior vice president, said that although production industry-wide is down dramatically, interest rates today are still hovering near historical lows.

"This favorable interest rate climate, coupled with forecasts for the overall improvement of the U.S. economy, signal the potential for a very solid year in our industry, primarily in terms of new construction and existing home sales," Maher said.

Production volumes for AAMG’s four other business channels last month included: National Lending Center at $382 million and Standard Federal Bank at $196 million. LaSalle Bank Loan Origination Channels: LaSalle Home Mortgage at $63 million and ABN AMRO Mortgage Financial Institutions at $16 million.

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The National Building Museum’s Washington, D.C., exhibition “Affordable Housing: Designing an American Asset,” proves good design is possible even within the tight budgets associated with low-cost housing.

The exhibition, which opened this week, explores the benefits of good design for residents and broader communities. The selected projects in the showcase demonstrate that low-cost housing does not necessarily have to mean low-quality housing.

Architects focused their visions and energy on designing attractive, efficient homes for low-income families in both urban and rural settings. Using models, photographs, drawings and video to illustrate the projects, this exhibition proves that affordable housing can be a true American asset.

The projects demonstrate an increase in the recognition of tenant needs and an understanding that affordable housing is an integral and beneficial component of any community. The projects also show consideration of unit and building type positioning, ensuring that units do not have unsightly views, such as of parking lots.

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Countrywide Bank, Calabasas, Calif., opened a financial center in Fort Myers, Fla. The opening adds to the current locations in Clearwater, New Port Richey, Naples, Lake Mary, Orlando and Sarasota, which opened last year.

Countrywide Bank said its strategy of providing small-staffed financial centers instead of large, costly, traditional bank branches helps pass savings on to consumers in the form of higher rate CDs and other savings products.
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On the employment front, at least 1.37 million new jobs are expected before the year ends. This may seem like a lot, but it’s not. More than 2.4 million jobs have been lost since 2001. Furthermore, the aggregate figure hides great variation across markets: only 8 out of 38 major markets with net job losses since 2001 will reach new employment highs in 2004.

Markets such as Boston, Chicago, Dallas, Detroit, Minneapolis, New York, Pittsburgh, Portland, San Francisco and San Jose are unlikely to see those job losses recovered until 2005 or even 2006. That is not to say there will be no new households formed in those cities—there will be, but not at a rate that can promote a meaningful recovery in rental demand.

Aside from jobs, another key factor that will help revive apartment demand is declining housing affordability, both in real dollars and in perceptions or expectations. Last year set new records for house prices across all markets, and yet in most of those markets, the affordability of a single-family home or a condo increased, pushing homeownership rates to new highs. Overall, the mortgage payment on a median-priced home decreased slightly in 2003, and so did the average apartment rent. Not surprisingly, the handful of markets that did see higher mortgage payments also outperformed the rest in terms of rent growth: all of Southern California, Baltimore-Washington, Newark, Philadelphia, Miami, Jacksonville and Fort Lauderdale.

After falling from an average of 6.54 percent in 2002 to an average of 5.86 in 2003, it is highly unlikely that the 30-year fixed mortgage rate will fall any further. Expectations of higher mortgage rates have their genesis from a number of emerging trends such as the falling dollar, the budding economic recovery and the increasing federal budget deficit. As the economic recovery gains traction, interest rates will increase, and so will the cost of purchasing and owning a home, making renting all the more attractive as a next best substitute.

Today, more than 20 percent of rental turnover in professionally-managed apartments is attributed to move-outs resulting from home purchases. Decreasing move-outs, as a result of higher mortgage rates, should help multi-housing properties maintain occupancy and reduce operating expenses as well as build momentum for rent increases when stronger new demand does return.

Moreover, amid the still-trying conditions in the apartment market, there are now a handful of markets where good job growth and decreasing housing affordability are accompanied by lower deliveries of new apartment product. As these markets are laying down a foundation for better performance beyond just a one- or two-year horizon, proper timing and pricing of multi-housing transactions are the keys to successful acquisitions and exit strategies over a five- to ten-year hold.
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The property owners, CIP Real Estate, Irvine, Calif., purchased the two industrial projects in 2001 with long time venture partner, Alex. Brown Realty, Inc.

The new financing, however, enables CIP to recapitalize the equity and place long-term fixed rate financing on the projects. With the new financing, CIP Real Estate retired maturing short-term financing.

The financing will also satisfy Alex Brown Realty’s shorter term investment strategy and create a long-term, stabilized investment on the industrial assets for CIP’s private capital group.  The 10-year loans have an interest only feature for the first year. The interest rate was not disclosed but CIP said it is “competitive.” 

Tim Hawthorne, executive vice president, and Jared Rogers, vice president of CIP Real Estate, represented the firm in the financing.

CIP Real Estate is a real estate investment company that specializes in the acquisition, development, repositioning and management of business and industrial parks properties throughout Southern California. It recently completed improvements to each of these parks and upgraded the tenancies.   

Milliken Business Center, located in Ontario, Calif., averaged 95 percent occupancy in the past 3 years but now has a 97 percent lease after the addition of more than 55 million square feet in the past 3 years. The 12-building, 157,701 square foot multi-tenant industrial park features 14-foot clear heights and grade level loading. 

Brea Canyon Business Park is a fully leased 79,875 square foot multi-tenant industrial park in Walnut, Calif., immediately adjacent to the City of Industry.
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CampusMBA’s Advanced Fraud Seminar takes place March 4-5 in San Antonio, Texas. Advanced Fraud is an in-depth study of fraud schemes and how to lessen their impact to a lender’s bottom line. Through case studies and multiple break-out sessions in this two-day seminar, students will learn how to identify fraudulent schemes, calculate potential damages, explore recovery options, and understand the impact of the USA Patriot Act on Mortgage Fraud.

Representatives from the FBI, HUD and state real estate Commissions will provide up-to-date statistics and case studies. Participants need not have attended the Detecting and Avoiding Mortgage Fraud seminar to enroll in this seminar.

For more information about CampusMBA’s Advanced Fraud seminar, go to http://www.campusmba.org/index.cfm?STRING=content.cfm?section=250

CampusMBA also offers FHA Risk Management Workshop March 23-24 in Phoenix, Ariz. The workshop is designed to reduce a lender’s risk associated with FHA audits by providing essential information. Attendees will learn strategies and techniques needed to effectively manage their FHA loan origination activities. The workshop explain FHA’s recently revised appraisal rule, which significantly increases lender risk and responsibility.

This hands-on training program consists of a two-day workshop covering FHA loan origination audits, how to prepare for and respond to these audits and the potential impact of FHA’s appraisal rule. Attendees will gain a comprehensive understanding of FHA’s monitoring and compliance process, as well as key elements lenders can use to minimize their financial risk and maximize compliance with FHA requirements.

For more information about the FHA Risk Management Workshop, go to http://www.campusmba.org/index.cfm?STRING=content.cfm?section=549

Information about all CampusMBA programs can be found at www.campusmba.org.
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The National Policy Conference is a hands-on opportunity to represent the real estate finance industry and make a difference in its ability to thrive. You'll have the chance to hear directly from lawmakers, Washington insiders and pundits, visit with your Congressional representatives and 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.

In this key election year, MBA is sending a 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 next month.

Confirmed speakers include:

• Rep. Michael Oxley, R-Ohio, chairman of the House Financial Services Committee
• 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.

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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The FBI cites one recent example of how mortgage fraud impacts the industry, The Erpenbeck Company (TEC) vs. Peoples Bank of Northern Kentucky (PB). The Erpenbeck debacle was just one of the mortgage-related crimes in the FBI’s case summaries in its report, on “Financial Institution Fraud (FIF) and Failure Report for Fiscal Year 2003 ,” complied by the Bureau’s Financial Institution Fraud Unit and the Financial Crimes Section.

According to the FBI, TEC and its related subsidiaries located in Edgewood, Ky., misdeposited proceeds from new home sale closings into its accounts maintained at Peoples Bank of Northern Kentucky. Checks made payable to construction loan lenders totaled nearly $25 million over a 30-month period and resulted in double mortgages for nearly 220 homeowners. The bank also extended $9 million in loans to TEC.

In September 2002, the Kentucky Post reported a shareholder lawsuit filed against PB’s board of directors and officers, claiming the TEC scandal reduced the bank’s value by $50 million. The lawsuit alleged negligence by the bank and directors for not preventing Erpenbeck officials from illegally depositing $25.7 million in checks made out to other banks. It alleged a breach of fiduciary duty by the directors and said their violation of Kentucky law caused the stock to lose its value.

TEC filed for bankruptcy and PB dismissed its top executives, including its founder. Thereafter, Peoples Bank of Northern Kentucky’s assets were sold to the Bank of Kentucky. The investigation continues.

“During the late 1980s and early 1990s, nearly 60 percent of the fraud reported by financial institutions related to bank insider abuse. Since then, external fraud schemes replaced insider abuse as the dominant FIF problem confronting financial institutions,” the report said. “Check fraud and counterfeit negotiable instruments schemes, technological advances as well as availability of personal information through information networks fueled the growth.”

According to the report, between April 1996 and September 2003, the FBI received 268,536 suspicious activity reports (SARs) for criminal activity related to check fraud, check kiting, counterfeit check and counterfeit negotiable instruments. These activities accounted for 47 percent of the 569,294 SARs filed by U.S. financial institutions (excluding Bank Secrecy Act violations) and equaled nearly $8 billion in losses.

The lines between traditional banking services and other financial services have faded. The FBI report said as financial institutions become less regulated and provide more financial services through the sale of insurance, securities, investment products and online banking, the impact of fraud on financial institutions could change as well.

Complex criminal activity and loan fraud have expanded to multi-transactional frauds involving groups of people from top management to industry professionals who assist in the loan application process, the report said. “These professionals include loan brokers, appraisers, accountants and real estate attorneys. Such transactions are sometimes hidden against a backdrop of genuine transactions which give them the appearance of legitimacy.”

The Mortgage Bankers Association upholds strict standards for its members. Potential members are required to sign a Canon of Ethics. These Canons include professionalism, Integrity and Confidentiality, Public Trust, Fiduciary Responsibilities, Disclosure of Information, Conflicts of Interest, Compliance with Laws, Non-discrimination, Honesty in Advertising, Sanctity of Agreements, Competition and Ethics Compliance.

Some of the more common schemes seen by government criminal investigators include:

Property Flipping—a buyer pays a low price for property, and then resells it quickly for a much higher price. While this may be legal, when it involves false statements to the lender, it is not.
 
The FBI cites numerous cases of land flipping in its report. One case involved five individuals who expedited a scheme involving the fraudulent sale of properties at greatly inflated values to obtain mortgages in excess of the property’s true market value, resulting in losses of nearly $1 million on more than $11 million in loans. In most cases, the individuals employed “straw buyer’s” good credit to obtain loans.

Fraudulent Qualifications—real estate agents assist buyers who would not otherwise qualify by fabricating their employment history or credit record.

Many mortgage fraud cases involve some form of fraudulent qualifications, using fake W-2s or false employment verifications. In one case, The Charlotte Observer reported on this month that nine of 13 people indicted in a mortgage fraud scheme involving High Point, N.C.-based Oasis Mortgage Co. pleaded guilty in U.S. District Court in Winston-Salem, N.C.

The nine pleaded guilty to charges of conspiracy to commit loan, mail, wire and bank fraud, punishable by up to five years in federal prison and a $250,000 fine for each count.

Brokers and other workers at Oasis Mortgage Co. face charges of creating false documents in support of nonexistent or inflated loans, according to the Charlotte office of the FBI. False documents filed by the company included fake tax returns, pay stubs and verbal verifications of unemployment.

Insider Fraud—in 2003, the FBI report cited 1,984 total convictions, 484 of those were committed by bank insiders. This is down, though, from 1999 with 2,878 total convictions involving 781 bank insiders.

In November, five individuals were charged in Boone County, Ill., including the owner and president of Lifetime Homes, Century Homes and Builders Funding Corp., all located in Belvidere, Ill. Other charged included a licensed real-estate broker, and an expediter and closer for Century Homes and Builders Funding. The last individual charged was employed as a loan officer and manager of the Chicago-based Anchor Mortgage Corp.’s branch in Elgin, Ill.

The scheme caused Anchor Mortgage to issue loans insured by HUD/FHA totaling more than $3.2 million for 28 properties. Several buyers defaulted on the fraudulently obtained HUD/FHA insured loans, causing losses to HUD in excess of $650,000.

(Next: Learn how the MBA is a leader in stopping mortgage fraud.)
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