"The increase in mortgage rates has reduced application activity across the board, particularly for refinances,” said Michael Fratantoni, MBA's senior director of single family research and economics. “Refinance applications are down more than 60 percent relative to this time last year."

The Market Composite Index of mortgage loan applications stood at 658.8, a decrease of 9.5 percent on a seasonally adjusted basis from 727.6 one week earlier. The MBA seasonally adjusted Purchase Index decreased by 3.5 percent to 446.4 from 462.8 the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 33.5 percent of total applications from 32.4 percent the previous week and represents its highest share of such activity this year.
 
Other seasonally adjusted index activity included the Conventional Index, which decreased by 9.7 percent to 981.5 from 1087.2 the previous week. The Government Index decreased by 5.7 percent to 120.2 from 127.5  the previous week

The survey covers nearly 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990.  Respondents include mortgage bankers, commercial banks and thrifts.
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The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. Output evidently continues to grow at a solid pace despite the rise in energy prices, and labor market conditions continue to improve gradually. Though longer-term inflation expectations remain well contained, pressures on inflation have picked up in recent months and pricing power is more evident. The rise in energy prices, however, has not notably fed through to core consumer prices.

The Committee perceives that, with appropriate monetary policy action, the upside and downside risks to the attainment of both sustainable growth and price stability should be kept roughly equal. With underlying inflation expected to be contained, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Ben S. Bernanke; Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Jack Guynn; Donald L. Kohn; Michael H. Moskow; Mark W. Olson; Anthony M. Santomero; and Gary H. Stern.

In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 3-3/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis and San Francisco."
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New services and features, including eBills, account aggregation, inter-bank transfers and customer alerts, are transforming the online banking market. Consumers are already in the learning curve for online banking, many from direct deposit at work, which alone saves nearly $10 in travel and time.

"The proportion of U.S. households with computers reached 61.8 percent in 2003, and 87.6 percent of those households used their computers to access the Internet. This limited internet access translates into limited online banking," said Don Montuori, acquisitions editor for Packaged Facts. "This presents a stark dilemma for online banking, as it can currently be performed only from about 55 percent of American households. While that number is increasing, it is increasing slowly."

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Financial Title Company (FTC), Folsom, Calif., chose Valocity, Memphis, Tenn., to provide clients online, nationwide valuation products. Users can order appraisal products through a private label development Valocity designed to integrate with Financial Title’s Web site.

In addition to traditional valuation products and services, users can access automated products and services such as Automated Valuation Models (AVMs) and get up-to-date information on the appraisal process via Financial Title’s Web site. 

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Fitch Ratings, New York, released a study examining the performance of its U.S. structured finance ratings in 2004 and over the period 1991 through 2004.

The frequency of Fitch's U.S. structured finance upgrades and downgrades both declined in 2004. However, the decrease in the number of downgrades was higher than the decrease in upgrades, resulting in an improved ratio of upgrades to downgrades for the year of 2.36 to 1 compared with 1.95 to 1 in 2003.

The residential mortgage-backed securities (RMBS) sector contributed the bulk of the year's upgrades. In fact, RMBS upgrades, towered over downgrades by a ratio of nearly 12 to 1, but declined year-over-year because of the slowdown in refinancing activity in the second half of the year. In contrast, upgrades were up significantly for all major structured finance sectors, including asset-backed securities (ABS), upgrades doubled compared to 2003; commercial mortgage-backed securities (CMBS), up 26 percent; and collateralized-debt obligations (CDO), up 70 percent.

In addition, Fitch's structured finance downgrades fell across the board in 2004. The number of RMBS downgrades declined 40 percent, ABS downgrades fell 21 percent, CMBS downgrades 25 percent, and CDO downgrades 45 percent.

Rating performance improved across all the major structured finance-rating categories in 2004. Overall, 10 percent of Fitch's U.S. structured finance ratings upgraded in 2004 while just 4 percent downgraded.
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Milone oversaw all legal aspects of Arbor including compliance with federal and state regulatory requirements, litigation matters and company contracts. Prior to joining Arbor, Milone was with the Philadelphia law firm of Ballard Spahr Andrews & Ingersoll LLP, and was senior real estate counsel with the national tax credit syndication firm of Sterling Financial Group in Manhasset, N.Y.. Milone has more than 14 years experience as a practicing real estate attorney and in-house counsel.

Horn served as general counsel to Arbor Commercial Mortgage since its inception in 1996 and general counsel and secretary for Arbor Realty Trust, Inc. since November 2003. He served as general counsel with Arbor National Holdings from 1991 until its sale in 1995. Horn assumed the role of general counsel at Arbor Commercial Mortgage when the company was formed in 1996. Horn’s experience also includes serving as general counsel with Resource One Inc. and Long Island Trust Co . He has more than 30 years of legal experience.

Sperry Van Ness, Irvine, Calif., named Tom Hamm as national director of hospitality. Hamm will also continue to serve as senior advisor for Sperry Van Ness in Stamford, Conn. Hamm will be responsible for running a monthly national conference call that includes deal exchanges, industry and product discussions and relevant training tips. He will also work with local brokers on deal opportunities for national accounts and run a monthly “open mic” call session to answer questions from the hospitality team.
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Wells Fargo Bank, N.A., CMO, provided a 10-year term and a 30-year amortization loan, through its Midwest regional office in Chicago.

Crosseroads Shopping Center, a 68,000 square foot facility, houses 18 tenants including a 15,000 square-foot MC Sports, Fashion Bug, Hallmark and Ciatti’s Italian Restaurant. One hundred percent of the space was leased as of the loan closing. Crosseroads is “shadow-anchored” by a 52,000 square foot TJ Maxx and More store. Old Navy will soon occupy vacant space adjacent to TJ Maxx. Petsmart is building on vacant land next to the shopping center.

The 16-year-old center, located near Onalaska, Wisc., is a rapidly growing community adjacent to LaCrosse, which has an overall metropolitan population of 130,000. The center lies across from Valley View Mall, the major regional mall in the area.

Jon Dahlin and Ross Dahlin of Itasca Funding Group Inc. arranged the financing. The project was developed, leased and managed by Security Development Corp., based in Eden Prairie, Minn.

Jon and Ross Dahlin also arranged a $3.05 million loan on Village Place Apartments. LaSalle Bank N.A., Chicago, provided the fixed-rate, non-recourse financing.

The 48-unit, four story, age-restricted apartment building, built in 2001, is located in a rapidly growing exurban community northwest of Minneapolis called Buffalo. Michael Development, based in St. Louis Park, Minn., developed, owns and manages the building.
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For reprint information on stories in MBA NewsLink, contact Al Esposito at 1-800-394-5157, extension 28.
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Many office leases have terms of five and 10 years or longer, and mortgage loans for some office building markets could see further deterioration in credit quality despite generally stable or improving U.S. market conditions, the report said.

"Even in office markets where rents are expected to rise, cash flow at specific properties could continue to decline for several years as existing, in-place leases with above-market rents roll down to current and future market rental rates," said Jim Church, analyst at Moody’s and author of the report. "The credit implications are particularly significant for assets where the current rent roll still includes income from leases signed during recent rent spikes that have yet to adjust, or 'roll down,' to the rent level that would apply to a new lease signed today.”

The report, "US CMBS: Default Probability of Office Loans Varies By Leases In-Place and Position in Local Market Cycle," analyzed the impact of lease roll-over mortgage loan probability of default in 56 U.S. office markets.

Rents for the U.S. office market as a whole dropped 20.2 percent from their peak in 2000 through year-end 2004. Rent declines for the top 10 commercial mortgage backed securities (CMBS) markets included: Houston, with a 9.3 percent drop, Los Angeles, at 9.6 percent, Atlanta at 12 percent, Washington D.C., 13.0 percent, and Northern New Jersey, with a 14.1 percent decline. Chicago, at a 17.4 percent decline, Dallas, 21.5 percent, New York, 27.3 percent, Boston, 41.8 percent, and San Francisco, with a 45.4 percent drop in rents, rounded out the top 10. “Rent declines from the peak are significant,” Church said.

The report stressed the importance of compensating for possible rent declines in a systematic underwriting framework. "Even in some of the largest and most stable markets, such as New York, the failure to account for the difference between in-place and market rents in office loan underwriting could lead to a significant increase in credit risk," Church said.
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