The ads, which began running in Washington, D.C. media this week, build on MBA’s branding effort and feature the slogan “Investing in Communities.” They do not discuss prevailing political issues but rather are designed to emphasize the role of mortgage bankers in the nation’s communities.

Cheryl Crispen, MBA’s senior vice president of marketing and communications, said the ad campaign provides an awareness buildup to MBA’s National Policy Conference, which takes place April 19-20 in Washington and features visits with members of Congress.

“We’ve targeted our audiences so that when MBA members go on The Hill during the National Policy Conference, that the people they talk to will have a degree of familiarity with MBA,” Crispen said. “The ads do not talk about RESPA reform or predatory lending issues directly. Instead, the keywords are ‘stable and prosperous’ and ‘fair and efficient.’ The ads are designed to be feel-good in nature.”

The radio ads will run locally on three news/talk stations during the morning and evening “drive times.” The print ads will run in Roll Call, The Hill, the National Journal, the Weekly Standard and the National Review.

“This is aimed at enhancing the prestige of MBA,” said Kurt Pfotenhauer, MBA’s senior vice president for government affairs. “It’s one more piece of the overall agenda of what we do.”
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Online Documents extracts data from each disclosure order placed by InterFirst. The data are passed electronically to the SMI flood division where a flood-zone determination request is processed. Additionally, a printed disclosure package is sent to the consumer from Online's central processing center.

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DocuLex Inc., Orlando, Fla., announced networked document scanning/capture and management via Goby Capture, using Secaucus, N.J.–based Panasonic’s RTIV scanning software and scanners and also incorporating two-dimensional bar coding for document profile capture and content indexing for in-house electronic document management allowing for document capture and upload to a company’s server from any location.
 
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a la mode, Oklahoma City, Okla., completed a custom plug-in for its XSites Order Manager (XOM) allowing appraisers contracted by Fannie Mae, Washington, D.C., to deliver real estate owned (REO) appraisal reports. Appraisers check reports against a set of business rules to meet Fannie Mae’s guidelines. When errors or omissions are found, XOM delivers completed and rules-checked report to Fannie Mae via HTTP protocol.
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To sell or refinance, a CMBS borrower must navigate the defeasance process, as nearly all fixed-rate conduit loans originated since 1998 prohibit a simple cash prepayment. Defeasance is a substitution of collateral in which a portfolio of government (U.S. Treasury or agency) securities replaces the property as the collateral. The securities match the cash flow of scheduled mortgage payments, including the balloon payment. The receipt of principle and interest from the securities pays all remaining debt service, so the note technically remains in place but the securities repay the note.

The Moody’s study included the full universe of CMBS transactions, not just Moody's rated deals. Moody’s said it treats defeased loans as Aaa securities.
 
Sandra Ruffin, Moody's analyst and author of the report, said defeasance assures investors of their income stream throughout the loan, particularly with interest-only bonds or bonds purchased at a premium that would otherwise significantly affect yield through early prepayment. Generally, the defeasance of ten percent or more of the outstanding pool balance can result in an upgrade in ratings at Moody’s if a pool has not experienced significant deterioration in its overall credit profile, the ratings agency said.

Moody’s identified 1,115 outstanding loans with a current value of $9.3 billion with defeasance as of year-end 2004. More than one-half of all outstanding defeasances were completed in 2004. Multifamily properties represented the largest share of defeased loans, based on value or number of loans, with office loans the second largest share by value, followed by retail. Loans between $10 million and $24.9 million in size represented the largest share of defeased loans when measured by value, at 22 percent, and the largest number of defeased loans under $5 million, 665 loans, consisted of a 60 percent share.

Roughly 56 percent of all defeased loans were 1997 and 1998 deal vintages. “[That is] not surprising in that defeasance did not become the CMBS standard until 1997," Ruffin said. “1997 and 1998 vintages have had a longer time period during which to defease compared to more recent vintages."

Moody’s said credit characteristics of the CMBS transactions with defeased loans improve because “the probability of default is significantly reduced” when U.S. Treasury securities replace real estate assets. The ratings agency expects that defeasance will continue to be a significant feature in CMBS. With an increasing base of loans eligible for defeasance and stable or improving property values, borrowers will look increasingly to defeasance as a mechanism for recouping equity from their properties, Moody’s said.

The costs of U.S. securities range from 20 percent to 25 percent of the outstanding balance at the time of the defeasance. Transaction costs associated with defeasance add another $60,000 to $75,000, regardless of the size of the loan, Ruffin said.
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• Mortgage Bankers Association Chief Economist Doug Duncan analyzes Federal Reserve Board Flow of Funds data, which shows record levels of capital flowed to the commercial/multifamily mortgage markets in 2004;

• Staff from MBA’s Research and Economics Department discusses the fourth quarter 2004 Commercial Real Estate/Multifamily Finance Quarterly Data Book;

• Nearly half of commercial lenders nationwide believe there is a real estate bubble, according to the results of a quarterly survey on the commercial real estate market. Talbot Briddell, managing director of Phoenix Management Services, Philadelphia, discusses his company’s “Lending Climate in America” Survey of 122 commercial lenders, many who say there is a significant overvaluation in the real estate market.

If you’re an MBA member who would like to subscribe (free) to MBA Commercial/Multifamily NewsLink, go to www.mortgagebankers.org/cmnewslink.
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The Franklin Lofts Building, constructed in 1905, was originally designed and used as a bank and office building. The current owner purchased the property in 1999 and redeveloped this historical landmark into a 36,000 square foot special events center, the Corinthian, located on the first two floors, and 62 luxury residential units on floors 3-8. An adjacent parking garage was constructed in 2001, which features ground-level retail space fronting Main Street. Current retail tenants include El Rey Cuban and Mexican Restaurant and Wolf Cleaners.

Live Oak’s Jonathan Gilfillan and John Fenoglio worked on behalf of Franklin Lofts L.P., to secure a three-year adjustable-rate refinancing through NewStar Financial, Boston.

“Residential sales at the Franklin Lofts have increased over 100 percent since the opening of Houston’s MetroRail and the property has emerged as the centerpiece of downtown residential activity” said Gilfillan.

Live Oak Capital, Ltd. also arranged permanent financing for the University Plaza Retail Center in Edinburg, Texas. Greg Young of Live Oak arranged the loan with J.P. Morgan in Dallas.  The loan was for $1.4 million with a fixed interest rate of 5.54 percent at a 10-year term amortized over 30 years.

Investment Ideas, Inc., located in California, purchased the property and will manage the center. University Plaza was built at the end of 2004 and developed by Blue Mountain Development in McAllen, Texas. The property consists of 11,920 square feet and was 100 percent occupied at the time of closing. It is shadow-anchored to a Wal-Mart.
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Network with lenders and gain knowledge of how they make these programs work. The conference will feature key updates on the following issues:

• Government housing and specialty product programs
• Credit and appraisal policies
• Endorsement and complianceissues

Speakers include Keith Pedigo, director of the Loan Guaranty Service at the VA; Russell Davis, administrator of the Rural Housing Service; and an official from the Federal Housing Administration to be determined.

Breakout sessions on June 2 examine Credit Policy/Underwriting; Selling Government Housing Finance Products; Getting Your Loans Endorsed or Guaranteed; FHA and VA Appraisal Issues; and a discussion with FHA’s Homeownership Center Directors, featuring panelists Ron Bailey of the Denver Homeownership Center; Joe Bates of the Santa Ana Homeownership Center; Charles Gardner of the Atlanta Homeownership Center and Engram Lloyd of the Philadelphia Homeownership Center. Tim Doyle, a director with MBA’s Government Affairs office, will moderate this session.

On June 3, breakout sessions discuss Managing Audits and Avoiding Indemnifications; Using Neighborhood Watch/Avoiding Credit Watch; and Specialty Product Sessions on Renovation Lending, Reverse Mortgages (HECMs) and Section 502 Guaranteed Housing Products.

The conference takes place at the Capital Hilton, 16th & K Streets, Washington, D.C. 20036. Program registrants are responsible for making their own hotel reservations by calling 1-800-HILTONS or 202/393-1000. Conference room rates start at $169 for single or double per night. The hotel cut-off date is May 2. MBA has also arranged airfare and car rental discounts.

For more information, go to the Conference Web Site at http://events.mortgagebankers.org/fha2005/default.html.
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For more information, visit www.mortgagebankingmagazine.com.
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Gabe Minton, vice president of industry technology at the Mortgage Bankers Association, said there is a “particular emphasis” around security. “We think it is extremely important,” Minton said, speaking at MBA's  National Technology in Mortgage Banking Conference & Expo. “We’re jumping up and down. We’re waving red flags through the industry [about] security. If we are going to collect the information or store it, whether or not the data is in motion or at rest, it needs to be secured, encrypted and protected.”

James Canton, chairman and CEO at the Institute for Global Futures, spoke about the potential of technology, including the use of a personal computer to enter a virtual office and speak with company representatives. Canton also emphasized the importance of security. He said some systems are up to 256-bit encryption rather than 128-bit encryption and without greater security, Congress might need to implement more legislation.

The loss or theft of data can affect millions of consumers at a substantial cost to companies in money and reputation. Twelve states have active bills in their legislatures on consumer information protection and five states have laws. Norris said a breach of secure information based on a California state bill (CA SB 1386) would require disclosure to every state resident affected by it and costs of up to $500,000, not to mention bad publicity for the company.

Choicepoint, Alpharetta, Ga., following its disclosure of 145,000 individuals to identity thieves posing as legitimate businesses, agreed to pay for a one-year credit monitoring service from a Costa Mesa, Calif.-based Experian unit at costs that could reach $17.4 million. “That’s a pretty significant amount for any company,” said Luke Norris, senior security administrator at Kroll Factual Data, Loveland, Colo.

“Dr. Canton talked about a 1,500 percent rise in identity theft this year and even more next year,” Minton said. “We’ve been hit with a whole bunch of implementation issues, such as the Gramm-Leach-Bliley Act and the Sarbanes-Oxley Act.”

“All these laws just say encryption, so you can encrypt it any way you want,” said Robert Schlecht, senior technology project specialist at MBA. Schlecht said the government did not want more than 64-bit encryption to import and export data 10 years ago but, over time, 128-bit encryption replaced the lower amount and a secure socket layer (SSL) was added.

According to Canton, the industry appears on the verge of 256-bit encryption. “That’s the nature of the security business,” Schlecht said. “As processes develop every 18 months, security and those mechanisms will get stronger, longer, higher, faster and greater.”

Encrypted cookies can slow down processes at Kroll Factual Data, but Norris said the company believes security is “much more important.” Kroll uses SSL, a security program layer developed by Netscape, or IPSec (Internet Protocol Security) encryption, a program with two choices to authenticate the sender of data and encryption, for all data in transit. Norris said Kroll enforces access controls, encryption and a data destruction policy for data at rest. “We make sure data on any disk leaving the building is destroyed,” Norris said.

Kroll Factual Data is looking into possible enhancements in security after a misappropriated identity and password in the LexisNexis Seisint unit disclosed personal information on 32,000 individuals, Bank of America consumer information on tape backups became lost in transit and the Choicepoint incident took place.

Kroll Factual Data is exploring a possible encryption key escrow policy, to “unencrypt and reencrypt” with a key to change data at rest. Norris said possible enhancements to data in motion include moving from proprietary cookies to a Public Key Infrastructure (PKI) standard and possible adoption of MBA standards from the Mortgage Industry Standards Maintenance Organization (MISMO) and its spinoff, Secure Identity Services Accreditation Corporation (SISAC).

SISAC, a wholly owned subsidiary of MBA that is responsible for accrediting digital identity credential users for the mortgage industry, resulted in the development of an industry-wide set of policy requirements around secure identity management, a process for accrediting identity credential issuers and other standards. SISAC puts “skin in the game and creates third-party credibility,” Minton said.

“We’re working with the government and we’re working with other financial verticals to try and standardize that [encryption] so that you can lock down that data as you collect more,” Minton said. “That is really, really important.”
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