“This certainly ranked as our most successful National Policy Conference,” said MBA Senior Vice President of Government Affairs Kurt Pfotenhauer. “Our members are educated and prepared and represented the industry well on Capitol Hill this week.”

The conference attracted nearly 300 participants from around the country. They heard from key Capitol Hill players, including Sen. Chuck Hagel, R-Neb.; Rep. Bob Ney, R-Ohio; Sen. John Kerry, D-Mass.; Rep. Barney Frank, D-Mass.; and Sen. Evan Bayh, D-Ind. From the Bush Administration, participants heard from HUD Secretary Alphonso Jackson and Treasury Secretary John Snow.

Additionally, members of MORPAC, MBA’s political action committee, held dinners on April 20 with six members of the Senate Banking Committee and the House Financial Services Committee.

On April 21, MBA officers, senior management and members of MBA’s Commercial Board of Governors (COMBOG) met with Federal Reserve Chairman Alan Greenspan, who provided an overview of the Fed’s assessment of the economy.
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The survey, conducted April 8-11, found a significant difference in the perceptions of older and younger Americans towards paying debt. Fifty-six percent of Americans in the 18 to 34 year age range said consumers pay their bills because it is the right thing to do compared to 70 percent of Americans 35 to54 years in age.

"Over the years we have seen a change in attitude toward debt, especially among young Americans," said Gary Rippentrop, CEO of ACA International. "This makes our job of working with consumers on the debt they owe to companies, and federal, state or local governments even more necessary."

Across all age ranges, nearly three out of four Americans believe people pay their bills for personal reasons, including: that if they don't they will be called by a collection agency (73 percent), they won't be able to make additional purchases (73 percent) or their credit score will go down (71 percent). Only 29 percent said they were concerned about the impact on the person/business they owe (29 percent) or concern about the impact on the American economy (19 percent).

Americans with debt overwhelmingly identified spring (36 percent) and summer (35 percent) as the seasons where consumers are most likely to get control of their finances and pay down debt that they owe. The survey found 6 percent of respondents said fall was the season when they would be able to pay down their debts, while 14 percent said winter was the season.

"As the use of credit has grown across the economy, companies are increasingly relying on the debt collection industry to ensure they can collect on the credit they have extended," Rippentrop said. "Given the amount of credit available, keeping losses from bad debt down has become vital for American businesses."

The survey was conducted by telephone with a national sample of 1,000 adults 18 years or older. The margin of error is +/– 3.2 percent.
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Chicago-based Aon said terrorist activity is making the world a riskier place in which to do business and the map assesses the level and nature of terrorist threats around the world. The U.S. rating of “elevated” remains unchanged from last year, Aon said.

Economically, Treasury Secretary John Snow said agencies that include the Office of Terrorism and Financial Intelligence helped the U.S. “find and freeze nearly $6 billion in Iraqi assets outside of Iraq, the return of over $2.7 billion of those funds, and the recovery of more than $1 billion in cash inside Iraq.”

“Our efforts in both attacking terrorist financing and protecting the financial system are complementary and are effecting the changes required to protect the integrity of our financial systems by identifying, disrupting and dismantling sources, flows, and uses of tainted capital within those systems,” Snow said. “To support these efforts, the President requests $351.3 million for fiscal year 2006.”

The Treasury Department will deliver a study to Congress by the end of June on the impact of the Terrorism Risk Insurance Act (TRIA) since its implementation in November 2002. TRIA provides federal reimbursement to insurance carriers for most U.S. commercial/multifamily losses caused by federally certified foreign terrorist attacks which cause aggregate damages to all policyholders of at least $5 million.

Commercial mortgage servicers say insurance renewal notices in October will exclude terrorism insurance if there is no reauthorization of TRIA by that time.

With greater uncertainty surrounding TRIA, Aon said it is urging its clients to join the lobbying efforts. "But, more importantly, if TRIA does expire at the end of this year the aggregate capacity of the stand-alone terrorism market is going to come under severe strain,” said Aaron Davis, vice president of the U.S. property syndication group at Aon. “Businesses need to explore alternative options for mitigating and transferring their terrorism risks now."

The Mortgage Bankers Association continues its efforts for reauthorization of TRIA as the deadline for expiration draws near. MBA, also a member of the Coalition to Insure Against Terrorism (CIAT), would like to determine a long term solution to the issue after TRIA’s extension.

Robert Lowe, chairman of the board and CEO of Lowe Enterprises , Los Angeles, testified at a Senate Banking Committee hearing last week on behalf of CIAT. He said his company continues to pay premiums and it is working with the Department of Homeland Security to enhance communication between its buildings across the country. He urged the committee to extend TRIA quickly but build it for a public and private solution to the problem. "It will not go away in two or three years," Lowe said.

Lowe noted, however, that lenders will not fund projects without appropriate insurance, workers compensation will be at risk without TRIA and jobs will unnecessarily stall. "The real estate industry needs predictability in business and capital market decisions because the industry makes long term decisions daily for [projects, employees and customers]," he said.

When asked this week if the government had a responsibility to extend TRIA, since TRIA would cost nothing to extend unless another terrorist attack took place, and the government uses taxpayer funds to protect the U.S. against terrorism, Snow said Congress initially acted in a responsible manner because the market was not prepared to make terrorism insurance coverage available after September 11. “I think what they have done subsequently is responsible,” he said.

Snow, however, added that there is a market for risk. “We want to use the market as much as we can for risk. Government should not underwrite risk so the market can.”

The Terrorism Risk Map shows that participation in the US-led Iraq coalition increased terrorism risk in countries such as Australia, Poland and Estonia. Aon said there is concern that Al-Qaeda and other international terrorist organizations could take advantage of anti-western sentiment and launch terrorist attacks in these countries in the future.

"Terrorism is not a new threat and many international businesses have to date been rightly pre-occupied with the risks facing their operations in the Middle East, Africa and the Gulf,” said Paul Bassett, executive director in Aon's Crisis Management division. "Companies must acquire as much knowledge as possible about the risks they face and their exposure to those risks in order to minimize the human and financial impact of such attacks. Businesses can then assess how best to allocate their expenditure on insurance and counter terrorism risk management procedures effectively.”
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Lexington Corporate Properties Trust, New York, purchased the portfolio from Wells Real Estate Investment Trust, Inc., New York, and Wells-affiliated joint venture partners. The portfolio includes 24 office, one industrial, one office/R&D and one office/warehouse building totaling 5.1 million square feet. The properties are predominantly leased to single tenants in fourteen states across the country. Six additional properties, currently owned by Lexington, were also leveraged in the transaction.

Cohen Financial, Chicago, and Holliday Fenoglio Fowler, L.P. (HFF), Boston, teamed up to advise Lexington. Cohen Financial and HFF provided counsel in negotiating and closing the acquisition financing transaction arranged by Lexington with the lender. This transaction marks the third time Cohen Financial and HFF have joined together on an assignment in recent years.

“The portfolio was highly sought after by lenders due to its size, geographic diversity and Lexington's strength of sponsorship,” said Todd Armstrong, HFF senior managing director. “We were impressed with JPMorgan, which created innovative financing to meet the complex needs of this dynamic transaction. This acquisition adds significant diversity to Lexington's properties at a very attractive cost of capital.”
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Carney is a business servicing consultant with Fidelity Information Services. In this role he has more than 11 years experience within the servicing industry. His current focus has been in launching Fidelity Information Services' Best Practices for Default Administration. 

Mubarak is a senior business servicing consultant with Fidelity Information Services. She brings 31 years of knowledge and experiences in both default and customer service, with 21 years in mortgage servicing. Employed at Fidelity Information Services since 1995, her focus is building exceptional client relationships.

Carney and Mubarak are the instructors for CampusMBA’s Default Best Practices Workshop, a two-day program designed to assist management in assessing their operations and evaluating the quality of internal management processes via a Best Practice Matrix. The next Default Best Practices Workshop is May 10-11 at the Hyatt Regency Chicago. For more information, call (800) 348-8653 or go to www.campusmba.org.)

Sabol: “Servicing is a vital part of the mortgage lending process. How do you define servicing?”

Mubarak: “Mortgage loan servicing is the delicate balance of administering the investor’s requirements, serving the borrower’s needs, and following the myriad of federal, state and GSE regulations, in the most efficient manner possible that insures profitability.”

Carney: “Servicing to me is the act of balancing customer needs, investor requirements and company goals to ensure all parties have a successful experience.”
 
Sabol: “How has the role of servicing changed in the past five years?”
 
Carney: “In the last five years, it seems that servicing operations are leveraging their technical expertise more and more. The utilization of analytical tools and scripting has changed the face of servicing. It is an ongoing challenge to keep staff trained in manual processes while enhancing the automation of your environment. I also believe that changes to the state level guidelines have increased the risk and offered challenges in maintaining workflow consistencies.”
 
Mubarak: “Yes, the increased regulation has servicing set in its sights, especially for the non-prime portfolios. This has made it necessary for servicers to increase quality control measures and adjust processes to become (and remain) compliant. In addition to staying ahead of the changing environment, improving efficiency remains a challenge. Technology has come a long way in the past five years to help face these challenges.”
 
Sabol: “What is the future of mortgage servicing?”

Mubarak: “Continuous improvements in technology will probably be in the forefront, especially taking advantage of Web-based opportunities. I see increased automation, which is a wonderful tool; however, servicers should exercise caution in becoming so automated that they lose sight of the actual business or do not remember how to manually perform the automated process. Although the prime and non-prime servicing techniques significantly differ now, I would like to see more balance between to two approaches, so that each can benefit from the successes of the other.”

Carney: “I think most non-essential services could be delivered in a web-based “virtual servicing” platform. Of course, the challenge is maintaining a personal touch. Outsourcing has also become a major strategic question of late.”
 
Sabol: “What are the traits of a good customer service representative? What makes a good servicing department?”
 
Mubarak: “Excellent listening and communication skills are indeed an essential for customer service representatives. Ferreting out the root of the problem and negotiating win-win solutions with today’s sophisticated borrower is a challenge and requires a technologically savvy representative who knows not only the servicing business, but also the resources needed to resolve the problems. A good servicing department has a trained staff, empowered to resolve as many problems as possible on the spot, and active two-way communication between all departments. Although servicing activities are diverse, all are connected with the common goals of compliance, profitability and satisfied borrowers.”

Carney: “Karen and I agree that to be a good customer service rep, it all starts and ends with communication skills. One’s ability to relate to another, strip away the feelings, mine the facts will help ensure solutions that work for all involved. A service representative should minimize the risk by maintaining professionalism at all times. A great servicing department juggles the needs of all stakeholders and presents “Best Practice” solutions that ensure profitability and decrease loss exposure.”

Sabol: “What are the consequences for not following best practices for servicing? How can companies adopt best practices?”

Carney: “Some of the more common consequences are fines, penalties and law suits. Certainly a lower Tier Ranking may be in order for those flying by the seat of their pants. In order to adopt best practices, a company first has to peel back the layers on their current practices and get to the root of the problem. “

Mubarak: “As Mark mentioned, there are the normal monetary consequences, such as interest curtailments, penalties, losses incurred because of delayed activities or servicing errors. Serious and prolonged errors can lower the GSE tier rankings. More significant consequences include class action lawsuits and losing the right to service GSE loans, which can be catastrophic in terms of the servicer’s reputation. Evaluate the current practices, develop and execute a plan to correct existing problems, and implement continuous quality control measures. Adopting best practices is not a one-time occurrence, but rather an on going process.”
 
Sabol: “What are your closing thoughts on servicing?”
 
Carney: “In my experience, the only constant has been change itself, thus I feel it is imperative to stay abreast of industry related issues and litigation. This will help develop “Best Practices” that are not only preventative, but maintain the highest value return.”

Mubarak: “In the 21 years that I have been in mortgage loan servicing, a few things remain constant but many more things have changed. Best practices will certainly be the key to proactively managing continuous change.”
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