But as demand grows, affordability concerns many in the housing industry, especially with emerging demographics such as minorities. Panelists at the Mortgage Bankers Association’s National Secondary Market Conference and Expo here described a mortgage market full of innovation—and risks.

“Interest rates are not driving affordability but the payment itself,” said S.A. Ibrahim, president and CEO of GreenPoint Mortgage Funding Inc., Novato, Calif. (Note: Ibrahim was recently appointed CEO of Radian Group, Philadelphia).

As the market continues to innovate and introduce a plethora of products to the marketplace there is a level of added risk, Ibrahim said. Some mortgage products that have not been tested in various market conditions; in a high interest rate recession, he said, the delinquency rates could be four to six times riskier than others.

“In a high interest rate recession, how well will [certain mortgage products] perform? It’s never been through a recession,” Ibrahim said.

Mortgage products such as Alt-A and subprime loans have pushed rates lower, which helps consumers. But investors could get squeezed, said John Robbins, MBA vice chairman and chairman and CEO of American Mortgage Network, San Diego. “It will get harder for the small lenders,” he said.

On public policy issues, such as new data requirements under the Home Mortgage Disclosure Act (HMDA), the panel described it as a “risk race.”

“To level the playing field we have to set a national standard,” said Steve Skolnik, executive vice president with First Franklin Financial Corp., San Jose, Calif.

Robbins said the new HMDA data requirements are “terribly flawed,” based solely on credit and property data and not taking into account key decisioning data, such as credit scores. He said other criteria needs to be considered for more accurate measurements used to ensure that discrimination doesn’t happen.

“There needs to be a call for education of the public as well,” said Robbins. “We have to educate them about what needs to be included to make the data clear.”
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The average contract interest rate for 30-year fixed-rate mortgages fell to 5.74 percent from 5.75 percent one week earlier, with points decreasing to 1.18 from 1.28 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.  

The average contract interest rate for 15-year fixed-rate mortgages dropped to 5.31 percent from 5.33 percent one week earlier, with points decreasing to 1.22 from 1.26 (including the origination fee) for 80 percent LTV loans. The average contract interest rate for one-year adjustable-rate mortgages (ARMs) decreased to 4.14 percent from 4.15 percent one week earlier, with points increasing to 0.98 from 0.97 (including the origination fee) for 80 percent LTV loans. 

The Market Composite Index stood at 714.1, an increase of 0.2 percent on a seasonally adjusted basis from 712.4 one week earlier. The MBA seasonally adjusted Purchase Index increased by 0.1 percent to 482.5 from 482.0 the previous week whereas the seasonally adjusted Refinance Index increased by 0.4 percent to 2061.2 from 2052.5 one week earlier. On a year-over-year basis the Purchase Index is down by 0.1 percent overall while the Conventional Purchase Index is up by 4.0 percent.

The refinance share of mortgage activity decreased to 39.1 percent of total applications from 39.3 percent the previous week. The ARM share of activity decreased to 33.4 percent of total applications from 34.7 percent the previous week.

Other seasonally adjusted index activity included the Conventional Index, which increased by 0.2 percent to 1068.6 from 1066.6 the previous week; and the Government Index, which increased by 1.0 percent to 122.5 from 121.3 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. Recent data suggest that the solid pace of spending growth has slowed somewhat, partly in response to the earlier increases in energy prices. Labor market conditions, however, apparently continue to improve gradually. Pressures on inflation have picked up in recent months and pricing power is more evident. Longer-term inflation expectations remain well contained.

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; Susan S. Bies; Roger W. Ferguson, Jr.; Richard W. Fisher; Edward M. Gramlich; 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 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, Kansas City, Dallas, and San Francisco.

More information can be found at the Federal Reserve's Web site, http://www.federalreserve.gov.
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The May 2 letter from Soula Proxenos, managing director of Fannie Mae’s international housing finance services, said the decision stemmed from HUD Secretary Alphonso Jackson’s comments before the Senate Banking Committee in April suggesting that Fannie Mae’s international activities “may not be consistent with its charter purposes.”

Since its inception, the department had provided consulting services in 38 countries.

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Freddie Mac is assisting the Neighborhood Housing Services of New York City in expanding its Latino homeownership outreach and education campaign to Northern Queens and continuing the program in the South Bronx. The campaign provides homeownership counseling and other homeownership assistance in English and Spanish to the Latino community. 

The Latino outreach campaign, which began in 2003, has helped 556 participants decrease debt, build credit and savings and become wiser consumers, Freddie Mac said. Components of the campaign include Financial Fitness classes, homebuyers' clubs, homebuyers' fairs and advertisements in Spanish-language newspapers.

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Fidelity National Real Estate Solutions, Jacksonville, Fla., announced launch of  its Paragon Wireless Interface. With this interface, real estate professionals can receive Paragon MLS data from any browser-enabled device, such as a Wireless Application Protocol (WAP)-enabled mobile phone or Personal Data Assistant (PDA).

Using the same user name and password required to access Paragon, real estate professionals can log into the system through their wireless devices. Once logged in, they have access to searches, including street searches, MLS number searches, price searches and advanced combination searches. The results of these queries include detailed property information, driving directions and photos.  Additionally, the Paragon Wireless Interface provides real estate professionals with listing agent information for each listed property.  

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BenchMark Consulting International, Atlanta, announced key findings from its 2005 Home Equity Lending Benchmark Program. The program noted that 1) There are many shared opportunities for cross-selling and leveraging customer relationships in consumer and home equity lending; 2) In order to build sound customer relationships, expediency and consistent communication is critical; 3) With the exception of one institution, the industry as a whole continues to struggle with the conversion to a paperless process.

“Overall, controlling the customer relationship is key to an effective business model,” said Jim Leath, consumer lending and mortgage banking practice manager for BenchMark. “Everyone’s roles and responsibilities should be clearly delineated, from the front to back offices.”

Since 1994, BenchMark has provided participating organizations with performance evaluations in comparison to industry peers. This year’s Home Equity Lending Benchmark examined data from participants who lead the field in home equity originations, including five of the top ten home equity originators.

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Platinum Software Solutions, Northridge, Calif., announced release of a new lien release and assignment processing software. Doc-Rite integrates continually updated county fees and requirements data, electronic document processing technology, including integration to imaging/scanning databases and to embedded signatures and notarization and e-recording capability to counties.

The software was developed by lien release and assignment processing specialists who desired to create efficiencies in the loan processing system. The software has been in development and beta testing for several years, and is due to be released for delivery in the third quarter.

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Cavalry Mortgage has selected Guardian Mortgage Services, Lakewood, Colo., to manage its closing and post-closing operations. A division of Murfreesboro, Tenn.-based Cavalry Banking, Cavalry Mortgage is a mid-sized service-focused lender.

GMS uses its Web-based Transaction Management System technology to automate document production, management functions and workflow into a centralized, paperless model.
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CWCapital, Needham, Mass., an affiliate of the Caisse, will manage the assets, including surveillance and special servicing. The Caisse said the completed transaction, backed by nearly $85 billion of underlying mortgages on commercial real estate properties, represents one of the single largest offerings of subordinated CMBS and CDO assets to the market.

CWCapital said its assets under management will increase to nearly $2 billion, and the company will become one of the top three managers of CMBS first loss risk in the industry. The deal includes a platform assets purchase agreement between Allied Capital and CW Capital, which provides for the sale of certain commercial real estate related assets, including servicer advances, intellectual property, software, and other platform assets to CWCapital.
 
“By this transaction CWCapital, one of our subsidiaries, will be acquiring special servicing and surveillance capabilities which will enhance its ability to maximize returns to the Caisse and other investors for whom the company provides investment management services,” Richard Dansereau, president of CDP Capital–Real Estate Advisory, a subsidiary of the Caisse.

Allied Capital also entered into a letter of intent with the Caisse regarding the remainder of Allied’s commercial real estate assets. Additional agreements could involve the sale of a portion or all of these assets by the end of the second quarter, the company said.

“Investing in commercial mortgage-backed securities has become more competitive, and the markets have recognized the ability to leverage this asset class in excess of what a BDC structure can accommodate,” said Bill Walton, chairman and CEO of Allied Capital. “We therefore concluded that these assets are better suited to a more leveraged capital structure and that the best opportunity for our shareholders is to sell the portfolio as a whole and realize its significant value.”

Allied Capital estimates that the net gain from the sale of the CMBS and CDO portfolio will be roughly $229 million, after estimated transaction costs and other payments of nearly $20 million. Allied Capital said it plans to use the cash proceeds to invest in private finance investments and to repay current outstanding borrowings on its revolving line of credit of nearly $200 million. The company also said it plans to repay maturing long-term debt, and for general corporate purposes.
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• Commercial servicers discuss the Securities Exchange Commission’s Asset Backed Securities (ABS) rule and its impact on disclosures for commercial mortgage-backed securities (CMBS). Find out the preparations servicers will need to undertake before the rule takes effect in January 2006.

• MBA staff attended the American Society for Testing and Materials International Spring Committee Meetings in April. The meetings included discussions on mold and seismic calculation standards for commercial property assessments. ASTM sets standards for materials, products, systems, and services. MBA’s Mold Task Force plans to conduct a baseline property survey as MBA’s Seismic Working Group participates in property assessment from earthquake damage.

• Plus, DealMakers of the Week, People in the News and more…tomorrow in MBA Commercial/Multifamily NewsLink. For more information, go to http://www.mbaa.org/cmnewslink/.
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Foschini and Lee arranged permanent financing in the amount of $80 million for the refinancing of Concourse Towers and AmSouth Center, two premier Class B office projects totaling 727,364 square feet located in West Palm Beach, Fla. and Nashville, Tenn., respectively. The five-year loan was interest only for the entire term and arranged through a correspondent lender on behalf of 2000 PBL Venture, Ltd. The interest rate was not disclosed but Foschini called the interest rate “very favorable.”

Foschini and Lee financed the sale of the Miami Service Center, located within the America’s Gateway Park, for $4.8 million on a 49,384-square foot office/flex property located in Miami. America’s Gateway Park is a master-planned, 2.6 million square foot business park that features a mix of office buildings, warehouse/distribution facilities, and office/service centers.

The same team arranged permanent financing on behalf of DCP, LLC, in the amount of $3.4 million, for the acquisition of 10 industrial condo units totaling 77,140 square feet within Doral Commerce Park, an industrial complex totaling 199,800 square feet located in Doral, Fla.

Foschini and Lee, in association with Ronald Roth of L.J. Melody’s Connecticut office, arranged financing of $11.9 million on the acquisition and development of a mixed-use, 323-unit condominium and retail project planned in West Palm Beach. The loan was arranged on behalf of Wasserman Real Estate Capital, LLC. “The A&D loan is a pre-cursor to a large construction loan to be originated as pre-sales are reached on the project,” Foschini said.

Foschini and Lee also represented Brookwood Financial Partners in their $50.2 million disposition of Brickell Bayview Centre to American Capital Partners. The Miami office building totals 286,341 square feet. The property’s major tenants include Rumberger, Kirk & Caldwell, P.A., Consulate of Brazil, Consulate of Japan, The Beacon Council, Bovis Lend Lease, and Washington Mutual Bank.
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Through this distinctive program, MBA addresses the future of the industry and offers sophisticated advice on leadership skills. Thought-provoking conference sessions provide critical information, as well as significant value, to take back with you for your business.

This year’s conference features the following keynote addresses:

• Barry Nalebuff, professor of Economics and Management at the  Yale School of Management, presents "Why Not? How to Use Everyday Ingenuity to Solve Problems Big and Small." He is an acclaimed educator and author on teaching people how to solve problems, think strategically and ask questions. Nalebuff is a Forbes columnist and Marketplace commentator, as well as the co-founder and chairman of Honest Tea, one of Inc. Magazine's fastest growing companies in America. He has been a consultant to a host of successful companies, including: American Express, BP, Bell Atlantic, Citibank, Corning, GE, McKinsey and Warner-Lambert.

• Baseball legend Jim Bouton believes that to achieve goals, you need to think like an athlete and focus on the process. This means getting into the fun of the enterprise, the challenge of long odds, the satisfaction in details, the thrill of extraordinary effort and the joy of work. Bouton shares his experiences as a winning New York Yankee and all-star in the 1960s, a comeback kid in the major leagues after an eight-year retirement, best-selling author and sportscaster.

• Gary Orren, professor of Public Policy and Management at the John F. Kennedy School of Government at Harvard University, presents the “Principles of Persuasion for Executives.” He believes that the ability to communicate persuasively lies at the heart of management and the core of leadership, whether the goal is to convince one person face-to-face, or to sway the public at large. This interactive session highlights proven principles of effective persuasion drawn from social psychology and other behavioral sciences. As a leading public opinion and political analyst, Orren has served as an advisor in local, state and federal national election campaigns and has taught at Harvard for 34 years.

• Doug Duncan provides his always perceptive and entertaining insight into the economy, the mortgage market and lender performance. As MBA's senior vice president of research and business development, and chief economist, he oversees the Research, Education, Industry Technology and Business Development departments.

Complementing the educational focus of the meeting are networking opportunities and a spouse/guest program. This year's conference is incorporating a two-day golf tournament that will include handicaps and flight winners. The first Presidents Conference Cups will be presented. Award-winning comedian Eddie Brill (Comedy Central and David Letterman) performs on June 7.

This event is exclusively for Chairmen, Presidents, Owners, Principals, CEOs and COOs of regular MBA member firms, members of MBA's Board of Directors and Board of Governors and Premier Associate members.

Program registrants are responsible for making their own hotel reservations. Listed on the National Register of Historic Places, The Breakers has received the AAA Five Diamond Award. Amenities include two 18-hole championship golf courses, a spa, tennis center and more. Contact The Breakers by phone or fax and state that you will be attending MBA's Presidents Conference. Be sure to make your reservations before May 13. The cut-off date does not ensure availability of rooms. If rooms are available until May 13, you will receive the discounted hotel rate provided below. After May 13, reservations will be made on a space-availability basis only, and you will be charged the regular hotel rate.

For more information, go to the Conference Web site, http://events.mortgagebankers.org/presidents2005/default.html
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“We clearly want legislation. We want a strong regulator. We think it’s good for the housing market,” said Thomas Lund, senior vice president and interim head of single-family mortgage business with Fannie Mae, Washington, D.C. “We’ve been working with Congress and the Treasury trying to make sure we get something done.”

Two bills, S. 190 and H.R. 1461, would restructure the GSEs’ regulatory schema. William Batz, executive vice president and COO with Federal Home Loan Bank of Pittsburgh said that while a new structure is probably necessary, it should not inhibit the ability of secondary market players to support the housing market.

“The legislation begins with a particular goal in mind, then you have the ‘oh while we’re at it’ phenomenon—‘while we’re at it let’s do this and let’s do that,” Batz said. “The concern that we have is not to increase the cost of funding for housing. There is a subplot to push the GSEs away from the government nexus that give us our entities disposal to the extend that these while you at it proposals give the market the impression that the GSEs don’t quite have the same guarantees that they have enjoyed.”

Lund said that while Fannie Mae supports a new regulatory structure, it must be flexible enough to support the housing market now and in the future.

“We think that it makes sense to give the regulator a lot of authority. We don’t know what this industry or environment will look like in 10 years. We want to make sure as we build this thing that we have the ability to innovate and to meet the demand of our customers,” Lund said. “Right now I think people are somewhat fools because there is such unbelievable liquidity in this market. People are chasing yield because there is not a lot of yield capabilities out there. We need to make sure that the GSEs are here to provide that liquidity. That is one of the key of functions of what we are for. Our portfolios and our guaranteed risks are there to bring funds from the other parts of the world into our housing industry and to keep this industry liquid in good times and bad.”

Don Bisenius, senior vice president of credit policy and portfolio management with Freddie Mac, McLean, Va., said Congress should not alter the GSEs’ mission too much.

“When I think of the mission of the GSEs, we usually put it into three categories—liquidity, stability and affordability,” Bisenius said.

“By creating a regulator that has safety and soundness and the mission in the same regulator it would be very good for us. It will allow the regulator to feel the same set of conflict that we feel as we try and reach out to the edges but at the same time make sure we are doing things that are sustainable that are good for the industry and good for stabilization,” Lund said. “I think that will very much be a positive. It allows us to work very closely to figure out where we need to be on the credit spectrum and the affordable lending spectrum.”
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