Grant, editor of Grant’s Interest Rate Observer, noted that the Treasury Department’s recent announcement to bring back the 30-year Treasury bond after a four-year absence signals a rising interest rate environment that adjustable-rate and interest-only borrowers should heed.

“As the Treasury is preparing to lock in historically low long-term borrowing costs, homeowners are increasingly borrowing for shorter terms, and at adjustable rates,” Grant wrote. “On the question of how to borrow, and for how long, someone is right and someone is wrong. Astoundingly, it appears that the government, not the people, has the better grasp of the situation in 2005.”

Doug Duncan, chief economist with the Mortgage Bankers Association, said for borrowers, much depends on whether Grant is right.

“The advantages of ARMs are fairly straightforward in a stable interest rate environment,” Duncan said. “In the long term, the failure to lock into lower rates today could be a problem for the borrower.”

Federal Reserve Chairman Alan Greenspan, in recent testimony before Congress, noted that 30-year fixed-rate mortgage rates have dropped to a level only a little higher than the record lows touched in 2003 and, as a consequence, the estimated average duration of outstanding mortgage-backed securities has shortened appreciably over recent months. The Fed has raised key interest rates eight times since last summer.

“Attempts by mortgage investors to offset this decline in duration by purchasing longer-term securities may be yet another contributor to the recent downward pressure on longer-term yields,” Greenspan said.

Duncan noted that Treasury’s decision to revive the 30-year Treasury stirs up debate as to whether it should have eliminated them in the first place. “It was probably a mistake to eliminate the 30-year Treasury in 2001,” he said.

More importantly, Duncan said, historical patterns suggest that Grant’s scenario could—could—be true.

“Historically, you could see these rates vary over a long period. If we know for certain that rates are going to rise over the next 25 years, it would be wise to lock in,” Duncan said. “But we don’t know for sure. Grant says it’s happening. Is it inevitable? Not necessarily.”

What has happened, Duncan said, is a period in which the economy ended its declining rate environment. “We recently ended a period of rates declining. That period ended in June 2003, when 10-year Treasuries were 3.08 percent. I told people then, ‘go lock in today, it will never be that low.’”

Having said that, the new environment does not necessarily mean that borrowers should be abandoning ARMs and interest-only loans.

“If you plan stay in the house for the long term, you might want to lock in,” Duncan said. “If you are in it for the short term, then an interest-only or ARM can provide advantages. With an interest-only loan you can save a lot of money in the short term. It depends on how long you stay, and the payments.”

On average, homeowners stay in their homes seven-to-nine years, Duncan said. “Under the interest-only scenario, they will have saved money. It’s financial decision-making. Consumers may have solid reasons for taking an ARM or an IO. If you know that you only plan to be there for three years, it’s [probably] worth the gamble that prices will appreciate and you will save money.”
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Julie Piepho, CMB, is president and owner of Milestone Leadership Consulting in Fort Collins, Colo. She has been a CMB since October 2002, graduating with the class at the 89th Annual Convention in Chicago. Milestone Leadership Consulting (www.milestoneleaders.com) specializes in mortgage consulting, individual and organizational leadership coaching, facilitation and public speaking.

Prior to starting her own company, Piepho worked in the mortgage industry for more than 20 years. While her knowledge ranges from sales and operations management, quality control, project management and joint ventures, she says she “grew up” in the savings and loan industry in Wyoming and her last position was as senior vice president with Wells Fargo Home Mortgage.

Piepho’s personal slogan is “helping people reach unprecedented levels of success”. She believes that each individual and organization has a vision and purpose that can propel them to new heights of success. Her experience in all facets of the mortgage industry allows her to help mortgage companies achieve goals the have only thought about.

Achieving the CMB designation was a goal she started on when she was a loan officer in Wyoming. Her association would not pay for any of the School of Mortgage Banking courses, so she put herself through all three courses.

“The dream was so real. I wanted to achieve my designation. A carrot for me with Course III was to get on the floor of the Chicago Board of Trade and actually ‘trade!’ It was so much fun!” Piepho said.

However, she put her goal of achieving the CMB on hold for more than 10 years, because she allowed herself to get caught up in the daily tasks of work and life.

“Finally, my sponsor and great friend, E. Michael Rosser, CMB, finally sat me down and said, ‘It’s now or never! Practice what you teach.’ So once again, I pulled out my goal sheet and put the CMB designation at the top,” Piepho said. By this time, she was out of the daily routine of the corporate mortgage world, starting a new business and studying for the hardest test she would ever take. The dream became a reality and she achieved her goal.

“The designation has impacted my business greatly, because the CMB brings to me the credentials of a 'Doctorate of Mortgage Banking,'” Piepho said. “Individuals and organizations recognize the knowledge, experience and drive possessed by someone has who achieved their CMB designation.”

When asked what advice she has for those interested in the CMB designation, Piepho said: “Just do it! If you’ve been in the industry for at least five years, you’ve probably have the knowledge you need to obtain your designation. If you don’t have the knowledge, it’s easy to find a CMB to sponsor you and help you achieve that goal. With the option of choosing the Residential or Commercial CMB, and progressing to the Master CMB, there is a CMB for you. I challenge you to become one of the elite professionals in the mortgage banking industry by achieving your CMB designation!”

Like Piepho, you too have exhibited the dedication–years of experience, education and participation within your chosen career. It is now time to claim your reward: the CMB.

Since 1973, leaders within the real estate finance industry have earned the CMB to exhibit their dedication to the industry – and to themselves. You may have thought about taking the steps to earn the CMB – but have asked yourself: Where do I get started? What is involved? CampusMBA Designations Staff and the Society of Certified Mortgage Bankers are available to assist you in making the steps in achieving your goal.

CampusMBA’s CMB Online Prep Course, conducted June 3 through July 15, is available to help you prepare for the CMB exam. This six-week web-based course is facilitated by CMB designees, and study materials will cover each Residential CMB exam topic. The instructors will provide feedback on discussion board comments, as well as sample essay responses, in order to help you focus your knowledge on the exam responses. You just have to take the first step: enroll into the CMB program and submit your resume to begin the point assessment process.

You make decisions everyday that impact the lives of others. Make the decision to change yours by earning your CMB this year. To get started today, contact either Jennifer Ridings at jridings@mortgagebankers.org or (202) 557-2763, or Alicia Willey at awilley@mortgagebankers.org or (202) 557-2766. If you are already a candidate and wish to register for the CMB Online Prep Course, call (800) 348-8653 or visit Web-Based Courses at www.campusmba.org.
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Roughly half of the Moreno Valley population is income-qualified for affordable housing, but there is only one affordable complex in the area other than the Cottonwood Place complex, Charter Mac said. “A good portion of potential homeowners are priced out of the Inland Empire housing market, which is in turn driving the demand for rental units in the area,” said Ronne Thielen, executive vice president of Related Capital Co.

Single-family home prices in the market rose by more than 30 percent over the past year, and rents are driving affordability out of the rental market. “As apartment demand rises, increasing rents are leaving lower income residents hard pressed to find affordable apartment options,” adds Dan Horn, President of Palm Desert Development Co. “We’re bringing affordability back to Moreno Valley, with rents as much as 70 percent lower than area market rents.”

Related Capital provided $9.8 million in financing to Palm Desert Development Co. for the phase III transaction, in exchange for tax credits generated by the new phase. CharterMac Mortgage Capital, the mortgage banking affiliate of Related Capital, provided a $1.7 million first mortgage funded through Fannie Mae. Additional funds were provided by the City of Moreno Valley.

Related Capital provided $6.1 million in financing for the 108-unit first phase of Cottonwood Place, completed in 1998 and 100 percent occupied with a waiting list of 180 households. Related Capital then provided $6.2 million in financing for the 61-unit second phase, which is now nearing completion.

The Cottonwood Place III, located in the central part of Moreno Valley, about 50 miles east of Los Angeles, will have five, two-story apartment buildings and a community building shared by all phases of the development.

Unit mix at the property will consist of two- and three-bedroom apartments totaling up to 1,089 square feet. All of the units will be restricted to tenants earning less than 60 percent of the area median income. Charter Mac expects rents to start at $290 per month--much lower than area market rates that start at about $875 per month. 

California-based Palm Desert Development Co. expects Phase III’s completion in the spring of 2006. The amenity package will include central air-conditioning, a frost-free refrigerator, self-cleaning oven, garbage disposal, dishwasher, mini-blinds, exterior storage closet, and a balcony or patio, the developers said. Cmmon amenities will consist of a swimming pool, barbeque and picnic area, sport court, and playground, as well as a clubhouse and community room.
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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 TOMORROW, 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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Stanley Street, president and founder of Street Resource Group , Atlanta, said the time between warehouse lenders funding the loan at closing and originators delivering it to the investor can take between 10 days and two weeks. “There is more demand because there are more players on the borrowing side and, therefore, there are now more lenders on the warehouse side,” Street said. “It’s a very growing market base.”

Street estimated roughly 30 percent of loans in the mortgage market are warehouse loans, handled by some 70 warehouse lenders. “It is important for the warehouse lenders, especially in an increasing rate environment with decreasing production, to maintain their production volumes and actually gain market share,” Street said. “We are finding the ability to deliver online real time technology to the mortgage originators is becoming an equal criteria for choosing who the warehouse lender will be for any particular originator. The competitive position of warehouse lending is directly impacted by the technology delivered.” 

Gary Hoyer, president and CEO of Warehouse One Inc ., West Trenton, N.J., said some investors who purchase loans from originators will pay a premium for electronic delivery of data to supplement the paper. “If they shorten that period down, [lenders] have access to their profits at an earlier period of time which positively impacts cash flow for these companies,” Hoyer said. “The investor does not need to rekey that information for portfolio purposes.”

For example, Brian Goldberg, vice president of operations at Countrywide Home Loans, Calabasas, Calif., said American Mortgage Express , Mount Laurel, N.J., delivers loan data electronically to Countrywide’s correspondent division. Countrywide’s EDI interface can electronically read 98.5 percent of data with accuracy.

Kevin Crichton, president and CEO of American Mortgage Express, said funding a loan with Countrywide, dropped from eight days to “one or two days” using its “best of breed” loan origination software (LOS) systems that integrate Jacksonville, Fla.-based Wellfound Decade’s service oriented architecture (SOA)-based Mortgage Integration Foundation to transfer customer specific data. “Within a two-month period, we have delivered 1,500 closed loans to Countrywide,” Crichton said.

The warehouse lender requires the mortgage note and if settlement agents deliver it later than three days, during the “wet periods,” they are penalized with fees from $100 to $500 for not delivering collateral on time. “That is another benefit of being able to efficiently process the loan [through automation],” Street said. Street Resources Group provides online administrative and communication tools for warehouse lenders and originators.

Hoyer said Warehouse One Inc. still needs to review the loans prior to funding but the company requires its clients, such as brokers who become warehouse lenders, to use scanners. He said electronic delivery of data benefits the conforming market, but not necessarily subprime loans. “If the warehouse cost happens to be less than the note rate, and typically it is, the spread for holding the subprime paper on the line actually contributes to the bottom line for an originator,” Hoyer said. “For conforming paper, the opposite is typically true.”

Warehouse lender costs include rates charged on the warehouse line, the index used, volume of loans and fees. Hoyer said, taken to its full potential, an electronic mortgage can reduce the entire amount to only administrative fees in the future. But a true e-mortgage is defined as a completely secure and compliant paperless process with an electronic note delivered almost instantly to an investor based on delivery guidelines. “The whole concept of warehouse lending completely changes,” Hoyer said. “Today, it’s the time value for money and some fee income. If you took it to [a true e-mortgage], the time value of money essentially disappears. You have a loan funded today and sold today. [A warehouse lender] put out money outstanding for hours rather than days.”

“With e-notes, a closing agent will immediately transfer the e-note to MERS [Mortgage Electronic Registry System] who will register the warehouse lender as the interim funder,” Street said. “In essence, it will eliminate wet periods. That’s better for the warehouse lender because they would have the immediate possession of that collateral, albeit electronically.”

“It literally can go so far as [a warehouse lender] to be nothing other than an administrative type of function that tracks fund usage for very brief periods of time,” Hoyer said. “But a lot of things need to happen between now and the future.”
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