The bill, introduced by Reps. Patrick Tiberi, R-Ohio, and David Scott, D-Ga., would establish a no-downpayment mortgage financing product through the Federal Housing Administration. Tiberi introduced a similar bill last year, which failed to pass the House amid concerns over the rate of FHA delinquencies and foreclosures, as well as the program’s potential cost to the government.

Subcommittee on Housing and Community Opportunity Chairman Robert Ney, R-Ohio, noted that Tiberi and Scott made revisions to H.R. 3043 that would appear to appease those concerns. Among those changes are a requirement of pre-purchase counseling of homebuyers to help them decide whether or not the product is a good fit for them; and mandating the use of additional credit risk tools such as FHA’s Technology Open to Approved Lenders (TOTAL) mortgage scorecard.

“It is important that Congress create more homeownership opportunities for minority home buyers,” Ney said. “This is an important piece of legislation. It strikes a reasonable balance and has more safeguards than the previous piece of legislation.”

Petrie, in his testimony, expressed MBA’s support for H.R. 3043. "While our country currently enjoys record levels of homeownership, the downpayment hurdle is a major obstacle for low- and moderate-income and minority families who can afford the monthly mortgage payment but find it problematic to save for the downpayment," he said. "MBA believes that in order to truly expand homeownership opportunities and improve housing affordability, we must overcome the downpayment challenge. We believe an FHA zero downpayment loan program is the appropriate tool for addressing this challenge."

The bill would implement a proposal included in the Bush Administration’s fiscal 2006 budget. It would establish a five-year pilot program allowing FHA to insure no-down-payment mortgages for up to 50,000 first-time homebuyers. Participants would pay slightly higher mortgage insurance fees to cover program costs.

"This program would be particularly important to minority families, who don't enjoy the same high homeownership rates as the population as a whole," Tiberi said. "This program could also serve as an incentive for families with spotty credit records to improve them so they could be eligible for no-down-payment home loans."

To be eligible for a no-down-payment mortgage, borrowers would have to meet credit requirements that will be determined by the Housing and Urban Development Department. Borrowers would also receive mandatory pre-purchase counseling, which no other FHA program currently requires. Voluntary foreclosure prevention counseling would be available if a loan becomes delinquent.

Petrie, president of P/R Mortgage & Investment Corp., Indianapolis, and chairman of Greensfork Township State Bank, Spartanburg, Ind., said MBA advocates a “targeted and measured” attempt to remove the downpayment obstacle and close the homeownership gap among ethnic groups and economic classes.

“MBA is not suggesting a ‘homeownership at all costs’ strategy,” Petrie said. “However, we understand the real estate finance system must be careful and appropriate when lending money to families for [what is] often the largest investments they will make. Recently, some have expressed concern that lenders are extending too much credit and these loans may pose a risk. All the more reason for a strong FHA, an FHA that is empowered to pilot products and, specifically, a no-downpayment mortgage financing product for homebuyers with required counseling and with all the protections that go along with FHA insurance.”

Petrie said the Zero Downpayment Program proposal, as scored by the Congressional Budget Office (CBO) in the President’s 2006 budget, is expected to have only a “minimal cost” over the next five years.

“These ‘costs,’ though, need to be put in perspective: even with a zero downpayment product, FHA’s operations are still expected to continue to generate hundreds of millions of dollars for the U.S. government,” Petrie said. “This five-year cost of H.R 3043 is likely to be comparable to the $50 million dollars that the House Appropriations Committee approved for the American Dream Downpayment Initiative for [fiscal] 2006 alone, and yet the Administration’s zero-downpayment program is expected to serve 150,000 homebuyers a year.”

MBA’s most recent National Delinquency Survey showed delinquencies and foreclosures of FHA loans declined during the first quarter. Petrie said FHA’s loss mitigation program would ensure that borrowers have many options at their disposal after their loan closes, if they run into difficulty.

MBA made two suggestions to improve the legislation:

• Allow classroom or group counseling under certain situations, instead of individual counseling. “This counseling resembles the type used by Fannie Mae and Freddie Mac for meeting the mandatory counseling requirements under their programs,” Petrie said; and

• The statute should explicitly state that generic examples of counseling documents be used to educate potential borrowers.  

“With these safeguards, MBA is confident that the FHA zero downpayment product will allow good borrowers to become good homeowners,” Petrie said.
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Option One and H&R Block Mortgage Corp. associates donated more than $67,000, and $50,000 of that was matched by the company for a total of $117,000.

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Los Angeles–based KB Home, and Calabasas, Calif.–based Countrywide Financial Corp., agreed to enter into a transaction where KB Home will sell substantially all of the assets of its mortgage subsidiary, KB Home Mortgage Co., to Countrywide Home Loans. The two companies announced the formation of a 50-50 joint venture that will make residential loans to KB Home customers. The terms of the agreement were not disclosed.

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Credit Plus Inc., Salisbury, Md., was named Charlotte, N.C.–based 1st Metropolitan Mortgage’s preferred credit vendor. 1st Metropolitan Mortgage’s current and new branches will utilize Credit Plus for credit reports, flood reports, title insurance and more.

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According to a report from the Illinois Association of REALTORS, Springfield, Ill., total home sales, including single-family homes and condominiums, rose by 6 percent to 17,656 sales in 2005 from 16,654 sales in May 2004. Year-to-date, total home sales are up 3.8 percent, from 64,297 homes sold in the first five months of 2004 to 66,750 sales for the same period in 2005.

Single-family home sales were up 1.2 percent in May 2005 to 11,995 from 11,855 in May 2004.  The median single-family home price in May was $198,000, up 9.4 percent from $181,000 a year earlier. The single-family average home price for May 2005 was $246,808, a 6.4 percent increase from $231,861 in 2004.

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New Century Financial Corp., Irvine, Calif., said the company plans to relocate its corporate headquarters to the Park Place office complex in Irvine, Calif., in 2007. The company signed a lease with Maguire Properties Inc. , Los Angeles, for a 190,000-square-foot space in a 20-story building to be constructed on the northern edge of the property, adjacent to the San Diego 405 freeway.  Construction is scheduled to begin in the third quarter, with an expected completion date of spring 2007.

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HSBC Mortgage Services, a Charlotte, N.C.–based unit of HSBC-North America, will relocate its corporate headquarters to Lancaster County, S.C., in 2006 and increase employment by as much as double current levels within five years.

Construction of the new 182,000-square-foot facility, led by Charlotte, N.C.-based Lauth Property Group, will begin this summer. The company's relocation will begin in early summer 2006.

HSBC Mortgage Services’ more than 450 employees are based at the company's headquarters. An additional 120 employees will remain at the company's Decision One branch office. HSBC Mortgage Services expects headquarters employment to grow to as many as 900 by 2011.
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Malden Plaza, constructed in the 1920's and renovated in 1994, consists of a single story 23,517 rentable square feet, multi-tenant shopping plaza on a 1.40-acre lot. The property is 100 percent leased to three credit tenants: Walgreens, Blockbuster, and D’Angelo.

The building frame consists primarily of cast in place concrete masonry walls. The newer addition includes steel columns, beams and truss joists with steel decking. The primary exterior materials consist of painted concrete block and brick veneer.

Malden Plaza is in Malden Center. Malden is a town in Middlesex County within mid-eastern Massachusetts, about five miles north of downtown Boston. Malden Center is roughly one mile from interstate 93.

“Our lender was quick to realize the value of this property given the credit behind the tenants,” said Richard Ashworth, president of Ashworth Mortgage. “Its quote was extremely aggressive offering a very low interest rate in a very competitive environment.”
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In a letter to Senate Banking Committee Chairman Richard Shelby, R-Ala.; the committee's ranking Democrat, Sen. Paul Sarbanes, D-Md.; House Financial Services Committee Chairman Michael Oxley, R-Ohio; and ranking Democrat Barney Frank, D-Mass., Treasury Secretary John Snow said the Bush Administration would accept an extension of TRIA only if it included a “significant increase,” to $500 million, of the event size that would trigger the federal backstop for coverage. He said that economic improvements since the September 11, 2001 terrorist attacks have made the U.S. economy more robust and that extending TRIA would have “little impact on the economy given its current strength.”

“It is our view that continuation of the program in its current form is likely to hinder the further development of the insurance market by crowding out innovation and capacity building,” Snow wrote. “Consistent with its original purpose as a temporary program scheduled to end on December 31, 2005, and the need to encourage further development of the private market, the Administration opposes extension of TRIA in its current form.”
 
Snow added that “any extension of the program should recognize several key principles, including the temporary nature of the program, the rapid expansion of private market development (particularly for insurers and reinsurers to grow capacity), and the need to significantly reduce taxpayer exposure. The Administration would accept an extension only if it includes a significant increase to $500 million of the event size that triggers coverage, increases the dollar deductibles and percentage co-payments, and eliminates from the program certain lines of insurance, such as Commercial Auto, General Liability, and other smaller lines, that are far less subject to aggregation risks and should be left to the private market.”

In a statement, MBA said it encourages Congress to “act now by holding hearings on this important issue.” Gail Davis Cardwell, senior vice president of MBA's commercial/multifamily group, said the failure to extend TRIA in the short term “will result in the commercial real estate investment markets becoming more dysfunctional as time progresses, rating agencies placing loans on ‘watch lists,’ potential ratings downgrades, increased costs, drags on productivity and lower yields to investors, who include those on fixed incomes.”

TRIA has been effective in enhancing financial capacity to write terrorism risk insurance coverage, effecting its wide availability and affordability, Davis Cardwell said. "We concur with the Treasury report's statement that challenges remain in predicting terrorism risk and the corresponding loss probability,” she said.

The nation’s ratings agencies also expressed caution following Treasury’s report. “Without some means to enable insurers to quantify their exposure, it is unlikely that terrorism insurance will be as readily available and cost effective as it is today, said Susan Merrick, managing director with Fitch Ratings , New York. “Therefore, Fitch sees the potential for ratings volatility in [commercial mortgage-backed security] bonds and disruption to the new issue CMBS market.”

TRIA was signed into law in November 2002 by President George W. Bush, following the events of September 11, 2001, to provide certainty to the marketplace. This program is due to expire on December 31 unless Congress acts to pass legislation to extend it.

Two bills currently sit in Congress that would extend TRIA beyond December 31. S. 467, the Terrorism Insurance Backstop Extension Act of 2005, was introduced in February by Sens. Christopher Dodd, D-Conn., and Robert Bennett, R-Utah. The bill would reauthorize and extend the federal terrorism reinsurance program provided by TRIA. In March, H.R. 1153 was introduced by Reps. Tom Capuano, D-Mass.; Steve Israel, D-N.Y.; Barney Frank, D-Mass.; Paul Kanjorski, D-Pa.; and Joseph Crowley, D-N.Y. That bill also proposes to extend TRIA.

On Capitol Hill, members of Congress said they were generally pleased with the Treasury report. Shelby said he was “pleased” with the Treasury study. 

“Upon initial review, it seems to indicate that while the TRIA program has functioned, in part, to act as a stop gap, it has also impeded the development of broader solutions for the problems confronting the marketplace," Shelby said. “After three years of TRIA, it is clear that the program as structured has created considerable market dysfunction which in turn has led to additional dependency on the federal government backstop.  Ironically, because of these deficiencies, it is possible that Congress will need to craft a temporary extension of the program to provide time to address this dysfunction and ease the sunsetting of the program.  However, any extension of TRIA should be narrow, targeted and minimize interference with our markets."

Oxley also commended the report. "TRIA was intended to be a temporary program that would ensure the continued availability of terrorism coverage for consumers while the insurance markets stabilized and new private-sector solutions were developed,” he said. “The Treasury report raises serious concerns that TRIA may actually be inhibiting the development of a long-term private marketplace and that consumer needs are still not being met in all areas.  As a result, a simple extension of the program is not in the best interest of American consumers or the economy.” 

Oxley said he was “confident that we can achieve a comprehensive, fiscally responsible solution to deal with terrorism insurance by the end of this year."

"MBA looks forward to working together with Congress and the Administration on this issue and is hopeful that hearings will be scheduled immediately so that TRIA legislation is considered this summer," said Kurt Pfotenhauer, MBA's senior vice president of government affairs. "Furthermore, MBA supports TRIA extension legislation already introduced in Congress and agrees with Banking Committee Chairman Shelby that Congress may need to enact a temporary extension of the program to provide time to craft a long term solution." 

The Coalition to Insure Against Terrorism, of which MBA is a member, had stronger words for the report. Spokesman Martin DePoy, vice president for government relations at the National Association of Real Estate Investment Trusts, called the Treasury study “flawed” and that it does not paint an accurate picture of the current terrorism insurance marketplace and fails to acknowledge that the risk of terrorism is unknowable. 

“The study's assertion that the now partial presence by reinsurers will somehow grow stronger in the absence of a federal backstop defies logic,” DePoy said. “Even Federal Reserve Chairman Alan Greenspan has questioned the ability of the private market alone to insure against terrorism. The study also ignores TRIA's value as a mechanism to help the economy rebound quickly in the event of another catastrophic attack.”

CIAT also urged Congress to immediately schedule hearings on the Treasury report. “Only in acknowledging that the immediate effect of TRIA's expiration is likely to be 'less terrorism insurance written by insurers, higher prices and lower policyholder take-up,' does the study reflect the realities of the marketplace and thereby confirm the need for a federal role beyond December 31st,” DePoy said. “Policyholders remain convinced that a federal terrorism insurance program of some kind must be in place next year to help protect the U.S. economy and American jobs. CIAT's goal is a backstop that ensures there is an adequate supply of terrorism insurance while, at the same time, addressing gaps in current coverage and creating a system that maximizes the development of private risk capacity.”

Shelby indicated that his committee would hold a hearing on the report and to consider proposals for reforming TRIA before the August recess. “It is my intention for the Committee to work in a bipartisan fashion, in cooperation with the House Financial Services Committee and the Administration, as the Congress considers the future of the TRIA program," he said.
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