Volume 4 | Issue 131 | Monday, July 11, 2005
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“Terrorism losses can be truly catastrophic. The actual size of terrorist events, especially those [events] with weapons of mass destruction, are truly cataclysmic and could swamp the ability of the insurance industry by itself to manage that risk. If you don’t have that industry to manage the risk, you basically destroy the very private market institutions that you were trying to support in the first place.”
--Christopher Lewis, director of alternative risk management in property casualty operations at Hartford Financial Services Co.
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Top National News
Residential Finance News
Steady Job Gains Gradually Tighten Labor Market
Participate in MBA/STRATMOR Peer Group Roundtables
MORPAC Thanks $5,000 Millennium Donors
Commercial/Multifamily Finance News
Scholars Debate Merits of TRIA Extension
DealMaker of the Day
MBA News
MBA Launches Industry Ad Campaign
CampusMBA Audio Program on Rules July 13
Spotlight: Washington
MBA Advocacy Update
Washington: The Week Ahead
Housing Markets Pricing Out Middle Class
Washington Post (07/11/05)
Low-income families are not the only ones finding it difficult to achieve homeownership, as soaring property prices are pushing even white-collar professionals out of the market. Deerfield Beach, Fla.-based housing analyst Jack McCabe notes that some households reserve more than half of their incomes for shelter costs, eating up savings and leaving little money for recreational activities. Home buyers are forced to obtain interest-only loans and other risky mortgage products in order to afford residences in the most overheated markets--namely San Francisco, Honolulu, West Palm Beach, New York and Boston. According to the Federal Deposit Insurance Corp., for example, the average income in Florida--close to $44,000--is 26 percent less than what is needed to purchase a median-priced dwelling in 2004. "The down payment used to be the issue, but the problem now is that housing prices have climbed so quickly that a lot of consumers are struggling to make their payments affordable," explains David Dworkin of Fannie Mae, which is now offering a program to facilitate financing for low- and moderate-income applicants.
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Debate on the Risks of 'Piggybacks'
American Banker (07/11/05); Shenn, Jody
The general guidance on home equity lending that banking regulators introduced in the spring shows that they are concerned about piggyback loans, which involve the extension of additional secured credit along with a first mortgage. While piggyback lending has fueled the home equity market, mortgage industry experts are unsure how much risk the extra credit is placing on the financial system. "That structure is one of the main reasons that we've seen as much growth as we've seen in home equity lines of credit," particularly risky high-leverage loans, says Barbara Grunkemeyer, deputy comptroller for risk at the Office of the Comptroller of the Currency. She adds that regulators are likely to address the risk first mortgage holders take on through piggyback loans in an interagency guidance to be issued in the fall.
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Congress Urged to Extend Terrorism Risk Insurance
New York Times (07/11/05) P. A17; Hernandez, Raymond
Developers and property firms are joining with private insurers and elected leaders to lobby Capitol Hill lawmakers for an extension of the Terrorism Risk Insurance Act (TRIA), which provides a federal backstop to cover losses in the event of another major terrorist attack. Those forming the alliance caution that if Congress does not act to reauthorize the program by the end of this year, terrorism coverage will become vastly more difficult to obtain and a number of major property deals could be scuttled as a result. The current plan requires the federal government to pay 90 percent of the losses resulting from a terrorist attack if they are greater than $10 billion, up to a total of $100 billion; the government pays a smaller percentage under $10 billion. Proponents state that banks will hesitate to finance property purchases and construction projects if TRIA is not extended, but opponents contend that increased reliance on the program represents an unwarranted bailout of the insurance industry.
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Luxury Home Buying, Improvement Rising--Coldwell
Reuters (07/11/05); Adler, Lynn
According to Coldwell Banker Real Estate Corp. CEO Jim Gillespie, low interest rates, the improving economy and job market, larger executive bonuses and demand from baby boomers have boosted sales of high-end residential properties. Coldwell Banker's 2005 Luxury Index reveals that the number of $3 million-plus homes sold during the first quarter surged 35 percent compared to the January-through-March period of 2004. Nearly 66 percent of the buyers polled said they would not change their purchasing habits based on rising interest rates, with most of them planning to use their second homes for recreation, investment or housing for college-aged children. Additionally, the index found landscaping, home theaters, hot tubs and in-ground swimming pools to be the most popular upscale amenities.
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GMAC Ruling May Change Lease Practice
Silicon Valley/San Jose Business Journal (07/11/05); Berton, Brad
A San Francisco Superior Court ruling that prevented GMAC Commercial Mortgage Corp. from invoking the ambiguously worded "material adverse change" clause to declare a mortgage in default could change the lease practice, according to legal experts. A local family that owns a 48,000-square-foot commercial building in Milpitas, Calif., sued the lender for not returning a lease termination fee its former tenant, Sage Inc., paid in vacating the property. Sage's mortgage payments were current; but GMAC, which was acting as the mortgage holders' loan-servicing agent, held the termination fee in impound due to changes in the borrower's financial condition. The jury ruled that GMAC, which plans to appeal, acted "in a malicious, oppressive and fraudulent manner" in claiming the mortgage was technically in default and not including the funds in its calculation--an accounting strategy that cut the net worth by more than half. The punishment--more than $40 million in compensatory and punitive damages penalties--suggests that that "material adverse change" clause will not hold up in future cases and that it may be more beneficial for lenders to negotiate rather than to litigate.
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Japan's Burst Bubble in 1980s Real Estate May Not Echo in U.S.
Wall Street Journal (07/11/05) P. A2; Moffett, Sebastian
With U.S. housing prices soaring to remarkable highs in various parts of the country, some are comparing the trend to a similar surge in Japan in the late 1980s--when a property bubble formed and eventually burst. More than 10 years later, Japanese land prices are still on the decline; and banks have just recently begun to pull out of a land-related, bad-loans crisis. Although both Japanese and U.S. property industry growth was tied to low interest rates, economists note that there are some significant differences between Japan's plight and the current state of the U.S. market, including the fact that the real trouble overseas came from commercial-land speculation. While speculation in the American market is beginning to pick up, analysts note that there has not been a major land-grab by corporations; additionally, Japan's residential prices skyrocketed faster and higher than in the U.S.
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Want a Car With That New Garage?
Atlanta Journal-Constitution (07/11/05) P. 6E; Chidi, George
To get an edge on its competitors, Atlanta-based Forrest Homes is giving qualified buyers a free two-year lease on new Volkswagen Beetles, provided that the homeowners agree to keep advertisements for the builder and the dealership on the car. This is just the latest type of incentive offered by builders to lure buyers, expanding on traditional perks such as gift certificates and added amenities. The builder handles the mortgage and the car lease separately to prevent inflated prices. Forrest Homes Executive Vice President Mark Adamson says the company resorted to car leases instead of innovative home accessories because buyers in the Atlanta market want traditional home designs.
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| Steady Job Gains Gradually Tighten Labor Market |
MBA (7/11/2005) Velz, Orawin
 The labor market has been improving steadily this year, creating enough jobs to support the trend economic growth going forward. Although only 146,000 jobs were created in June, much below consensus of about 200,000, April and May gains were revised up by 44,000.
During the second quarter, the average monthly payroll gain was 180,000, compared with 182,000 in the first quarter. The unemployment rate edged down to 5.0 percent from 5.1 percent in May, primarily because of the flat labor force growth. The labor force participation rate (the share of population in the labor force) slipped to 66.0 percent in June.
The downward trend in the participation rate in this economic expansion, from 66.7 percent since the start of the expansion in November 2001, is quite unusual. Despite the decline in the unemployment rate to a low level, there is still slack in the labor market and inflationary pressure should remain in check. Average hourly earnings rose by 0.2 percent in June and by a modest 2.7 percent from a year ago.
Overall, the employment report is consistent with the June Federal Open Market Committee statement that the expansion remains firm, with a gradually improving labor market and well-contained inflation expectations.
Job gains should at least stay on track if not strengthen in the near term, gauging from the weekly data for initial unemployment claims–a measure of layoff activity. The four-week moving average of initial claims fell to its lowest level since early March. For the coming weeks, however, the claims data will likely be distorted from annual auto and textile retooling shutdowns.
Financial markets were initially rocked hard by the terrorist attacks in London. Immediately following the attacks, the yield on the 10-year Treasury notes sank to 3.93 percent from the safe-haven bid. However, as the day progressed, Treasuries pared their gains, and the 10-year yield steadily moved up to close at 4.05 percent.
While the bond market shrugged off the weaker-than-expected job report on Friday, it reacted strongly to Kansas City Fed President Thomas Hoenig’s speech in the afternoon. Hoenig noted that inflation has picked up and higher energy costs, labor costs and import costs present risks to the outlook. The hawkish speech sent the yield higher to around 4.10 percent by mid Friday afternoon.
The economic calendar is busy later in the week, with market-moving reports including June inflation for consumers (Thursday) and producers (Friday). Additionally, June retail sales (Thursday) should confirm that consumption spending picked up late in the second quarter, boosted by strong auto sales from General Motors’ employee discount campaign.
(Orawin Velz is director of economic forecasting in the Mortgage Bankers Association’s economics and research department. She provides commentary and analysis on key monthly economic indicators. She can be reached at ovelz@mortgagebankers.org.)
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| Participate in MBA/STRATMOR Peer Group Roundtables |
MBA (7/11/2005) Rawak, Melissa
When interest rates inch up and refinance volumes fall, we expect a challenging market for mortgage lenders. The go-forward market will reward mortgage bankers who focus on sound strategies and effective operating practices.
Lenders must have a renewed focus on maximizing revenues, decreasing costs and improving productivity. This requires a disciplined approach to management that rewards careful planning and an unflinching focus on efficiency. In the long run, cost minimization equals profit maximization as our industry matures.
To help member companies with this impending challenge, the Mortgage Bankers Association and STRATMOR Group conduct a semi-annual peer group benchmarking program that offers participating companies an opportunity to share best practices and gain an insight into how other companies are planning for this new environment.
Consisting of detailed surveys and roundtable meetings, including the non-prime survey, the data collected and analyzed is comprehensive, timely and accurate. Participating companies have also derived great value from the Peer Group Roundtable program, where they consistently reap unparalleled value from the dialogue at the meetings, which are an integral part of the program.
If you would like to participate in MBA’s upcoming Fall peer group survey (data as of June 30) please contact either Marina Walsh, MBA’s director of industry analysis, at mwalsh@mortgagebankers.org or 202/557-2817; or Jim Cameron, partner with STRATMOR Group, at jim.cameron@stratmorgroup.com or 770/632-4445, by July 15.
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| MORPAC Thanks $5,000 Millennium Donors |
MBA (7/11/2005) Coyle, Adrienne
Under the leadership of MORPAC Chairman David Kittle, CMB, and MORPAC director Julie Eddy, the Mortgage Bankers Association’s political action committee has delivered tremendous results. A quarter of the way through the two-year election cycle, MORPAC has already collected $400,000 in hard dollars.
A number of MBA members are responsible for this success, in particular its $5,000 Millennium Donors. The following individuals have contributed $5,000 in 2005:
Jonathan Kempner, MBA
Michael Petrie, CMB, P/R Mortgage
Regina Lowrie, Gateway Funding Diversified Mortgages
John Robbins, CMB, American Mortgage Network
David Kittle, CMB, Associates Mortgage Group
Kieran Quinn, CMB, Column Financial Inc.
Marsha Williams, Middleberg, Riddle & Gianna
Ray Reisert, CharterMac Mortgage Capital
Ken Marshall, Prairie Mortgage Co.
Diane Marshall, Prairie Mortgage Co.
Ron McCord, CMB, First Mortgage Co.
Dale Dykema, CMB, T.D. Service Co.
Rodrigo Lopez, CMB, AmeriSphere Multifamily Finance
Chris Peirson, PeirsonPatterson LLP
James Dubose, Colonial National Mortgage
George Hawkins, Castle Mortgage Corp.
Bruce Posey, CMB, Streeter Brothers Mortgage Co.
Peter Paul, Paul Financial LLC
W. Roger Haughton, PMI Mortgage Insurance Co.
Mark Hammond, Flagstar Bank
Marianne McCarty, Broadview Mortgage Co.
Paul Catinella Sr., Independent Mortgage Co.
Rob Story Jr., CMB, Seattle Financial Group
Rob Couch, CMB, New South Federal Savings Bank
John Moore Jr., GMAC Commercial Holding Co.
Sam Morelli, CMB, Sunset Mortgage
David Thayer, Reunion Mortgage Co.
Thomas Black, AMP, Black, Mann & Graham LLP
Robert Broeksmit, B.F. Saul Mortgage Co.
Debbie Dunn, CTX Mortgage Co. LLC
Chris Christensen, PeirsonPatterson LLP
Arthur Prieston, CMB, The Prieston Group
William Cosgrove, CMB, Union National Mortgage Co.
Barbara Peters, Associates Mortgage Group
Dee McClure, CWCapital
(This article is not a solicitation to contribute; all MORPAC contributions are voluntary. For more information, go to www.morpac.org.)
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| Scholars Debate Merits of TRIA Extension |
MBA (7/11/2005) Murray, Michael
As Congress prepares this week to examine the Treasury Department's report on the Terrorism Risk Insurance Act, scholars at a program sponsored by the American Enterprise Institute debated the merits of TRIA and its potential extension.
Insurance companies take the big picture view in reviewing extension TRIA, as it pertains to chemical, biological, radiological and nuclear (CBRN) attacks as well as the effect on the U.S. economy. The costs of a CBRN attack could shoot up as high as $220 billion to $225 billion, said Christopher Lewis, director of alternative risk management in property casualty operations at Hartford Financial Services Co, Hartford, Conn.
“Terrorism losses can be truly catastrophic,” Lewis said. “The actual size of terrorist events, especially those [events] with weapons of mass destruction, are truly cataclysmic and could swamp the ability of the insurance industry by itself to manage that risk. If you don’t have that industry to manage the risk, you basically destroy the very private market institutions that you were trying to support in the first place.”
The Insurance Information Institute reported that insurers are expected to pay $32.5 billion from losses that occurred with no federal relief from the September 11, 2001 terrorist attacks. In 2004, RAND Corp, Santa Monica, Calif., estimated insurers’ “qualified benefit” on 9/11 expenditures would have been at $19.6 billion (slightly less than the cost of Hurricane Andrew) through mid-year 2004 or 51 percent of the total, compared with $15.8 billion paid by the federal government and $2.7 billion paid by charity.
Stamford, Conn.-based Towers Perrin, in its March 2004 “Workers Compensation Terrorism Reinsurance Pool Feasibility Study,” showed that a Sears Tower (Chicago) attack by airplane would cost nearly $1 billion in reinsurance compared with $91 billion (a worst-case scenario) for a New York City anthrax attack. According to RMS (Risk Management Solutions), Newark, Calif., a major truck bomb attack could cause losses of $4 billion and a large-scale anthrax attack $32 billion in workers compensation.
“What we’re really concerned with is not the conventional risk but the weapons of mass destruction that can create losses that are just well in excess of what the insurance industry’s financial capacity can bear,” Lewis said. “And that’s where we see a central role from the government.”
The Treasury Report on TRIA sent to Congress June 30 said the modeling of terrorism risk has improved but it does not currently provide a reliable basis for traditional insurance pricing, noted James MacDonald, executive vice president and chief underwriting officer at ACE USA, Philadelphia. “Therefore, ‘actuarially fair’ pricing is not possible,” he said.
[The Mortgage Bankers Association favors extension of TRIA through 2007 and a permanent solution to terrorism insurance; without reauthorization, TRIA is set to expire at the end of this year. 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.”]
Kent Smetters, visiting scholar at AEI and an associate professor at the Wharton School at the University of Pennsylvania, called TRIA an entitlement and a “handout” for insurance companies and not to other industries.
“Everybody is affected by the war on terror—construction workers lost their jobs after 9/11, the entertainment industry, the hotel industry—they were all affected. Wall Street analysts, many of them were laid off. Why do we say that one group is entitled to a handout and not the other group?” Smetters said. “I agree that there are causes in terms of the regulations of the insurance industry, but the idea of singling them out and giving them a subsidy while we’re not bailing out [others]. Why not the hotel operators? The construction workers? Why not all these people?”
Lewis responded that the issue is the cost associated with terrorism, as a “negative externality,” is a cost that is associated with U.S. policy. “The greater good is being served by the national policy so it is not to say that it is an indictment in any way of what that policy is, but it is a side effect,” Lewis said. “To then claim that this externality cost is spread across the country in a disproportionate way that, somehow, a government policy that tries to negate, offset or manage that risk is suddenly a ‘cheap handout,’ I mean, that doesn’t make sense. It doesn’t tie out. If it is a negative externality cost, there are good reasons for evaluating what the role of public policy should be.”
Smetters said he believed TRIA reauthorization would pass based, in part, on an “odd coalition” of red and blue states.
“It’s a free guarantee and does not cost anybody anything so it is almost a no-brainer that it is going to be renewed…TRIA is a subsidy to 'blue states.' Think about the high-risk cities. They are all located in blue states. You also have the 'red state' people who are into this patriotism willing to lump TRIA onto the war on terror. So there is this odd coalition going on.”
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| DealMaker of the Day |
MBA (7/11/2005) Murray, Michael
The Los Angeles office of NorthMarq Capital Inc., Minneapolis, arranged permanent financing of $46.5 million for a portfolio of three apartment communities throughout Los Angeles and Orange Counties owned and operated by Advanced Real Estate Services Inc., Lake Forest, Calif. Financing included an average interest rate of 5.29 percent, a 10-year term and a 30-year amortization.
Richard Julian, president of Advanced Real Estate Services, contracted with NorthMarq to consolidate debt and raise funds to acquire additional properties in the Southland. Michael Elmore, NorthMarq’s senior vice president and senior director, arranged the financing and, as a result of this refinance, Julian generated $26 million in cash. With leverage, it created $100 million for future multi-family acquisitions in addition to existing investor funds.
Advanced Real Estate holds 4,500 units in Southern California and the firm said it hopes to grow that number to 6,000 units over the next two years.
The refinanced portfolio consists of 429 apartment units and includes more than 375,000 net rentable square feet situated on 18 acres of land. Each complex includes several floor plans that range from studio to three-bedroom units.
Meanwhile, NorthMarq Capital’s Minneapolis and Denver offices combined to arrange a refinancing of more than $13.3 million for the Four Seasons Apartments in Westminster, Colo. The apartment complex, built in 1971, consists of 384 units in 16 three-story garden-style buildings. It is situated on 26 acres.
Patrick Minea, senior vice president and managing director of NorthMarq’s Minneapolis office, and Steve Bye, executive vice president and senior managing director of the Denver regional office, arranged the financing through AmeriSphere Multifamily Finance, a Fannie Mae DUS lender and an affiliate of NorthMarq Capital.
The borrower is Two Seasons Associates LLP, an entity of Belgarde Enterprises, based in Minneapolis.
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| MBA Launches Industry Ad Campaign |
MBA (7/11/2005) Hagopian, Linda
The Mortgage Bankers Association is excited to announce the launch of a nationwide advertising campaign, titled "See a Lender First," a consumer education initiative sponsored by MBA on behalf of the industry.
Designed to educate consumers on the importance of seeing a lender as the first step in the home buying process, the campaign emphasizes the need for borrowers to find mortgage options right for them and encourages them to visit MBA's consumer education site—the Home Loan Learning Center. Go to http://events.mortgagebankers.org/marketing/Seealendercampaign.pdf to view samples of the advertisements and billboards.
The Home Loan Learning Center (Web site: http://www.homeloanlearningcenter.com/default.html ) offers prospective home buyers and current homeowners a complete and unbiased learning center. MBA encourages state and local associations across the country to link to the Web site and leverage the valuable information the site provides.
All of us at MBA are proud to be part of an industry that truly makes a difference in people’s lives and invests in communities across America.
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| CampusMBA Audio Program on Rules July 13 |
MBA (7/11/2005) Sabol, Krista
Rules are the foundation of your company’s success and competitive edge. They are the framework for profitability and compliance. Yet checking, validating and remediating rules during underwriting, rating or post-close processes can be like building a house. You’re fine as long as you have a lot of laborers to do the work and no changes if you want things to get done on time.
CampusMBA, the education arm of the Mortgage Bankers Association, presents an Audio Program, "Making Maintaining Complex Rules Simple." The program (Meeting No. E2502518H) takes place on Wednesday, July 13 from 3:00-4:30 p.m. EDT.
Industry expert Jim Henderson will discuss automating validation and remediation via a rules engine to increase efficiency to lower costs and gain the competitive advantage and most of all ensure compliance. Topics will include:
• What is a rules engine and where does it fit?
• How do rules engines affect operations?
• What types of rules are best suited for automation? What rules are not suited for automation?
• Requirements to set up your data and processes to support rules automation;
• How can you use rules automation to document and prove compliance?
Henderson has spent the past 10 years in business process automation, first as a systems engineer and architect and then taking the president's role at KeyMark. The company began with scanning, OCR and automated forms processing at state department of revenues and moved to automation of electronic and paper billing and mortgage loan processes using integrated business rules engines, workflow, unstructured forms processing and document management.
It's never been easier to train your staff on the most current topics relevant to your business. CampusMBA Audio Programs include a 60-minute presentation by an industry expert, followed by a 30-minute interactive question/answer session. Just dial in from your conference room speakerphone to train your staff—whether there are two or 20 employees in attendance.
The PowerPoint presentation that accompanies the audio program will be sent via email one week prior to the program date, and can be reproduced for all attendees.
CampusMBA Audio Programs are a timely, convenient, and cost-effective way to train your entire staff on the latest topics. Why register for an Audio Program?
• Inexpensive—$225 MBA members /$325 Nonmember per site;
• Timely topics—regulatory and sales strategy issues brought directly to your speakerphone and conference room;
• Quality Program—program and presentation materials developed by industry experts;
• Simple—just use your speaker phone; and
• Current—latest topics brought to you in a timely way.
Click here to register online or call (800) 348-8653. For more information, call (800) 348-8653, visit the CampusMBA Web site at www.campusmba.org or email CampusMBA at cbuzolich@mortgagebankers.org.
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| MBA Advocacy Update |
MBA (7/11/2005) Pfotenhauer, Kurt
MBA Officers Meet with FHA Commissioner Montgomery
.jpg) On July 7, Mortgage Bankers Association Chairman Mike Petrie, CMB, Chairman-Elect Regina Lowrie, MBA President & CEO Jonathan Kempner and other MBA staff met with newly appointed Federal Housing Administration (FHA) Commissioner Brian Montgomery.
During the meeting, MBA emphasized the long-standing partnership that it has with FHA. However, MBA also expressed concerns about FHA's dwindling market share in light of its unique ability to help underserved borrowers. Montgomery expressed an eagerness to work with MBA to continue to serve underserved segments of the population. The MBA delegation also discussed Real Estate Settlement Procedures Act (RESPA) reform and its importance to the industry.
For more information, please contact Tim Doyle at (202) 557-2860 (tdoyle@mortgagebankers.org).
Congress Schedules Hearings on TRIA
In response to the Treasury Department's release of its long-awaited study of the Terrorism Risk Insurance Act (TRIA) last week, Congress has scheduled two hearings on the subject.
This week, both the House Financial Services Committee and the Senate Banking Committee will hold hearings on July 13 and 14, respectively, to consider the Treasury study. MBA plans to submit statements for the records for both hearings, and is currently conducting a thorough review and analysis of the Treasury Department study.
MBA will provide a full report on the hearings in next week’s Advocacy Update; MBA NewsLink will provide coverage this week.
For more information, please contact Josh Denney at (202) 557-2816 (jdenney@mortgagebankers.org).
House Passes Treasury/Transportation/HUD Appropriations Bill
Last week, the House passed the Fiscal 2006 Treasury, Transportation and HUD appropriations bill by a vote of 405-18. The bill includes $50 million for American Dream Downpayment Initiative to remain available until 2008, $35 billion in commitment authority for the FHA General Insurance/Special Risk Insurance fund, and includes $60 million for the operations of the Office of Federal Housing Enterprise Oversight.
The bill again prohibits the Treasury Department from using funds to finalize a rule that would let banks into the real estate business and does not include authorization for the Administration's proposal for an FHA-insured zero-downpayment loan product. This, however, does not preclude Congress from passing legislation later this year creating such a product.
The Senate is expected to work on its version of the bill in July. We will keep you informed as the process moves forward.
For more information, please contact Renee Rappaport at (202) 557-2758 (rrappaport@mortgagebankers.org).
Greenspan Expresses Support for "Bright Line"
In a recent letter to Sen. Chuck Hagel, R-Neb., a sponsor of S. 190, the Senate GSE oversight reform bill, Federal Reserve Chairman Alan Greenspan noted his agreement with Treasury Secretary John Snow that Congress should give the GSE regulator clear guidance about the boundaries of the GSEs' mission and should have the authority to "investigate, monitor, and regulate the GSEs in such a fashion as to reduce or eliminate any potential operational and systemic risks posed by the GSEs' business line expansions."
Greenspan also commented that the GSEs boundaries on new products or technologies should be limited to their congressionally chartered mission. He also reiterated his support for mission-related portfolio limits.
For more information, please contact Josh Denney at (202) 557-2816 (jdenney@mortgagebankers.org).
Update on OCC Suit Against N.Y. AG Spitzer
In June, the Office of the Comptroller of the Currency (OCC) filed a suit against New York Attorney General Eliot Spitzer, to block Spitzer's probe of national banks' lending practices. The OCC contends that it has the sole authority to enforce laws pertaining to national banks. Arguments in this case are now expected to begin in late August, although in the meantime Spitzer can proceed with his investigation.
MBA is monitoring this case closely, as it could have significant implications for future fair lending enforcement actions and could affect congressional consideration of predatory lending legislation. Rep. Barney Frank, D-Mass., the ranking member on the House Financial Services Committee, recently reintroduced legislation to limit the OCC's preemptive authority over national banks, and supporters of preemption have expressed concern that efforts may be made to include such a limitation as part of a predatory lending bill.
MBA will continue to work on Capitol Hill for a uniform national standard to combat predatory lending, and will keep members informed of any developments in the OCC v. Spitzer case.
For more information, please contact Ken Markison at (202) 557-2930 (kmarkison@mortgagebankers.org).
FACTA Medical Privacy Comments Filed
MBA filed comments on July 8 with the Office of the Comptroller of the Currency, the Federal Reserve, the FDIC, the Office of Thrift Supervision and the National Credit Union Administration on an interim final rule under the Fair and Accurate Credit Transactions Act (FACTA) that limits the sharing and use of information about consumers' medical history and current health status.
MBA commends the agencies for creating exceptions in the rule that will give creditors access to health-related information when they have a legitimate business need for that information, and supports the decision to allow a reasonable length of time between publication of the Final Rule and the mandatory compliance date.
However, MBA notes that some improvements still could be made to the rule and requests that the agencies provide a safe harbor allowing the use of a form to clarify a consumer's consent to the use of medical information. MBA also requests that the agencies implement changes to the rule that allow investigation into the mental capacity of the consumer, and clarify that medical information can be used to verify medically based income, such as worker's compensation.
For more information, please contact Mary Jo Sullivan at (202) 557-2859 (msullivan@mortgagebankers.org)
Montgomery County Council (Md.) Revisits Predatory Lending Ordinance
The Montgomery County (Md.) Council held its third working session on July 6 to continue its discussion of Bill 36-04, a predatory lending ordinance. The ordinance incorporates predatory lending into an existing anti-discrimination law. During the working session, the Council increased damages for humiliation and embarrassment to $500,000 per violation. A previous draft had the cap at $250,000; the current cap is $5,000.
On a more positive note, the Council did remove disparate impact language from the bill, albeit at the disappointment of the Council president. The ordinance will now go before the full Council with the next meeting anticipated sometime after the Council's August recess. The steering language will also be revisited at the full Council meeting.
For more information, please contact Beth Percynski at (202) 557-2866 (bpercynski@mortgagebankers.org).
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| Washington: The Week Ahead |
MBA (7/11/2005) Sorohan, Mike
Congress returns to action this week, following a District Work Period.
The Senate Banking Committee will hold a hearing on Thursday, July 14 to discuss the Treasury Department’s assessment of the effectiveness of the Terrorism Risk Insurance Act. The Mortgage Bankers Association is closely monitoring this issue.
The hearing takes place at 10:00 a.m. EDT in room 538 of the Dirksen Senate Office Building.
The House Financial Services Committee gets its turn to examine the Treasury report on TRIA the following day. Its hearing takes place on Wednesday, July 13 at 2:00 p.m. EDT in room 2128 of the Rayburn House Office Building.
Meanwhile, the House Financial Services subcommittee on housing and community opportunity turns its attention to flood insurance. It holds a hearing on "Flood Map Modernization and the Future of the National Flood Insurance Program," on Tuesday, July 12 at 10:00 a.m. EDT in room 2128 Rayburn.
Both hearings can be accessed live over the Internet at http://financialservices.house.gov/. Senate hearings can be accessed at www.capitolhearings.org. You can also check C-SPAN to see if hearings will be televised.
Upcoming Reports/Events:
July 10-15: CampusMBA Commercial School of Mortgage Banking I, San Diego (SOLD OUT)
July 12: CampusMBA: Creating New Customers, San Diego
July 13: CampusMBA Audio Program: Making Maintaining Complex Rules Simple
July 13: Trade Balance, Commerce Department
July 13: Imports/Exports, Bureau of Labor Statistics
July 13: Treasury Department Monthly Statement
July 14: Real Earnings, Bureau of Labor Statistics
July 14: Advance Retail Sales, Commerce Department
July 15: Business Inventories, Commerce Department
July 15: Producer Price Index, Bureau of Labor Statistics
July 15: Industrial Production and Capacity Utilization, Commerce Department
July 17-22: Campus MBA School of Mortgage Banking Course I, Washington, D.C.
July 18: Housing Market Index, National Association of Home Builders
July 19: New Residential Construction, Commerce Department
July 20: MBA Weekly Application Survey
July 21: CampusMBA: Creating New Customers, Washington, D.C.
July 21: Composite Indexes, The Conference Board
July 25: Existing Home Sales, National Association of Realtors
July 26: Consumer Confidence, The Conference Board
July 27: MBA Weekly Application Survey
July 27: Revised Building Permits, Commerce Department
July 27: New Residential Sales, Commerce Department
July 27: State and Local Building Permits, Bureau of the Census
July 27: Beige Book, Federal Reserve Board
July 28: Housing Vacancies and Homeownership, Commerce Department/HUD
July 29: Gross Domestic Product, Bureau of Labor Statistics
Aug. 2-3: CampusMBA: The Executive Institute: Capital Markets and Mortgage Pricing Workshop, Washington, D.C.–NEW
Aug. 9: Federal Open Market Committee
Aug. 14-19:CampusMBA School of Mortgage Banking Course III, Chicago– SOLD OUT
Aug. 14-19: CampusMBA School of Mortgage Banking Course I, San Francisco
Aug. 24-29: CampusMBA: Detecting and Avoiding Mortgage Fraud, San Francisco
Aug. 31: CampusMBA Audio Program: Paper Pusher No More
Sept. 7-9: MBA Regulatory Compliance Conference, Washington, D.C.
Sept. 11-13: MBA Document Custody Conference, Miami Beach, Fla.
Sept. 18-23: Campus MBA School of Mortgage Banking Course II, San Diego
Sept. 19-20: MBA Quality Assurance Conference, Chicago
Sept. 20-21: CampusMBA: Handling Fraud Files, San Diego – NEW
Sept. 20-21: CampusMBA: Advanced Regulatory Compliance, Atlanta
Sept. 20: Federal Open Market Committee
Oct. 6-7: CampusMBA: The Next Step in Combating Mortgage Fraud, San Antonio, Texas
Oct. 6-7: CampusMBA: Best Practices – Loan Administration Workshop, San Antonio, Texas
Oct. 21-22: MBA State & Local Workshop, Orlando
Oct. 23-26: MBA Annual Convention & Expo, orlando
Nov. 1: Federal Open Market Committee
Nov. 1-2: CampusMBA: Real Estate Appraisal for Mortgage Lenders Workshop, Chicago
Nov. 7-9: MBA Accounting, Tax & Financial Analysis Conference, Boca Raton, Fla.
Nov. 8-9: CampusMBA: The Executive Institute: Market Analysis Workshop, Washington, DC
Nov. 10-11: MBA Residential Underwriting Conference, Coronado, Calif.
Nov. 30 MBA Legal Issues in Mortgage Technology Conference, San Diego
Dec. 4-9: CampusMBA School of Mortgage Banking Course II, Las Vegas
Dec. 7-9: CampusMBA Underwriting University, Miami
Dec. 13: Federal Open Market Committee
2006
Feb: 5-8: MBA Commercial Real Estate Finance/Multifamily Housing Convention & Expo, Orlando
Feb: 14-17: Servicing Management Workshop, Phoenix
Feb: 14-17: MBA National Mortgage Servicing Conference & Expo, Phoenix
March 29-April 1: MBA National Technology in Mortgage Banking Conference, San Diego
May 7-10: MBA National Secondary Market Conference, Chicago
May 16-19: MBA Commercial Asset Administration Conference, New Orleans
Information about MBA Events can be found at the MBA Web site, www.mortgagebankers.org; and at the CampusMBA Web site, www.campusmba.org.
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ABOUT MBA NewsLink
Publisher: Cheryl Crispen, Senior Vice President - Communications and Marketing
Editor: Mike Sorohan 202/557-2855
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MMurray@mortgagebankers.org
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