The average contract interest rate for 30-year fixed-rate mortgages increased to 5.62 percent from 5.58 percent one week earlier, with points increasing to 1.26 from 1.14 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.  

The average contract interest rate for 15-year fixed-rate mortgages increased to 5.21 percent from 5.18 percent one week earlier, with points increasing to 1.28 from 1.13 (including the origination fee) for 80 percent LTV loans. The average contract interest rate for one-year adjustable-rate mortgages (ARMs) decreased to 4.56 percent from 4.60 percent one week earlier, with points increasing to 1.01 from 0.97 (including the origination fee) for 80 percent LTV loans. 

The survey’s Market Composite Index stood at 791.9, a decrease of 7.2 percent on a seasonally adjusted basis from 853.4 one week earlier. On an unadjusted basis, the Index decreased by 25.7 percent compared with the previous week but was up by 22.0 percent compared with the same week one year earlier. 

"Mortgage application volume is down 7.2 percent from the previous week, with applications for adjustable rate products experiencing an even steeper decline of 15.8 percent," said Michael Cevarr, MBA's director of member surveys. "As a result, the ARM share of applications, at 27.9 percent, is at its lowest level since March of 2004."

The seasonally-adjusted Purchase Index decreased by 6.1 percent to 489.0 from 520.8 the previous week, whereas the Refinance Index decreased by 8.4 percent to 2554.3 from 2788.2 one week earlier. Other seasonally adjusted index activity includes the Conventional Index, which decreased by 6.4 percent to 1196.9 from 1278.7 the previous week, and the Government Index, which decreased 19.2 percent to 116.2 from 143.9 the previous week. 

The four-week moving average for the seasonally adjusted Market Index is down by 2.9 percent from 826.4 to 802.6. The four-week moving average is down by 2.0 percent for the Purchase Index from 501.7 to 491.7 while this average is down 3.8 percent from 2715.0 to 2611.7 for the Refinance Index.

The refinance share of mortgage activity decreased to 45.1 percent of total applications from 45.7 percent the previous week. The ARM share of activity experienced a sizable decrease, to 27.9 percent of total applications from 30.7 percent the previous week.

MBA made a one-day holiday adjustment to this week’s survey to accommodate the July 4 holiday, which took place on a Monday.

The survey covers 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 majority of the survey respondents clustered in the 15-45 minute range. Of that group, 28 percent said they spend 15 minutes getting to work each day; 25 percent put in 30 minute commutes; and 19 percent log 45 minute commutes. Fourteen percent of the survey's respondents put the hour in rush hour with 60-minute commutes. Among the real road warriors: 6 percent said they commute for 75 minutes; 3 percent travel 90 minutes; 1 percent endure 105 minute commutes; and 4 percent spend two hours just to get into the office. Respondents said they could live with a commute up to 57 minutes.

“Higher pay jobs tend to draw labor force from a wider commuting area,” said Orawin Velz, director of economic forecasting, Mortgage Bankers Association. “Also, lower-income commuters are less likely to use non-HOV transportation during peak hours.”

The car reins supreme for the executive commute. Seventy-eight percent of respondents said they drive. Mass transit only yielded 13 percent of the survey's responses, 5 percent said they walk to work and 1 percent said they ride a bicycle.

The Top Five cities where executives have the longest commutes are: New York (52.9 minutes), Boston (52.6 minutes), Philadelphia (51 minutes), Atlanta (47.8 minutes), and Chicago (46.7 minutes). The cities where executives have the shortest commutes are: Phoenix (30.7 minutes), Austin (32.6 minutes), Seattle (34 minutes), Denver (35.3 minutes), and San Diego (35.5 minutes).

"Following the most traffic-choked weekend in U.S. history, the workday commute may seem like a vacation, but it is a serious issue for many executives and their employers. In fact, 78 percent of our survey respondents said they would make a career decision based on commute time," said Marc Cenedella, president and CEO, TheLadders.com. "When weighing a great job offer against a potentially grueling commute, you have to ask yourself what kind of work you'll produce after battling traffic for two hours."

TheLadders.com's look at commuting is based on a series of independent surveys of registered $100k+ executives conducted on its Web site from June 17th through July 5th.
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Secure Funding eliminated its multiple sources of service providers to consolidate all needed products into one secure location.

Secured Funding’s retail operation orders all title requests through LSI, who also handles county recordings.  During the next few months, LSI will begin running credit for both the retail and wholesale divisions. 

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No Red Tape, Irvine Calif., launched its nationwide Commerce Velocity’s CQ BrokerConnect and Automated Underwriting platform. The two Web sites are designed to enhance No Red Tape’s 14,000+ brokers “experience” at the point of sale by providing them instant pricing, pre-qualification and full AU approvals complete with targeted conditions, stipulations and exceptions. 

The point-of-sale solution offers many features of importance to brokers. Chief is the ability to enter a few key points of information about a prospective loan and get back instant decisions about each of the products that qualify, or ‘fit,’ that loan scenario. The broker can then submit the loan for lock and full AU approval by uploading the 1003 and providing their credit reference number from their credit report. NRT can re-access brokers’ credit reports from multiple credit providers and provide the broker an AU approval with targeted steps and conditions. In addition, the broker will get real-time loan status via their pipeline view.

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Del Mar Database and Integrated Loan Services (ILS), San Diego, Calif., have teamed together to offer small-to-medium lenders tools with which to compete. QuickClose, one of these tools, is an efficient alternative to traditional title insurance that can reduce the time required to close a loan by up to 14 days. The time compressions could reduce the cost to the borrower by up to 40 percent of traditional title insurance cost.

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Fidelity National Information Services' LSI, Jacksonville, Fla., a division of Fidelity National Financial Inc., announced the conclusion of its pilot for Closing Stream, the Web-based closing product for mortgage refinance and home equity lending transactions. The pilot project confirmed that this patent-pending online closing process reduces loan cycle time, enhances borrower experience and ultimately increases lender revenue.

With Closing Stream, LSI controls the entire closing process, eliminating the need to coordinate third-party providers. Borrowers can schedule their closing earlier during the application process. Since this closing method is primarily Web-based, borrowers can participate in the transaction from any geographic location.

Prior to the scheduled closing, LSI sends the copies of the closing documents to the borrower via overnight delivery. The borrower is only responsible for returning one signed and notarized document to LSI. The returned document is combined with the original closing documents in preparation for the closing. At the scheduled closing time, the borrower logs into the Closing Stream system and dials a toll-free number to connect with an LSI closing representative. Using Closing Stream's online meeting application, the representative can cover each loan document to ensure the borrower understands all of the details.
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Meanwhile, Standard & Poor’s Ratings Services, New York, expects U.S. bank sponsors of ABCP conduits to be able to meet current domestic and proposed Basel II-related regulations without much further impact on the U.S. ABCP market.

"Having successfully tackled Financial Accounting Standards Board’s (FASB's) Interpretation No. 46-R (FIN 46) and consolidation issues, U.S. ABCP conduit sponsors are cautiously optimistic that they can meet the “eligible liquidity facility” requirements of Basel II, the S&P report said.

All U.S. banks providing liquidity to ABCP conduits need to be in compliance with the regulations of the Final Rule (set July 28, 2004) by Sept. 30. FIN 46-related regulatory relief came at a price that included a capital charge for liquidity ahead of the Basel II regulations.

Basel II, the revised version of the Basel Capital Accord of 1988, is a new agreement on regulations to assess risk on financial calculations. Its goal is to produce uniformity in the way banks and banking regulators approach risk management across national borders.

The imposition of a 10 percent credit conversion factor for eligible liquidity facilities is different than the proposed Basel II regulations and, from a competitive standpoint, is a disadvantage compared to non-U.S. bank providers of liquidity and credit to ABCP conduits, S&P said.

The report noted that banks with exposures to ABCP conduits are offloading credit risk exposures previously retained by liquidity facilities to prepare for Basel II and its likely implementation in their jurisdictions. Retention of any form of credit risk is subject to significantly higher regulatory capital charges under Basel II. Unrated exposures could be subject to a dollar-for-dollar capital requirement or a 1.25 percent risk weight. A bank’s exposure must qualify as an “eligible liquidity facility” to avoid new, higher regulatory capital charges, according to Basel II and related pronouncements.

For eligibility, the exposure must pass a “good assets” test, and liquidity banks cannot purchase assets that are externally rated non-investment-grade at the time of funding.

Most U.S. bank sponsors of ABCP conduits expect approval by their national regulators to follow the internal ratings based (IRB) approach under Basel II for their securitization exposures.

Under the IRB approach, banks can qualify to use the internal assessment approach (IAA) for their credit and liquidity exposures related specifically to ABCP conduits. Most liquidity facilities will be subject to a 100 percent credit conversion factor under the IRB approach, implying that the regulatory capital treatment will be the same for liquidity facilities as it is for credit facilities and other balance sheet exposures of the bank, S&P said.

"With a market size of about $800 billion, the importance of ABCP to the capital markets cannot be overestimated," S&P said. Conduit sponsors seem more optimistic than in years past, the report said. Despite the barrage of regulation related to capital adequacy on liquidity and credit facilities offered to ABCP conduits, 74 percent of market participants surveyed at the American Securitization Forum’s winter 2005 conference expected capital charges on liquidity to have a manageable effect on business.    

Liquidity facilities provided to ABCP programs under Basel II will be subject to a minimum regulatory capital cost of 56 basis points for IRB banks. Until the Final Rule takes effect, the current requirement is a zero percent risk weight if the liquidity facilities expire within one year.

Securities arbitrage conduits are now issuing extendible notes based on market value advance rates with limited or no liquidity and a limited extension period. Commercial paper's increasing popularity issued out of collateralized debt obligations (CDOs), and structures using repurchase agreements, diversifies funding and structural options more for issuers and originators using the ABCP market.

All of these structural innovations allow credit and liquidity providers to avoid the high capital charges associated with supporting more traditional ABCP, S&P said.

New capital charges on liquidity, tight spreads on extendible-note programs, and a seemingly incessant demand for warehousing financing in mortgage and other asset classes are the main motivations behind recent interest in structures that use the inherent cash flow or marketability of the assets.

The S&P report said extendible notes offer a "very attractive alternative liquidity solution" to these regulatory capital charges because a majority of them are structured with limited or no liquidity. Extendible-note outstandings have continued their steady upward climb over the past five years.

According to a Lehman Brothers’ June 24 announcement, outstandings of extendible notes now exceed $100 billion and currently constitute more than 12.5 percent of the total U.S. ABCP outstandings. Extendible notes represent 10 percent of the total ABCP market at year-end 2004, and nearly all market participants expect that share to increase significantly in the coming years.
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Bascom Arizona, a joint venture between The Bascom Group LLC of Irvine, Calif., and Multifamily Advisors LLC of Scottsdale, Ariz., completed the purchase in a joint venture with San Francisco-based Rockwood Capital.

The strategy for Glenn Daiutolo and Jerry Finney, co-managers at Multifamily Advisors, is to reposition Hacienda del Sol Apartment and make them affordable to new retail and office workers. Their goal is to acquire $400 million worth of multifamily properties in Arizona.

“Our target properties include everything from ‘A’ product to ‘D’ product, one-off assets to portfolios,” Daiutolo said. “We will even consider properties with low leverage, assumable conduit debt.”

Bascom Arizona Ventures owns 3,026 units in Arizona with an additional 976 units in escrow. It is seeking to acquire more properties in the Phoenix and Tucson metro areas.

“Overbuilding in the multifamily sector and new home construction averaging nearly 45,000 homes per year over the past several years has combined to significantly reduce cash flow,” Daiutolo said. “However, the recent decline in multifamily construction, strong job growth, and increasing interest rates bodes well for apartment demand.”

Finney, like Daiutolo, oversees asset management and renovations for the portfolio. He said Hacienda del Sol will meet the housing needs of retail workers at the new retail center near the property. “Their income levels will not meet the requirements of the other apartments in the immediate area,” Finney said. “Our plan is to renovate Hacienda del Sol and offer an affordable housing alternative.”

Diversified Partners is developer for the 660,000 square foot Santan Gateway shopping center, with more than 60 acres, and the 185,000 square foot Santan Plaza at more than 28 acres. The two shopping centers will add more than 845,000 square feet of new retail near Hacienda del Sol. Key anchor tenants include: Kohl’s Department Store, Wal-Mart Super Center and Sam’s Club. Also, the Chandler Municipal Airport is slated by Chandler to be developed as a large business park.

A mixed-use development project one mile north of Hacienda del Sol, will consist of residential for-sale housing, retail and office. Bascom Ventures said employment growth appears “extremely favorable for years to come.”

“After the necessary expenditure of capital to rehabilitate and improve the property, Hacienda del Sol will be the only affordable alternative for decent rental housing within a reasonable commuting distance for the influx of retail and office employees in the vicinity of the Loop 202/Arizona Avenue interchange," said Steve Hovland, director of asset management for Bascom Arizona.

The seller, a California based private investor, was represented by Marcus & Millichap, Encino, Calif. 

“The sale of a property like Hacienda del Sol is becoming commonplace with REITs [real estate investment trusts], pension funds, and private investors as they seek to sell older assets in commodity markets like Arizona and redeploy the funds in high barrier to entry markets with less volatility like the coastal markets in California and the East Coast,” Daiutolo said. “With the Arizona single family home prices escalating by 35 percent over the past 12 months, and single-family affordability on the decline, we expect a dramatic run up in rents over the next couple of years.”

Merrill Lynch Capital provided the acquisition financing for the transaction. Mitch Paskover in the Los Angeles office of Holliday Fenoglio Fowler L.P., Houston, secured the debt financing.  Tucson based Morrison, Ekre & Bart Management Services Inc. will be providing the third-party property management services. Commercial Services Building Inc., Anaheim, Calif., will provide the renovation work for Hacienda del Sol.

Hacienda del Sol, an 11.1 acre property built in 1985, consists of 17 residential buildings and features a large swimming pool and spa, a basketball court, a tennis court and a jogging/fitness trail. The four different floor plans range from 325 square-foot studio units up to the 654 square-foot two-bedroom / two-bath units.
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FEMA is in the midst of a $1 billion, five-year modernization plan to update its flood maps. At a hearing yesterday on Capitol Hill, officials from FEMA told the House Financial Services subcommittee on housing and community opportunity that the effort is addressing critical needs.

”We have completed mapping projects in nearly 1,000 of our most ‘at-risk’ communities, and Flood Mapping Modernization projects are underway in over 2,100 other communities,” said David Maurstad, acting director of FEMA’s mitigation division. “Our goal is to have the nation’s flood map inventory modernized by 2010, with all maps in a GIS format and available online. Equally important, we will have a comprehensive and robust risk identification and assessment system, allowing us to more readily track–over time–the nation’s ability to reduce flood vulnerability.”

In June of 2004, President George W. Bush signed into law legislation reauthorizing the National Flood Insurance Plan through September 2008. The Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of 2004, which had support from the Mortgage Bankers Association, enacted reforms that deal with repetitive loss properties and flood mitigation.

But since then, subcommittee Chairman Robert Ney, R-Ohio, has been critical of the program. In an earlier hearing in April, Ney said “administrative problems still exist” within the program. Among those problems was that FEMA was working with outdated maps. The subcommittee’s ranking Democrat, Rep. Maxine Waters, D-Calif., said that in some cases, FEMA was working with maps that were nearly two decades old.

The current maps, Ney said, ”reflect outdated data that could affect the ability to accurately identify current flood hazard areas.”

The Government Accounting Office, in a report submitted to the subcommittee, noted that while FEMA’s strategy is designed to support the program, its approach to implementing the strategy raises ”several concerns” that could hamper the agency’s efforts. Specifically, GAO said FEMA has ”not yet established clear standards for the types, quantity and specificity of data collection ana analysis associated with different levels of flood risk.”

GAO also said that while FEMA has developed a strategy for partnering with local, state and federal agencies, it does not have a ”clear strategy for partnering with agencies that have few resources, limited mapping capability and little history of flood mapping activities.”

In response, Maurstad noted that ”there is no ‘one size fits all’ solution to identifying the nation’s flood hazards. Obviously, the nation cannot resolve its natural hazard issues with a single, universally applied approach. This country’s geographic diversity–combined with its variety of natural hazard threats–requires us to apply, mix and match a series of processes to effectively identify hazards, communicate risks, and reduce vulnerability.”

For example, Maurstad said, in the arid West, streambeds can lay dry for years, yet these innocuous features can release torrents of water, without warning, after a brief thunderstorm. “On the other hand, in the East, where it rains regularly and vegetation is thick, rivers that flow year-round tend to take days before reaching their peak. Along our coasts, the hazards also vary widely. In the South Atlantic and Gulf, hurricanes strike quickly compared to long, drawn out, extra-tropical storms that can pound the northeastern shores for days,” he said.

Maurstad said FEMA “seeks information at the local level; we work very closedly with the communities—it’s our mutual benefit that this be done. We literally sit down at the table with teh communities that are responsible and work through these various issues, point-by-point.”

Part of the problem with FEMA’s ability to meet new standards, said James Williams of the Association of State Floodplain Managers Inc., Madison, Wis., is that the $1 billion allocated for the mapping update project isn’t enough.

”The program needs $3 billion,” Williams said. ”Will that [amount] give us gold-plated maps? No, but it will enable us to pass the ”red face” test—in other words, maps that the public would have confidence in their accuracy, maps that wouldn’t show a home 40 feet up a hillside as being in the floodplain.”
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