Craig Focardi, director at Tower Group, Needham, Mass., and author of “Brother, Can You Spare A Dime? Disparate Impacts of Bankruptcy Reform on Retail Lenders,” said Fannie Mae, Freddie Mac, GMAC-RFC and other mortgage investors and guarantors such as private mortgage insurance (PMI) “may not reimburse additional bankruptcy costs until they collect sufficient loss experience data.” The result would bring higher attorney fees and, therefore, higher unreimbursed costs to loan servicers, the report said.

The report noted that retail lenders will need to retrain collections staff, update collections policies and procedures and adjust collections systems to meet the new state income means test of the new act. For example, Chapter 7 eligibility requirements include annual income of equal or less than 100 percent of the state median under the new Act. Chapter 13 requires greater than 100 percent of the state median income and at least $100 in discretionary monthly income after living expenses and priority payments.

The new law makes it more difficult to file for Chapter 7 and "extinguish" unsecured debt. The report noted that Chapter 13 filings allow debtors to pay back a larger number of creditors under the new law.

Focardi said that in the past decade, the mortgage industry has created “fair and flexible workout plans,” but that mortgage servicers will need to adjust their collection procedures and policies. They will need to train staff and adjust systems by October because real estate will experience longer delinquency periods on loans in bankruptcy as repayment periods increase on unsecured debt from 36 months to 60 months, according to the report. “Loan servicers will have to track existing bankruptcies filed under current law concurrently with the new Act beginning in October 2005,” Focardi noted.

Focardi added that the new law will slow growth in the nonprime market because “it will be harder to file for bankruptcy and will take longer to exit bankruptcy. Financial literacy courses can be a leading indicator of a borrower’s future intent to file for bankruptcy,” he said. “[Borrowers] need to get financial education before they file.”

Under previous law, second-lien equity debt was wiped out when borrowers defaulted and lenders foreclosed, but Tower Group expects home equity lenders to change their collections strategies to try and recover a portion of secured debt outstanding. “In this environment, bankruptcy scoring becomes more important for servicers,” Focardi said.

“It’s a pretty good assessment,” said Vicki Vidal, senior director of government affairs at the Mortgage Bankers Association.  “This might not delay the foreclosure process unless someone wants it to. But we are going to have to see how this plays out.”

According to the report, the servicer changes based on the new law will present “new opportunities for IT vendors to provide automated solutions and analytics.”

“Although the technology impacts are not great, mortgage lenders and servicers and the vendors that serve them have only until October to change systems and processes to be compliant with the new Bankruptcy Act,” the report said.
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The study, conducted by the Chicago-based National Association of Realtors, found out of the 986 Realtors who participated in the 2005 Profile of International Home Buyers in Florida survey, 87 percent said that they did at least one home sale transaction with international buyers in the previous 12 months (between May 2004 and May 2005). Two-thirds, 66 percent, of those Realtors who brokered foreign-buyer purchases said that one to four of all their transactions were with international clients. Altogether, the Realtors surveyed closed 1,844 home sale transactions to non-U.S. buyers.

In all, citizens of more than 100 countries purchased home in Florida. The majority were European buyers, making up 58 percent of the home purchases. More than half of the buyers were based in the United Kingdom , the report said, accounting for one-third of all international purchasers.

Another one-third of international buyers were from Latin America, including South America, Central America and the Caribbean . Spanish and Portuguese-speaking buyers from that region accounted for 29 percent of the total, the report said.

More half of the homebuyers financed their home purchase with a mortgage. However, 36 percent paid cash. This finding was significantly different from the results of NAR’s 2004 Profile of Home Buyers and Sellers , which found only 8 percent of all domestic homebuyers paid cash. The report one disparity explaining the use of cash to purchase homes could be because of international buyers do reside outside the U.S.

Most buyers chose South Florida, Central Florida or the Gulf Coast. Almost one-third (30.4 percent) bought a home in Miami-Fort Lauderdale, followed by Orlando (22.7 percent), Naples-Fort Myers (13.7 percent), Tampa-St. Petersburg (9.9 percent), Sarasota (9.9 percent) and West Palm Beach (5.8 percent). Only 7.6 percent of foreign buyers bought homes elsewhere in the state, the report said.

According to the study, foreign buyers purchased homes to use as a vacation home (38 percent) or as an investment (37 percent). Only 17 percent purchased a home to live in while traveling to the United States. on business.

Other reasons non-U.S. residents purchased homes include low mortgage rates, more house for the money, the U.S. is seen as politically stable, airfares are generally affordable and the rise of the Euro has spurred travel to the U.S., the report said.

For the survey, FAR defined a foreign homebuyer as someone who principally resides in another country (outside the U.S.), and is not classified as a foreign-born resident of the U.S. International buyers are not U.S. citizens (either naturalized or native-born and living outside the U.S.), a U.S. immigrant or a foreign student or worker on a temporary visa.
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In its report titled "2005 First Half Review and Second Half Outlook,” Moody's said it expects CMBS issuance volume to grow to around $42.3 billion to $48.3 billion by the end of 2005, with more transactions in continental Europe because of an increase in CMBS conduit platforms within the past two years. "The focus of CMBS loan origination is in the U.K. However, it is expected that greater contributions will be made by Germany, Italy and some additional European jurisdictions," said Antoine Corpet, Moody's analyst and author of the report.

The Moody's report highlighted recent trends in the European CMBS market, including an increase in borrower requests for flexibility of portfolio substitutions, A/B note structures to reduce leverage on securitized loans, modified pro rata principal allocation of prepayments and conduit transactions that involve co-pooling of several originators.

Standard & Poor's Ratings Services, New York, reported A/B structures in European CMBS transactions as increasingly common in Europe. The trend is primarily based on more competition in the real estate lending market, said Jonathan Braidley, credit analyst and a director in the structured finance ratings group at S&P in London. "Lenders that intend to securitize their loans have thus been seeking ways to balance the need to offer high leverage with the desire to optimize the securitization execution," Braidley said.

Deals ranged from $56.56 million to $3.6 billion with an average size of $592 million for 28 CMBS and multifamily transactions closed during the first half of the year, according to the Moody’s report. In the first half of 2004, 14 deals closed with an average size of $604.3 million. Moody's said that U.K. issuance maintains a dominant share of the market with $14.74 billion from 17 deals, followed by the Netherlands, Germany and Italy which ranged from $1.2 billion to $1.04 billion, respectively. Moody’s excluded Italy’s $5.3 billion Societa Cartolarizzazione Immobili Pubblici.S.r.l. (SCIP 2) deal in the issuance volume.

Office and retail properties continued as dominant collateral security in the first half of 2005, at 42.8 percent for office and 37 percent for retail, the report said. Retail property in CMBS transactions increased significantly, assisted by falling property yields in the retail sector, according to the ratings agency.

Multiple borrower issuance deals increased to $4.1 billion in the first half of 2005 compared with $2.3 billion in the second half of 2004. Large single borrower transactions increased to $15.95 billion from $5.68 billion over the same period of time, the report said.

Moody's noted that no synthetic transactions closed in 2005, but it expects some synthetic issuances from continental Europe during the second half of the year, based on the rating agency’s pipeline.
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Both Summersville Place and Wheeling Station provide affordable housing and are subject to Section 8 Housing Assistance Payments (HAP) Contracts. The refinancing reduced mortgage interest rates on the properties. The borrowers had more than 400 basis points in debt service savings.

The loans were processed through the HUD-Charleston office. James Flinn, director of Red Mortgage Capital Inc., said, “The borrower [was able] to take advantage of the attractive interest rate environment, resulting in a significant reduction in annual debt service payments.”

Summersville Place, a 102-unit, three-story project located nearly 40 miles northeast of Beckley, W.V., was built in 1981 and financed with FHA Section 221(d)(4) mortgage insurance. Red Mortgage funded the $3,192,500 refinance loan using an FHA Section 223(a)(7) expedited refinance program for existing FHA insured loans.

Wheeling Station, located in Wheeling, W.V., is a 60-unit property. It also refinanced through FHA’s Section 223(a)(7) program. Red Mortgage Capital processed and funded the $1,943,000 refinance loan for the eight, two-story apartment buildings, originally constructed in 1982.
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For additional information please contact Beth Percynski at 202-557-2866 or bpercynski@mortgagebankers.org. This call is open to MBA members only and is closed to the media.
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Congress Holds TRIA Hearings

At both hearings, Snow reiterated the Administration’s belief that continuation of the program in its current form would likely hinder the further development of the private insurance market. However, Snow told the Senate committee that the Administration would support an extension of TRIA, so long as the “event size” that triggers coverage increased to $500 million, and deductibles and co-payments increased.

The Mortgage Bankers Association submitted statements  for the record of each hearing, urging Congress to extend TRIA. Following the Senate hearing, Senate Banking Committee Chairman Richard Shelby, R-Ala., expressed his belief that Congress will pass some form of a terrorism insurance program this year, and stated that the Senate would likely consider such legislation after the August recess. MBA will continue to urge Congress to pass an extension or reauthorization of TRIA this year.

For more information, please contact Josh Denney at (202) 557-2816 (jdenney@mortgagebankers.org).

GSE Oversight Reform Update
The House Financial Services Committee this week filed its report on H.R. 1461 , the House GSE oversight reform bill. The bill was subsequently referred to the House Judiciary Committee. 

Though the Judiciary Committee has the right to take up the bill at any time, it is unlikely that it will do so. House rules prevent the bill from being brought to the House floor until the Judiciary Committee discharges it. If the Judiciary Committee fails to act, the bill will be automatically discharged on September 16. 

Meanwhile, in the Senate, Banking Committee Chairman Richard Shelby, R-Ala., indicated Thursday that he hopes to move GSE reform legislation through the Banking Committee during the last week of July.

Rep. Richard Baker, R-La., and the Conservative Caucus will meet today, July 18, to work out differences on the affordable housing trust fund, which is included in the bill. Until those differences are resolved, it is highly unlikely that the bill will move.

For more information, please contact Erick Gustafson at (202) 557-2913 (egustafson@mortgagebankers.org).

MBA Participates in HUD RESPA Roundtable
On July 14, HUD held the first of six Real Estate Settlement Procedures Act (RESPA) Reform Roundtables. A range of industry, consumer and government groups as well as individual lenders and settlement service companies attended the meeting. MBA Chairman Elect Regina Lowrie and Senior Director Ken Markison represented MBA at the roundtable.

During the meeting, HUD described key provisions of the 2004 rule that HUD sent to the Office of Management & Budget (OMB) and later withdrew. HUD also handed out copies of revised documents that were included in the 2004 rule but were not released to the public, including a revised Good Faith Estimate (GFE) form and Mortgage Package Offer (MPO) form that replaced the Guaranteed Mortgage Package Agreement (GMPA). HUD paid particular attention to describing a Settlement Services Package (SSP) that could become part of a Mortgage Package Offer(MPO).

The roundtable included a facilitated discussion where various groups responded provided views on the GFE and packaging as well as whether Home Ownership Equity Protection Act (HOEPA) loans should be included in any packaging proposals. MBA indicated that it favors simplification of the process and regulatory relief and believes that any simplification should extend to all borrowers. MBA strongly emphasized that since its members give out the disclosures and bring the funds to the table, they are unique stakeholders in the process by virtue of the risk assumed in each transaction.

MBA also emphasized that any rule proposed by HUD must facilitate and not hinder the natural evolution of the markets toward simplified pricing. Recent conversations with HUD insiders indicate that HUD Secretary Alfonso Jackson is aiming for re-proposal of the rule in early 2006.

For more information, please contact Ken Markison at (202) 557-2930 (kmarkison@mortgagebankers.org).

President Bush Signs Do-Not-Fax Legislation
On July 9, President Bush signed S. 714 , the “Junk Fax Prevention Act of 2005,” which allows mortgage lenders to continue to fax "rate" sheets without obtaining prior permission from mortgage brokers with whom they do business. MBA strongly supported this legislation, which was introduced by Senator Gordon Smith, R-Ore.

The Act essentially nullifies a provision in a 2003 law that would have required lenders to get express written permission from individuals and businesses before sending a fax. The law also restores an exemption for sending unsolicited faxes to individuals and entities where there is an existing business relationship.

MBA successfully petitioned the Federal Communications Commission to postpone the effective date of the Act for two years and was instrumental in getting the legislation passed.  

For more information, please contact Vicki Vidal at (202) 557-2861 (vvidal@mortgagebankers.org).

House Holds Hearing on Flood Insurance
The House Financial Services Housing and Community Opportunity subcommittee, held a hearing on July 12 on the flood map modernization program being conducted by the National Flood Insurance Program (NFIP). The NFIP is administrated by the Federal Emergency Management Agency (FEMA). 

The hearing focused on a $1 billion flood map modernization initiative at FEMA to update, revise, and convert over 100,000 paper flood maps to a digital format. The hearing also addressed FEMA’s ability to complete the project at current funding levels, as well as the strategy for making the best use of available resources.

Last year, in a significant victory for MBA, President Bush signed S. 2238 , the "Flood Insurance Reform Act of 2004," which extended the NFIP through September 2008. The program was set to expire that same day. This four-year extension eliminated the annual scramble to reauthorize the program.

For more information, please contact Renee Rappaport at (202) 557-2758 (rrappaport@mortgagebankers.org).

MBA Participates in Democratic Governors Association Summer Policy Conference
MBA President and CEO Jonathan Kempner and Senior Director of Government Affairs Paul Richman attended and participated in the Democratic Governors Association Summer Policy Conference this week in Dearborn, Mich. The topic of the conference was “Sustaining a Healthy Economy in the 21st Century.”

The conference also included a panel that focused on housing issues, which was attended by Michigan Gov. Jennifer Granholm (D), Wisconsin Gov. Jim Doyle (D), Tennessee Gov. Phil Bredesen (D) and Pennsylvania Gov. Ed Rendell (D). At this session, MBA presented an overview of the state of industry and addressed the issue of the national “housing bubble” and discussed the recently released three-year economic forecast, the increased use of innovative new loan products, the need to provide more financial literacy and education for borrowers and the current debate in Congress over the reauthorization of TRIA. 

MBA also presented its views on key policy issues that are currently the focus of much state legislative and regulatory activity, including predatory lending, loan originator licensing, and the upcoming release and analysis of the 2004 Home Mortgage Disclosure Act (HMDA) data by the Federal Reserve Board. 

For more information, please contact Paul Richman at (202) 557-2899 (prichman@mortgagebankers.org).

FASB Agrees with MBA Position on Loan Commitments
On July 13, MBA sent a letter  to the chairman of the Financial Accounting Standards Board (FASB) seeking confirmation of MBA's position that FAS 133 requires only "rate lock" loan commitments to be accounted for as derivatives.

MBA sent the letter to support the industry's response to an Interagency Advisory, "Accounting and Reporting for Commitments to Originate and Sell Mortgage Loans," which states that "unlocked" as well as "rate lock," commitments for the origination of loans to be held for sale are derivatives under that Statement. The Advisory was released by five regulatory agencies (the OCC, Fed, FDIC, OTS and NCUA) on May 3.
 
The FASB responded to MBA's letter in a call received Friday. According to two senior FASB staff, the term "loan commitment," as the term is used in paragraph 6 of FAS 133, is a reference to a "rate lock" commitment, as maintained in MBA’s letter (see (1) of the letter). Consequently, the staff concurred with MBA's position that only "rate lock" commitments should be accounted for as derivatives. At the staff’s suggestion, MBA will be communicating this clarification to the regulators later today.

For more information, please contact Alison Utermohlen at (202) 557-2864 (autermohlen@mortgagebankers.org).

HUD Deputy for Multifamily Housing Resigns
Stillman Knight, deputy assistant secretary for Multifamily Housing at HUD, announced that he will be leaving the department effective July 22. Knight will be joining the NHP Foundation as executive vice president.

The NHP Foundation is a national nonprofit organization formed in 1989 to increase the quality and quantity of affordable housing. NHPF has a portfolio of more than 6,500 units.

To date, a successor for Knight has not been named and it is unclear who will be acting in the position after July 22.

For more information, please contact Steve O’Connor at (202) 557-2867 (soconnor@mortgagebankers.org).
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The House Financial Services Committee holds two other hearings this week. On Tuesday, July 19, it and the Committee on Resources hold a joint hearing on “Improving Land Title Grant Procedures for Native Americans” (11:00 a.m. EDT, 2128 Rayburn).

On Thursday, July 21, the subcommittee on Oversight and Investigations holds a hearing on “Credit Card Data Processing: How Secure is It?" (10:00 a.m. EDT, 2128 Rayburn).

On July 20, The Information Policy Institute and Experian present a panel to discuss the findings of a new study, outlining alternative financial data to help the underserved access the mainstream credit market. The report, “Giving Underserved Consumers Better Access to the Credit System—The Promise of Non-Traditional Data,” takes place at 8:30 a.m. EDT at the National Press Club in Washington, D.C.

House 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 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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