The regulation, effective 30 days from publication, also requires Fannie Mae and Freddie Mac to maintain “adequate internal controls, procedures and training programs” to assure an effective system to detect and report actual or possible mortgage fraud.

"The regulation makes transparent OFHEO's oversight of Enterprise initiatives to detect mortgage fraud at the earliest possible time," said OFHEO Acting Deputy Director Alfred Pollard. "This oversight, coupled with Enterprise efforts, will send a clear message that fraud will be actively resisted by the companies and their regulator. We believe the Enterprises are committed to this effort.”

OFHEO's examination force will review information received, which will help in assessing internal controls, security efforts, management of risks, and other factors at Fannie Mae and Freddie Mac, Pollard said. In addition, OFHEO is developing a process for sharing relevant mortgage fraud information with other federal agencies.

Pollard said OFHEO received assistance from the Federal Bureau of Investigation, the Department of the Treasury and the Financial Crimes Enforcement Network (FinCEN), as well as support of members of the President's Corporate Fraud Task Force. 
 
In addition to the final regulation, OFHEO has finalized a Policy Guidance detailing procedures for implementing the regulation.

Complete text of the final regulation can be found at:
(www.ofheo.gov/media/pdf/finalmortfraud72505.pdf)

And the Policy Guidance at:
(www.ofheo.gov/media/pdf/pgmortfraud.pdf)
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According to a report, "Structured Finance Global Ratings Roundup Quarterly: Second-Quarter 2005 Performance Trends," by Standard & Poor's, the 45 performance-related downgrades exceeded the former high of 31, which occurred during the first quarter of 2000 and again in the first quarter of 2005. Including the 351 rating actions initiated on U.S. RMBS deals during the recent quarter, Standard & Poor's has initiated 775 performance-related rating changes during 2005 through June 30.
 
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SouthStar Funding, Atlanta, enhanced its correspondent-lending offering by combining its Correspondent Partnership Division with its Loan Acquisition Group to become the Correspondent Lending Group. The Correspondent Lending Group targets community and regional banks, credit unions, mid-size mortgage lenders, mortgage brokers and homebuilders.

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According to a survey by Campbell Communications, mortgage capture rates of most real estate firm-lender partnerships are surprisingly low.
 
The report, “How Real Estate Agents View Relationships with Mortgage Providers,” revealed real estate agents appear to be losing influence with home purchasers. The survey found that real estate agents currently control or influence the choice of mortgage providers in less than 40 percent of home purchase transactions. 

Real estate and lender partnerships, and how the ventures are structured were among the survey findings. For example, a 63 percent of responding real estate agents said their firms partnered with one or more mortgage providers. However, at least 16 percent of these arrangements were classified as informal.
 
Of the real estate firms involved with partnerships, 71 percent reported the arrangement was exclusive with just one mortgage provider. The balance involved partnerships with two or more mortgage providers.
 
The survey also found that few real estate agents with mortgage partnerships recommend just one lender to home purchasers. At firms with exclusive partnerships, 78 percent of responding real estate agents said they recommended multiple mortgage providers to homebuyers.
 
Real estate agents indicated that a mortgage partnership was not a primary consideration in recommending a mortgage lender. Rather, things such as good service and dependable closing dates were among the most important factors cited by agents when it came to recommending a mortgage provider. 
 
The survey was conducted in May of more than 1,700 agents and brokers for Inside Mortgage Finance.
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As industrial demand picks up, there is nonetheless concern with the pace of new industrial development, according to TWR analyst Laura Stone Mortimer, the report’s author. New construction is of particular concern in the large distribution/path-of-goods markets where building seems to be occurring to satisfy investor demand, as opposed to tenant demand, she said.

“The disproportionate amount of supply completed in comparison to net absorption in some of the larger distribution markets is setting off alarm bells,” Mortimer said. “Unless new supply slows and net absorption accelerates, these markets will see a slower pace of progress in returning market fundamentals back to their long-term averages.”

Growing optimism among investors is fueling a spike in sales and offerings of warehouse and flex properties, the report said. Both subproperty types saw a spike in sales that is greater than any other property type and 83 percent higher than just one year ago, according to Real Capital Analytics.

Through May, a total of $10.1 billion in industrial transactions occurred, according to Real Capital Analytics. The number of properties sold is already 48.0 percent higher than the first five months of 2004 totaling 666. The average price per square foot has increased to $63 from $52 one year ago and the average cap rate has declined 30 to 40 basis points (bp) to 8.0 percent.

“Rising prices along with improving market conditions is making the industrial market all the more tempting to investors relative to other core property types,” Mortimer said. “There is also a growing sense of optimism among investors as the sector recovers and investors become less risk averse. Nevertheless, will this growing enthusiasm prove to be the industrial recovery’s downfall?”

New warehouse development is far ahead of where one would expect based on prevailing market conditions. Since 2000, there has been 568 million square feet (msf) of new warehouse space completed. TWR tracks 54 major markets totaling 6.8 billion square feet (bsf) of warehouse space, of which 8.4 percent is new space, built since 2000. The single-tenant component of the new space completed is about 40.0 percent.

During this time, growth in supply has outpaced new demand almost 2-to-1, with only 268 msf of new warehouse absorption since 2000. This imbalance is prolonging the recovery in rents and availability in many markets. The top 10 markets for new supply are listed in the above table. These markets account for 56.0 percent of the new supply completed since 2000.

Breaking out the distribution of new space built by size and type of tenancy shows that the majority of new space completed is either less than 250,000 sqft or greater than 400,000 sqft. There is also more single-tenant warehouse space built in both Los Angeles and Riverside than multi-tenant.

“This is surely due to the increase in imports from China that are coming into the country through this major port,” Mortimer said. “As a result, more distribution facilities are being located in the less dense area of Riverside to accommodate the influx of goods. This disproportionate number of single-tenant completions is also accounting for the low availability rates in these areas, which remain the lowest in the country.”

Other markets that also have a large influx of single-tenant space include Atlanta and Chicago. Both markets have experienced supply outpacing demand since 2000 and as a result are experiencing high availability rates and a slow pace of rent growth, Mortimer said.

TWR expects 123 msf of new space anticipated to be completed in 2005, with the pipeline showing 194 msf in planning stages. “Beyond what is on the drawing board today, and given the enthusiasm of investors to enter the industrial market, one wonders if developers might accommodate investors by increasing the pipeline even further in order to give these folks something to purchase,” Mortimer said.
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"This was a relatively straight forward deal with a strong asset in a tremendous submarket," said Bill Asbill, senior managing director at HFF. He and Bob Donhauser, also a senior managing director, worked with director Cary Abod to secure a 10-year, 5.19 percent fixed-rate securitized loan through J.P. Morgan Mortgage Capital, New York, a conduit lender.

The borrower, an entity of Guardian Realty Investors, received a loan with a 30-year amortization schedule after a five-year interest-only period. It was based on an 80 percent loan to value (LTV).

In 2004, Donhauser and Asbill, arranged financing on neighboring 8609 Westwood Center Drive. Guardian Realty Investors owns and manages more than 30 office buildings in Washington, D.C., northern Virginia and suburban Maryland.

"The strength of the borrower was also very important," Abod said. "Guardian has a portfolio of 2.1 million square feet and is very well capitalized.

8619 Westwood Center Drive is currently 100 percent occupied by tenants, including Liberian International Ship, Corporate Registry and NaviSite. It has 358 covered and surface parking spaces. The property is located in Tysons Corner, close to Washington, D.C., the airports and suburban Maryland.
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• Gen. Colin Powell, USA (Ret.) keynotes the convention’s Opening General Session on Monday, October 24. Powell, most recently Secretary of State under the Bush Administration, is one of the nation’s most celebrated military and political figures of our time.

• Former President Jimmy Carter keynotes the Third General Session on Tuesday, October 25. Carter, the nation’s 39th President and winner of the 2002 Nobel Peace Prize, is also widely known for his efforts with Habitat for Humanity, of which MBA is an active supporter and participant.

• Syndicated columnist George Will headlines the Chairman’s Luncheon on Monday, October 24. Will, whose column appears in The Washington Post and dozens of other publications, has been syndicated since 1974 and is a regular contributing editor of Newsweek magazine.

• Officials from Fannie Mae and Freddie Mac address the Second General Session on Monday, October 25. This session brings together executives from the GSEs to discuss how the changing business landscape is affecting your business and the industry. From new technologies to changing borrower demographics, the role of the GSEs is constantly evolving.

• Longtime basketball coach Pat Riley headlines the annual Sports Luncheon on Tuesday, October 25. Riley, most recently head coach of the Miami Heat, also had stints as coach of the Los Angeles Lakers and the New York Knicks.

• The annual Club MBA on Tuesday, October 25 features the dance music of K.C. and the Sunshine Band. Tickets are going fast for this event.

• MBA Chief Economist Doug Duncan delivers the keynote address for the Fourth General Session on Wednesday, October 26. Duncan will provide a forecast of our economic future and what it means to the industry. Additionally, he addresses the ongoing technology evolution of the real estate finance industry.

Registration is taking place now. For more information, visit the convention Web site at http://events.mortgagebankers.org/92nd_annual.
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Verid Inc., Fort Lauderdale, Fla., has developed a method to authenticate a person's identity through a series of multiple-choice questions that can be used through a call center or via the Internet. The application service provider (ASP) uses data obtained through multiple sources and its own internally developed software to create a series of questions for the person being verified to answer.

"Our customers connect to us by the Internet," said Chris Rickborn, COO of Verid. "They send us some information, a name and address; it could include a social security number, date of birth, whatever their particular configuration would require. We will use that information, validate that information, we will use it to find additional information about the person."
 
Verid then runs a process, which creates questions and answers about an individual and builds what the company calls an "authenticating session" for the individual. "We say, 'Here are three questions we want you to ask this person and here's the possible answers they could give.' We do things on a multiple-choice type of method where we give them the possible answers and the consumer has to select which one is right."

"If you look at the fundamentals of authentication, you can break it down into three categories: something that you are, your DNA or fingerprint; something that you have, your driver's license or passport; and something that you know," Rickborn said.

According to Verid, Knowledge Based Authentication (KBA) is least-expensive and least-intrusive to the customer. While some companies use shared secrets, which include data such as mother's maiden name or city of birth, Verid implemented the use of modern KBA technology by mining information about an individual spanning many years. For example, they may ask where someone you are related to might live.

"We really approached it from a standpoint of authenticating someone during a session," Rickborn explained. "In other words, we use a similar concept that has been around for a while, which is challenging an individual to answer some questions about their background in order to be authenticated. Now, the difference is the way you go about doing it. It's not necessarily what kind of data you use or whether it's in-wallet or out-of-wallet. The processes wrapped around trying to verifying the mental fingerprint of someone. What that means is being able to challenge an individual with some information, with some questions, that are top of mind, non-intrusive, but at the same time, not something that anyone else should be able to answer about that individual."

As consumers become more wary of providing personal information over the phone or the Internet, Verid's method provides consumer protection. Most systems use information from credit reports to verify information. "The problem with that process is that someone has the credit file. The second problem with it is it typically, information from a credit file is not something that individual consumers like to discuss with someone they don't know or enter that information into a form online," Rickborn said.

"We are protecting both the business and the consumer because we are protecting the business from some potentially fraudulent transactions but we're also protecting the customer because the call center agent never knows what answers were right or wrong," Rickborn added. "When the consumer provides the answers, all the call center agent would see in a response from Verid would be a pass or fail."
 
"After they provide the information, our customers cannot see the data, it is not stored and provide where our clients can see it. If you think about the issues out there today of information being mishandled this is a process that limits the amount of person information that is exchanged, stored and handled. It's a very clean and secure type of interchange."
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