Consumption spending growth was healthy, the housing market has remained a major contributor to growth, and both business investment and the trade sector improved. The inventory decline sets up for a stronger pace of growth in the second half of this year, as businesses will need to boost production in order to meet demand.

Inflationary pressures are contained. The personal consumption expenditures (PCE) price index picked up in the second quarter, largely from higher energy prices.  Excluding the volatile food and energy items, the core PCE (the Federal Reserve’s favorite measure of inflation) decelerated sharply to 1.8 percent in the second quarter from 2.4 percent in the first quarter (SAAR).

The Bureau of Economic Analysis also revised historical data from 2002 to 2004 as part of its annual revision. The revision indicated that the economy grew at an annual average of 2.8 percent between 2002 and 2004, compared with a previously reported 3.1 percent. The inflation trend was also slightly higher.

A separate report last Friday indicated that wage pressures have remained dormant in the second quarter. The year-over-year increase in the employment cost index (ECI)—considered to be the best gauge for labor cost inflation—was the smallest since the third quarter of 1999. The Fed has recently expressed concerns about inflationary pressures stemming from the gradually tightening labor market. The ECI data suggest that labor cost inflation remains benign, despite the currently low unemployment rate of 5.0 percent.

Long-term yields have trended higher since the end of June on signs of stronger economic growth. The yield on 10-year Treasury notes edged higher from Thursday’s close of 4.20 percent on the solid GDP report. The yield continued to rise further after the Chicago Purchasing Managers' Index (PMI)—a barometer for business conditions in the Chicago area—surged by nearly 10 points after three consecutive months of decline. The 10-year yield hovered around 4.28 percent by mid Friday afternoon.

This week will be bookended by two market-moving reports: the July Institute for Supply Management (ISM) Manufacturing Index, a gauge of the nation’s manufacturing conditions (Monday) and the July employment report (Friday).

The Chicago PMI report, combined with other regional manufacturing indices released earlier, suggests an improvement in the ISM index. The weekly initial unemployment claims—a leading indicator for payroll employment gain—were distorted by the annual retooling shutdowns in the auto industry in July, making it more difficult to estimate the July payroll employment gain. We expect a payroll gain of around 185,000.

(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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"When I started my business, I took a significant risk by venturing into an unfamiliar and somewhat unknown industry," said Judi Henderson-Townsend, founder and president of Mannequin Madness, a mannequin recycler in northern California."Four years later, I am looking to expand my business to other cities. I am confident about this next step, as I believe in this business and am willing to take smart risks to ensure its future success."

More than 400 women business owners surveyed were asked to determine whether they would take substantial or above average risks in regards to their business. Almost one of every four surveyed (21 percent) said they were willing to take substantial financial risks expecting substantial returns when saving or investing for their business, while 45 percent were willing to take above average financial risks expecting above average returns.

"This report shows that, contrary to common belief, women business owners are indeed willing to take financial risks in order to expand their businesses," said Marjorie Alfus, chair of the Center for Women's Business Research. "In fact, two-thirds of the women in this study were willing to take above average or substantial risks to achieve their growth goals. The success of their risk taking is documented in the dynamic growth rates—employment by women-owned businesses expanding at twice the rate of all businesses (24 percent versus 12 percent) and revenues growing 17 percent faster than all businesses."

However, risk-taking among women business owners looking to expand their businesses is significantly higher than those who are not. This is particularly true of women business owners who seek external capital to expand their business and of those who had successfully sought this type of funding in the past.

Twenty-five percent of expansion-oriented business owners are willing to take substantial financial risks and an additional 51 percent are willing to take above average risks.

Risk-taking was consistent among all types of women-owned businesses in the study, regardless of company size, age of business or personal characteristics of the business owner (age, education, ethnicity, etc.).

"As women-owned businesses continue growing at twice the national average, it's important for us to understand the unique factors behind their growth," said Joy Ott, regional president for Wells Fargo Bank in Montana and national spokesperson for Wells Fargo's Women's Business Services program. "Entrepreneurial culture defines this country and the spirit of small business owners in the United States today, and nowhere is this better personified than in women business owners."
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Parklands Manor Associates LP, the borrower, received an $11.8 million refinance loan for Parklands Manor & Garden Village Apartments in Washington, D.C. The loan was structured as a five-year term with an optional sixth year and a 30-year amortization. It was underwritten to a 62 percent loan-to-value (LTV). Green Park Financial funded the loan using a six-month extended rate lock option. The option allowed the borrower to lock the rate in on November 2004 and close at the end of May 2005.

Clare McCabe of WCS Mortgage, a Green Park Financial preferred correspondent, originated the loan.

Parkland Manor and Garden Village Apartments consist of 573 garden-style units that were built in 1953 and renovated in 1995.  The properties are part of the six-community Villages of Parklands. A community center, tax credit office and Covenant House provide various social service programs on site.  Other amenities include six playgrounds as well as a Splash Park and New Image Daycare Center.

Green Park Financial provided a $10.3 million refinance loan for Woodmill I Apartments in Dover, Del. The loan, structured as a nine-plus-one with two years interest-only term, has a 30-year amortization. The loan closed 30 days from application and was underwritten to a 65 percent LTV.

Brad Johnson of Carey, Kramer, Pettit & Panichelli, a Green Park Financial preferred correspondent, originated the loan.

Woodmill I Apartments consists of 180 units in six garden-style buildings. The apartments are the first phase of a two-phase property that is marketed as Woodmill Apartments. 

The adjoining phase, Woodmill II, is subdivided and has 258 units. Green Park financed Woodmill II in 2003 as part of the Baytree & Woodmill II transaction. The clubhouse, fitness center, pool, and tennis courts are located on the site of Woodmill II.

Green Park also funded a $4 million refinance loan for Oak Ridge Apartments in Silver Spring, Md., under its streamlined small mortgage program. The loan was structured as a ten years / 9.5 years yield maintenance followed by 30-year amortization. The loan was underwritten to a 54 percent LTV.

Oak Ridge Apartments consists of 113 brick, mid-rise style units. The complex features two playgrounds, two laundry facilities and a Metrobus stop.
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“This project has been brought to fruition by a dedicated and astute committee. Its announcement is a major accomplishment for this Association.” 

MBA’s release of the Certified Mortgage Banker (CMB) designation program in fall 1973 was indeed a major accomplishment for the organization. Described as a designation earned by members “who have demonstrated through education, experience, and performance a proficient knowledge of the broad spectrum of real estate finance," candidates completing the requirements would also have much of which to be proud.

The first CMB requirements were set forth by the Certified Mortgage Banker Board of Review. As described by Mattson, the CMB program was developed to recognize professional capability and establish standards of competence within the industry for the first time, giving the industry criteria by which to measure these achievements. 

The steps in the process were seemingly simple, but meeting the requirements was—and still is—challenging. Many of the program elements designed in 1973 have remained constant throughout the years, including accumulating 150 points, passing a written examination, participating in an oral interview at MBA Headquarters, signing a code of ethics and completing the program within five years from the date of application.

In addition, candidates had to acquire points through experience, higher education, the School of Mortgage Banking, correspondence courses, MBA event attendance and participation in MBA governance or serving as MBA faculty. Early candidates also had to submit an original paper on a mortgage banking topic prior to the written exam, and they were tested on residential and commercial real estate finance.

Since that time, the designation has retained much of the original criteria set forth by the founding fathers of the CMB. Yet as the industry has evolved, so has the designation. The designation is now open to MBA members, as well as to state MBA members. The original paper assignment was eliminated, but the experience requirement was increased to a minimum of five years. While the magic number to advance to the testing phase remains 150, the structure of how those points are accumulated evolved to a minimum and maximum point structure, creating a better balance in our candidates. 

Twenty-six years later in 1999, a CMB Task Force was created to examine the designation and discuss its future. To maintain integrity and professionalism, the CMB Commission was established to govern the designation. The leadership is composed of seven members who must also be members of MBA's Board of Directors, Residential Board of Governors or Commercial Board of Governors. Based upon the task force and commission recommendations, a pinnacle point in MBA history was realized: the ability to pursue either a Residential CMB or Commercial CMB.

In 2002, the size of the graduating class was a sign that interest in the CMB was growing–30 professionals graduated at MBA’s Annual Convention in Chicago. With the increasing number of candidates, provisions were made to better accommodate them throughout the process. Oral exams were conducted at the Oregon Western Regional Conference in addition to the traditional oral exam schedule at MBA headquarters. 

While 2002 was a big year for the CMB, 2003 proved to be even more eventful. New Residential, Commercial and Master CMB requirements were implemented. While the process remains arduous, the availability of earning the CMB in either area of expertise became more of a reality for additional members. After holding either designation for two years and meeting additional requirements, candidates could pursue the Master CMB.

Candidates were also given the opportunity to take the final exam on location at the completion of the School of Mortgage Banking Course III. Also in 2003, the first class of Commercial CMBs were recognized in the first-ever graduation ceremony at MBA’s Commercial Real Estate Finance/Multifamily Convention. The first issue of The Society Page e-newsletter, exclusively for designees, made its debut.

Another pivotal point in CMB history was marked by the addition of the designation as a part of MBA’s strategic operating plan for the three-year fiscal period, beginning in 2004. This exhibits the importance of the designation to the association, its members, and to the industry. To assist candidates with their exam preparation, the first Residential CMB Online Prep Course was offered in 2004. To ensure that designees stay abreast of the industry issues, bi-annual continuing education requirements were also implemented.

That year, Wayne and Middleton Thompson became the first married couple to earn the CMB in the same class, graduating at MBA’s 91st Annual Convention in San Francisco.

This year, oral exams are being conducted at more than 15 locations throughout the year, and more than 150 professionals will graduate over the course of the year. Gearing up for the next Commercial CMB graduating class in February, a Commercial CMB Online Prep Course is currently in development. The CMB designation continues to evolve and thrive due to the support of CMB designees, MBA leadership, MBA members, State and Local members and MBA staff. 

Since the Certified Mortgage Banker Board of Review gathered and set forth the CMB designation procedures and point system, many things have changed, but one thing has remained the same: the CMB recognizes the best of the best in our industry. It is a symbol of dedication, perseverance, and excellence. As marked by the words of Mattson, the CMB is an accomplishment for MBA, and it is an accomplishment of which every designee should be proud.

To learn more about the CMB designation or to enroll in the program, visit www.campusmba.org/cmb or contact Jennifer Ridings (jridings@mortgagebankers.org) at (202) 557-2763 or Alicia Willey (awilley@mortgagebankers.org) at (202) 557-2776.

(Krista Sabol is a senior specialist in education communications and technology with CampusMBA, the education arm of the Mortgage Bankers Association. She can be reached at ksabol@mortgagebankers.org.) 
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House Financial Services Subcommittee Holds Hearing on TRIA
The Coalition to Insure Against Terrorism (CIAT), of which MBA is a member, testified on July 27 before the House Financial Services Committee's Subcommittee on Capital Markets, Insurance and GSEs at a hearing entitled "The Future of Terrorism Insurance."

James Maurin, chairman of Louisiana-based Stirling Properties and the immediate past chair of the International Council of Shopping Centers, represented CIAT. During his testimony, Maurin told the subcommittee that extension of TRIA was necessary, as businesses and the insurance industry have not matured enough to handle the economic risks on their own. He also noted that if the private insurance market was capable of dealing with this issue, it would be preparing to do so now.

The Mortgage Bankers Association continues to push Congress to act as quickly as possible this year.

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

Senate Banking Committee Passes GSE Oversight Reform Bill
On July 28, the Senate Banking Committee approved Chairman Richard Shelby's (R-Ala.) GSE oversight reform bill, S.190,  by a vote of 11-9. The bill would give the regulator broad power to issue regulations and guidelines, strong authority to better define and enforce the charter acts, and flexible authority to set capital requirements. The new regulator would have enforcement authority modeled after that of the banking agencies and be funded outside of the Congressional appropriations process.

The proposal also includes product-approval and activity review language that is consistent with the spirit of the MBA's longstanding policy that the regulator ought to establish a "bright line" to ensure that the GSEs remain focused on their secondary market purposes.

Immediately following the vote, MBA congratulated Shelby and the Banking Committee for favorably reporting the bill, and expressed support for future consideration for the creation of an ombudsman for the new regulator and support for clarification that the regulator has the authority to allow the Federal Home Loan Banks to securitize mortgages.

With Congress departing shortly for its August recess, all activity will be at a standstill until September. The two most contentious issues in the debate remain portfolio limits and the affordable housing fund, and the ultimate success of the bill will likely depend on what compromise can be reached on those issues.

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

Senate VA Committee Reports Out Veterans Benefits Improvement Act
On July 28, the Senate Veterans Affairs Committee reported out S. 1235, the "Veterans' Benefits Improvement Act of 2005," introduced by committee Chairman Larry Craig, R-Idaho. The bill contains an MBA-supported provision that authorizes the VA Secretary to determine the annual interest rate cap adjustment for VA hybrid ARM products.

Currently the Secretary has the authority to establish initial and lifetime interest rate caps on VA hybrid ARMs, but the annual cap is limited to 1 percent, with the result that VA and FHA hybrid ARMs must be securitized in separate Ginnie Mae pools, putting the VA product at a disadvantage to FHA hybrid ARMs. Senate floor action is expected after the August Congressional recess.

For more information, please contact Burton Wood at (202) 557-2806 (bwood@mortgagebankers.org) or Tim Doyle at (202) 557-2860 (tdoyle@mortgagebankers.org).

Summary of HUD's 2004 RESPA Rule
As reported in last week's Advocacy Update, at RESPA roundtables on July 14 and 28, HUD presented a PowerPoint description of key provisions of the 2004 RESPA rule including the Good Faith Estimate and Mortgage Package Offer (MPO) forms. MBA has compiled a summary of the 2004 rule, which is attached along with HUD's PowerPoint presentation.
 
Notably, as indicated last week, the 2004 rule would have simplified the GFE tolerances, not moved to dual packaging (although it would have permitted a settlement services package to become part of a guaranteed mortgage package) and would have permitted packaging of HOEPA loans after a phase-in period. MBA had advocated these points. At both roundtables, HUD made clear that although HUD submitted the rule to OMB and withdrew it in early 2004, the rule did not necessarily reflect HUD's current thinking.

MBA continues to monitor the RESPA reform debate closely, and earlier this week held a conference call with its RESPA At-Ready Task Force. We will continue to keep members apprised of any developments.
 
For more information, please contact Ken Markison at (202) 557-2930 (kmarkison@mortgagebankers.org).

MBA Urges Elimination of FHA Forms
In a recent letter to the Federal Housing Administration (FHA), MBA urged Commissioner Brian Montgomery to eliminate the Valuation Conditions (VC) Sheet, the Notice to Homebuyer disclosure and the Plans & Specs requirements on new construction in light of new appraisal forms issued by Fannie Mae.

MBA states that the VC Sheet and Notice to Homebuyer forms are the number one reason why FHA appraisals are more expensive than conventional appraisals and the requirement for plans and specifications and plot plans are a major reason that discourages builders from working with mortgage companies in providing FHA financing. MBA also notes that the elimination of these requirements can begin to change the perception that FHA is harder to use than conventional programs.

For more information, please contact Tim Doyle at (202) 557-2860 (tdoyle@mortgagebankers.org).

OFHEO Issues Mortgage Fraud Reporting Final Rule
The Office of Federal Housing Enterprise Oversight (OFHEO) this week issued its Mortgage Fraud Reporting Final Rule. OFHEO also issued policy guidance on the Final Rule's implementation.

The Final Rule proceeds with the requirement that Fannie Mae and Freddie Mac report mortgage fraud or possible mortgage fraud to OFHEO, but has been modified from the proposed rule in several key areas, identified by MBA in a comment letter as particularly troubling. It is MBA's belief that the changes significantly reduce the potential impact on lenders.

On February 25, OFHEO published for comment a proposed rule that would set forth safety and soundness requirements by requiring the GSEs to report mortgage fraud or possible mortgage fraud on mortgages and mortgage-backed securities they purchased, or refused to purchase, within four days of discovery.

As proposed, MBA had strong concerns that the rule would result in a huge burden on lenders as the Enterprises' reporting requirement would translate into increased requests for information and documentation from lenders. Additionally, MBA did not see any benefit from the rule to lenders or the industry with regard to mortgage fraud prevention.

In OFHEO's Mortgage Fraud Reporting Final Rule, six of 10 concerns raised by MBA in its comment letter to OFHEO were addressed. Most importantly, the Final Rule:

• Modifies the definition of possible mortgage fraud to include the idea that a GSE "has a reasonable belief, based upon a review of information available" to the GSE that fraud is occurring or has occurred;
• Clarifies that the GSEs can communicate with lenders about fraud without prior approval by OFHEO;
• Changes the four-day reporting time limit to require a GSE to "report promptly" (which has been defined in guidance as 10 days after the determination of a "reasonable belief" is made); and
• Clarifies that the reporting requirement will not be applied retroactively.

Additionally, the policy guidance that was issued along with the Final Rule, in identifying the types of mortgage fraud or possible mortgage fraud to be reported, offers guidance that appears to create a standard of materiality that was not present in the proposed rule. Together, these changes sufficiently narrow the scope of the rule, such that volume of reports from the GSEs are expected to be much less than could have been required under the proposed rule.

The remaining areas of MBA's concern directly related to the potential burden that would cascade to lenders as the GSEs seek information to comply with the reporting requirements and the with the lack of any identifiable benefits to the industry from the rule. MBA's concerns about the burden upon lenders, while not completely removed, have likely been significantly diminished due to the above cited changes.

For more information, please contact Tim Doyle at (202) 557-2860 (tdoyle@mortgagebankers.org).

MBA Hosts Congressional Education Series Event
On July 25, MBA hosted its monthly Congressional Education Series lunch on Capitol Hill. This month's event, which was held in the Senate, featured a discussion of the secondary mortgage market. More than 40 congressional staffers attended.

For more information, please contact Mary Goldsmith at (202) 557-2876 (mgoldsmith@mortgagebankers.org).

RESBOG Meets; Approves New Policy
On Wednesday, July 27, MBA's Residential Board of Governors (RESBOG) met via conference call. During the call, RESBOG unanimously approved a resolution establishing MBA's opposition to increased GSE loan limits for areas beyond the four already deemed high cost. An increase in the loan limits in high cost areas is included in the House GSE oversight reform bill, but there is no such provision in the Senate bill. The issue should be reconciled in conference.

For more information, please contact William Kooper at (202) 557-2737 (wkooper@mortgagebankers.org).

Senate Commerce Committee Marks Up Identity Theft Legislation
The Senate Commerce Committee yesterday unanimously approved S. 1408, the "Identity Theft Prevention Act of 2005." The bill, sponsored by Sen. Gordon Smith, R-Ore., aims to address the recent data breaches of sensitive personal information and the current lack of tools for consumers to protect themselves from identity theft.

The bill will now proceed to the full Senate for its consideration.

For more information, please contact Rachel Voss at (202) 557-2865 (rvoss@mortgagebankers.org). 

MBA Participates in WOW Initiative
On July 27, MBA participated in an educational conference call on predatory lending with local directors of the Congressional Black Caucus Foundation (CBCF) With Ownership Wealth (WOW) initiative.

The call focused on providing information to the local directors that could help them prevent borrowers from becoming victims of predatory lending and what resources are available to assist borrowers who have been victims of predatory lending. MBA highlighted the two programs that it has developed as resources, the Home Loan Learning Center and the Stop Mortgage Fraud web sites. In addition to the MBA representatives, representatives from the Center for Responsible Lending also participated in this call.

The CBCF WOW Initiative is a collective of corporations in the mortgage industry, trade associations, and nonprofit community-based groups. These organizations work together nationally and locally under the banner of the CBCF to achieve the goal of helping to prepare African Americans and other minorities to buy and keep homes of their own, so they can build intergenerational wealth. The WOW Initiative seeks to address part of the gap by focusing primarily on helping consumers prepare for homeownership. The work of the WOW Initiative is done mainly through local WOW programs. Each local WOW program directs consumers to sources of tangible assistance—education, credit counseling, down payment resources, etc.—and stays with them as they move toward their goal of becoming homeowners.

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

Senate Banking Committee Approves Cox Nomination to SEC
On July 28, the Senate Banking Committee approved the nomination of Rep. Christopher Cox, R-Calif., to become chairman of the Securities and Exchange Commission.

The nomination will now go the full Senate for consideration. If approved, Cox will replace former SEC Chairman William Donaldson, who resigned in June.

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

Frank Introduces Legislation on OCC Preemption
This week, House Financial Services Committee ranking Democrat Barney Frank, D-Mass., and Rep. Luis Gutierrez, D-Ill., introduced legislation, H.R. 3426, to clarify the extent to which national banks have to comply with state consumer protection laws, such as anti-predatory lending laws and privacy acts. In the Senate, Sen. Jon Corzine, D-N.J., introduced companion legislation, S. 1502, this week.

MBA will monitor this legislation as it moves through the legislative process.

For more information, please contact Francis Creighton at (202) 557-2736 (fcreighton@mortgagebankers.org).

MBA Committee Meetings
• The RESPA At-Ready Working Group held a conference call on July 26;
• The Uniform Closing Instructions Working Group held a conference call on July 26;
• Predatory Lending Bill Technicians Task Force held a meeting at MBA on July 27 to review provisions of the Ney-Kanjorski bill;
• RESBOG held a conference call on July 27;
• The Document Custody Subcommittee held a conference call on July 27 and met with the GSEs on July 28 to discuss electronic storage issues; and
• Washington representatives of MBA member companies received a briefing on legislative issues at MBA on July 28. 
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