Lewis should know. His company has been involved in thousands of eminent domain cases in its 45-year history. The company represents private enterprise and government agencies in the acquisition of private property through eminent domain. Lewis noted that when government agencies act to acquire a property through eminent domain, the property owner may not be offered a fair price at first.

"While many condemning authorities will make a fair purchase offer initially, some owners may not get just compensation," Lewis said. "We have been involved in thousands of these cases since the 1960s, and it is quite common for there to be disagreement about a property's value, or damages to the remainder of the property."
 
Lewis, also an appraiser, served as a real estate instructor at the University of Houston and as a consultant to government officials. His advice for property owners who are facing eminent domain is to consider hiring an appraiser experienced in the issue.

“If the offer is insufficient, the property owner should definitely appeal,” Lewis said. “The buyer rarely produces the highest offer in the initial stage of negotiations.” Such a situation is “typical” for an eminent domain transaction, he noted.
 
Eminent domain caused heated debate this summer. In June, the U.S. Supreme Court issued a ruling in Kelo v. City of New London. The Court's opinion gave governments the authority to condemn private property for development by private, for-profit investors. The City of New London, Conn. plans to take waterfront property for a mixed-use commercial development.

"The Supreme Court ruling in the New London eminent domain case was alarming to many Americans," Lewis noted.

Since the Supreme Court ruling, many states enacted laws restricting local government's use of eminent domain acquisitions. And many elected officials have publicly expressed concern over how approving eminent domain requests might resonate with voters.
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Have you started using your MBA Membership Directory?  If you have, then you have experienced first-hand the value of the information now available at the stroke of a finger. If not, start today!  To receive your member access, please contact Venita Murray, senior membership specialist, at (202) 557-2845 (vmurray@mortgagebankers.org).

Please take a moment to review your company listing.  MBA updates the Directory monthly, and you can make changes to your listing at any time.

Updating your profile is easy.  Just visit http://mymba.mortgagebankers.org and enter the username and password that was provided in a recent email from Venita Murray.  At this site, primary contacts or a representative of your company can:

* Update company information;
* Register additional users to the Directory (all staff members can use one CD to load the Directory).
* Manage MBA subscriptions such as Mortgage Banking magazine, and more.

Changes made to corporate profiles are uploaded to the membership directory on a weekly basis.  Each month, users are prompted to update their directory.  Accepting this prompt will load all changes that have been made and will provide you with the most up-to-date details regarding not only your company, but all MBA members.  Keeping your company profile updated guarantees that the most current information is being displayed and accessed by your peers in the industry.

But, please don’t stop there: share this valuable networking tool with all of your employees. Simply take a moment to register any and all staff members via http://mymba.mortgagebankers.org and pass your CD along to other staff members so that they too can download the Directory.
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The U.S. CMBS market's relatively efficient interaction of borrowers, investors, lenders, issuers, servicers, mortgage brokers and rating agencies is being adapted to fit varying market dynamics around the world. CBRE Capital Markets/L.J. Melody views the remainder of this year and into 2006 as an opportunistic time to connect the dots between the U.S. CMBS web of players and the broadening European CMBS market.

Across the pond, European CMBS lenders have grown from a handful of investment banks in 2004 to a reported 20 conduits as of today. CMBS issuance volume is predicted by Fitch's European head of CMBS, Rodney Pelletier, to top $50 billion by the end of this year, double that of last year.

The strength of both the U.S. and European CMBS structure is supported by the continued investment draw to CMBS bond spreads. JP Morgan maintains its recommendation to buy CMBS bonds compared to alternative A-rated corporate bonds, emphasizing overweighting AA and A CMBS. These bonds' spreads are at the widest spread differential from triple-A CMBS they have experienced within the past two years. Similarly in Europe, the AA and A CMBS bond spreads are widening. AAA Sterling CMBS now offers a spread pickup over prime RMBS, according to JP Morgan research. 

While U.S. and European CMBS bond spreads seem to be tracking comparable paths, the underlying CMBS market dynamics between the two geographies are quite varied. In the U.S., continued support for CMBS bond investment drives capital back to the commercial mortgage loan originations front, keeping pricing and leverage very competitive. While borrowers have traditionally tapped CMBS executions for high leverage, those same borrowers are now achieving very attractive pricing that may well fall inside of the spreads offered by traditional balance sheet lenders. The attractive pricing is due in large part to the investor demand for the CMBS product.

In Europe, the CMBS market is much less circular in nature and issuances are somewhat simpler. REMIC rules do not apply and many deals are originated through an SPE derived from a property company, containing a small number of loans–typically not more than 15. Commercial mortgage loans tend to be written for terms less than 10 years with no prepayment penalties, enhancing transaction uncertainty for the issuer, the bond investor and also the loan servicer. 

According to Ronan Fox, head of European CMBS for Standard & Poor's: "CMBS in Europe competes with a healthy and growing portfolio lender market. Relationship-based lending is at the heart of much real estate lending in Europe. Mortgage brokers and intermediaries are not widespread and the challenges for new entrants in the lending markets across 20 jurisdictions are daunting."

In spite of this challenge, traditional U.S. CMBS lenders and newly formed conduit units within traditional European lenders are clamoring to fill CMBS pipelines during 2005-2006.  If European borrowers begin to act like their U.S. counterparts did in the late 1990s and break traditional borrower-lender relationships to embrace the most aggressive spreads and the highest leverage, then the growth of European CMBS and its web of participants could multiply. 

Another factor affecting its potential is the upcoming Basel II risk-based capital requirements that, in effect, encourage lenders to remove lower-quality loans from their books. One exit would be CMBS. CBRE/L.J. Melody is pursuing this opportunity by expanding its loan servicing and loan asset management, property derivatives and investment advising for CMBS in this market.

Connecting the U.S. and European investors, lenders, borrowers and servicers is a trickier proposition when fundamental market and collateral risks vary. Knowledge of and involvement in the underlying commercial real estate markets through equity and debt financing, property trades, market research, loan and asset management and participant relationships is necessary for success in the international CMBS marketplace.

By maintaining client/borrower and lender relationships domestically as well as abroad, CBRE/L.J. Melody has connected the dots between U.S. borrowers and lenders for more than $21 billion of commercial mortgage loan originations during the past 20 months.

What dots will connect you in the CMBS web of 2006?

(The views expressed in this article do not necessarily reflect the views or policies of the Mortgage Bankers Association. MBA NewsLink welcomes your opinion pieces; for more information, contact Mike Sorohan, editor at msorohan@mortgagebankers.org.)
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GMACCM provided $35 million in permanent, fixed-rate financing for an Austin, Texas retail property. Round Rock Crossing is a 205,000-square-foot retail shopping center anchored by Target and Best Buy. The property, on 35 acres, includes a Sportsmen’s Warehouse and Michaels.

Jim Lemos, senior vice president at GMACCM at the Austin loan origination office, arranged the transaction through TIAA-CREF, Charlotte, N.C. Capital City Partners received the funding. “Our knowledge and expertise in the Austin market, as well as our correspondent relationships, offered the borrower many viable permanent financing options,” Lemos said. “Ultimately, we provided two-stage funding over 12 months with an option to fund a third phase of the center.”

GMACCM provided $65 million in permanent, fixed-rate financing for a portfolio of retail properties primarily located in Fredericksburg, Va., with one property in Columbia, Md. Loan proceeds repaid a credit facility Kimco used to acquire a portfolio of retail properties. This group of properties represented 45 standalone properties with 25 of the stores located at Central Park Shopping Center in Fredericksburg, Va. Tenants include Circuit City, Applebee’s, Chick-Fil-A, Chuck E. Cheese and other national retailers.

David Fishler, vice president of the New York loan origination office at GMACCM, arranged the transaction through GMACCM’s Proprietary Lending Group. Central Park 1200 LLC, and other separate borrowing entities that are all affiliates of Kimco, received the funding.

“GMACCM closed the loan within 60 days of the application signing,” Fishler said. What’s more, we successfully underwrote and closed the loan on 45 separate properties within the agreed upon timeframe, under the exact terms specified in the initial application. The ground leases and fee mortgages on the 45 individual standalone assets served as collateral.”

The transaction is GMACCM’s third loan with Kimco.

GMACCM arranged $56 million in fixed-rate, refinancing for a San Francisco office building, 111 Sutter , located one block from Market Street. The property is in the heart of San Francisco’s Financial District and has an occupancy rate of 93 percent.

The Class A office property, with an irreplaceable architectural shell dating back to 1926, underwent more than $30 million in renovations back in 1999 and was named “The Best Restoration Project of 2001” by the San Francisco Business Times .

AXA Equitable Life Insurance Co., New York, funded the deal. AXA Equitable was advised by GMAC Institutional Advisors throughout the loan process. CEP Investors XII LLC received the funding.

Joe Andrada, senior vice president of the San Francisco loan origination office, John Motzel, senior vice president at GMACCM and Robert Lipson, vice president of the Red Bank, New Jersey loan origination office of GMACCM, arranged the deal.

Andrada said the strength of the relationships helped to ensure a strong deal. Andrada said he had a strong relationship with the local borrower, Ellis Partners, and Motzel and Lipson had strong relationships with the national partner, LaSalle Investment Management, Chicago. “Because of these relationships, we were able to provide the borrower with assurances as to the lender’s flexibility, and we were able to work with both parties to close a transaction that was beneficial for both,” Andrada said.
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You want your loan agents and brokers finding and closing loans, not dealing with mundane, tedious tasks such as collecting, filing, faxing, shipping, or validating documents. But proper documentation is the life-blood of the loan process.
 
In "Paper Pusher No More,” industry expert Jim Henderson will discuss methods to enhance productivity of your employees. Topics will include:

• Time studies and task analysis: Old-fashioned industrial engineering is a great place to start ;

• System boundaries: Eliminate paper pushing and mundane tasks by choosing the right computer systems for your processes;

• New technologies: An overview of new technologies that might help and where they are typically a fit; and
 
• The ultimate buy-in: Making your employee's job easier.

Jim Henderson has spent the past 10 years in business process automation, first as a systems engineer and architect and then in the president's role at KeyMark. KeyMark 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.
 
Jim has served with the HIPAA Electronic Claims Attachment Subcommittee and has spoken at numerous industry events including AIIM, ARMA and AICPA. He is a Certified Information Capture Professional and Certified Document Imaging Architect.

It's never been easier to train your staff on the most current topics relevant to your business. Listen in to a 60-minute presentation by an industry expert, followed by a 30-minute interactive question and answer session. Just dial in from your conference room speakerphone to train your staff—whether there are two or 20 employees in attendance.
 
ThePowerPoint 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 for MBA members/$325 Non-member 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.

For more information, visit the CampusMBA Web site at www.campusmba.org; call (800) 348-8653 or email cbuzolich@mortgagebankers.org.
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Congress

MBA Completes Analysis of GSE Reform Bills
Attached is MBA's analysis and comparison of the 2005 GSE reform bills. The side-by-side analysis compares H.R. 1461, the House GSE oversight reform bill, as reported on May 26, with the Senate bill, S. 190 , as introduced on January 26 and as reported on July 28.
 
For more information, please contact Chris Harrington at (202) 557-2863 (charrington@mortgagebankers.org).
 
HUD Holds Final RESPA Roundtable
On Thursday, August 25, MBA participated in HUD's seventh and final Real Estate Settlement Procedures Act (RESPA) Reform Roundtable. A range of industry, consumer and government groups as well as individual lenders and settlement service companies invited by HUD also attended the roundtable. During the roundtable, HUD committed that any future action would be in the form of a new proposed rule, allowing for formal comment.

As at the previous roundtables, HUD described the 2004 rule that it submitted and later withdrew from OMB including the revised Good Faith Estimate (GFE) and Mortgage Package Offer (MPO) forms. HUD then facilitated a discussion to obtain participants' views on a range of RESPA issues including improvements to the GFE, packaging and yield spread premiums.

Meeting participants generally supported improving the GFE rather than providing a broad packaging exemption. MBA suggested that if HUD is to focus on an improved GFE, it should look at both the GFE and HUD-1 to make sure that both forms are comparable and understandable to the consumer. MBA also noted that HUD might consider regulatory relief in the form of a limited Section 8 exemption within the context of an enhanced GFE to permit volume discounts and average cost pricing to help lower settlement costs for consumers. 

MBA also pointed out that any remedies established for violations of the rules should include a right to cure to avoid costly class action litigation. Also, in the context of the group's discussion of the importance of borrower education, MBA reminded the group of HUD's responsibility to develop a special information booklet to accompany the GFE and the importance that MBA placed on borrower education to help improve the mortgage process. 

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

MBA Responds to NM AG's Letter Concerning Predatory Lending
This week, MBA responded  to New Mexico Attorney General Patricia Madrid's recent letter to non-prime lenders nationwide calling upon the industry to adopt a set of standards negotiated as part of one specific settlement in order to combat predatory lending. 

In its response, MBA notes that it understands and shares the concerns Madrid expressed for protecting consumers from predatory lending and unequivocally condemns such practices. However, since Madrid's press release called for the industry to adopt the set of standards negotiated in a December 2002 settlement with Household Financial , MBA points out that a more effective approach to achieving our common goal of combating predatory lending would be the adoption of a uniform national standard containing strong consumer protections and objective compliance standards. MBA also points out that the success of the modern mortgage markets is dependent upon legal certainty and predictability, which a national standard would provide.

MBA also called upon  Madrid and other attorneys general to join in efforts to promote financial literacy among consumers about their rights in the mortgage process, and specifically asked the Attorney General to work with MBA on its the Stop Mortgage Fraud program.

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

FHA Business Practices Working Group Holds Conference Call With FHA Officials
On August 18, MBA's FHA Business Practices Working Group held a conference call with FHA policy officials on ideas to streamline the FHA appraisal and new construction process. MBA proposed the ideas in a July 22 letter to FHA Commissioner Brian Montgomery because FHA appraisal requirements translate into higher costs for FHA borrowers and are often cited as a major reason why FHA financing has been stereotyped as overly bureaucratic by real estate agents and property sellers.

In light of new Uniform Residential Appraisal Report (URAR) forms created by Fannie Mae and Freddie Mac, MBA believes that FHA's appraisal requirements can be reduced without adversely affecting the loans' quality. During the call, FHA officials expressed support for MBA's proposals, noting that they are reviewing these proposals and discussing them with appraiser groups. 

In terms of new construction, MBA has suggested that the requirements for plans and specs be eliminated if the property is completed sufficiently for an appraiser to appraise and that the FHA fee inspector requirements be modified to reduce redundant work. MBA proposes all of these suggestions within the context of bringing FHA's requirements more in line with conventional financing so that it will be easier for borrowers to choose FHA financing, even after the origination process has begun.

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

White Paper on Housing and Mortgage Markets Released
Last week, MBA released a white paper , which provides an analysis of the housing and mortgage markets. The paper examines issues such as the potential for a house price "bubble" and the growing use of non-traditional mortgage products.

According to the paper, low mortgage rates at the national level and strong employment growth rates at the local level can explain much of the recent increase in house prices and much of the differentials in appreciation rates across the nation.

For more information, please contact Mike Fratantoni at (202) 557-2818 (mfratantoni@mortgagebankers.org).

MBA Receives Clarification from SEC
On August 25, several Securities & Exchange Commission (SEC) staff responded to an MBA inquiry regarding reporting under Section 1122, "Compliance with applicable servicing criteria," of new SEC Regulation AB, Asset-Backed Securities. 

Section 1122 requires entities that meet a 5 percent threshold to submit reports (to be attached as exhibits to SEC 10-K reports) containing an assertion and assessment by management regarding compliance with specified servicing criteria, and a CPA report attesting to the accuracy of management's assessment. To date, there has been substantial confusion surrounding the proper calculation of the 5 percent threshold for the purpose of determining which parties are subject to reporting under Section 1122.
 
Two recent MBA sponsored conference calls revealed the extent of confusion surrounding this reporting requirement. The confusion was spawned by a lack of clarity of the Regulation and by earlier indications that the 5 percent threshold should be calculated based on the unpaid principal balance of the loans underlying an asset-backed security (ABS) as of the closing of the transaction. This interpretation gave rise to questions regarding the possible implications of transfers of servicing rights (e.g. due to servicing sales, mergers and acquisitions and outsourcing arrangements) after that date.
 
During the call, SEC staff clarified that the 5 percent threshold for reporting under Section 1122, as well as the 10 percent threshold for reporting under Section 1123, "Servicer compliance statement," should be performed at year-end, rather than at the closing of the transaction. Consistent with a year-end determination, the SEC staff indicated that contracts for transfers of servicing (through mergers and acquisitions, for example) should incorporate provisions to ensure that all parties are aware of the requirements of Regulation AB and that they will be prepared to furnish reports under Section 1122 and compliance statements under Section 1123 as required.  While this new interpretation is helpful in terms of understanding the Regulation, it also is expected to require greater numbers of entities to report under these sections than would have been the case if the threshold were required to be performed at the closing of transactions.
 
The SEC staff also indicated that the term "asset type" should be interpreted broadly for purposes of determining the scope of testing pursuant to the "platform level" concept described in Section 1122.  Consequently, MBA now understands that "mortgages" would be deemed an "asset type" for the purpose of testing compliance with the servicing criteria in that section.  Consistent with this broad interpretation, the SEC staff said an entity would produce one report for each asset type, as opposed to multiple reports for separate categories of assets within each asset type (e.g., prime versus non-prime loans), under Section 1122.
 
The SEC staff agreed to make themselves available to the MBA for further discussion of Regulation AB as issues and questions arise.  The next MBA call on Regulation AB is scheduled for Thursday, September 1, from 3 to 5 p.m. ET.  The agenda for that call will include the thresholds for reporting, the platform level concept for testing, reporting instances of noncompliance, and other aspects of Sections 1122 and 1123.
 
For further information regarding MBA's work on Sections 1122 and 1123 of Reg AB, please contact Alison Utermohlen at (202) 557-2864  (autermohlen@mortgagebankers.org) or Katie Schwarting at (202) 557-2742 (kschwarting@mortgagebankers.org).
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