Consumers' assessments of labor markets improved, however. The share of consumers finding jobs plentiful rose by 0.6 percentage points to 23.5 percent, while the share finding jobs hard to get declined by the same amount to 23.2 percent. This marks the first time since October 2001 that those who found jobs plentiful exceeded those who found them hard to get.

Despite mixed consumer fundamentals, confidence remains near the high end of the range it has been in since the middle of 2004. The Conference Board’s measure of consumer attitude focuses more heavily on labor market conditions than the University of Michigan’s and, thus, the improving labor market conditions likely explain the conflicting performance in the two surveys. 

Factory orders (which include the previously-released durable goods orders and a new release of nondurable goods orders) fell by 1.9 percent in July–in line with expectations. The decline reflected the unrevised 4.9-percent decline in durable goods orders; orders for nondurable goods increased by 1.7 percent–the biggest jump since March. The overall decrease in factory orders was the biggest in 15 months, however. July's weak report on new orders was in contrast to positive data from regional manufacturing surveys for August, which showed increases in production, employment and new orders.

Finally, the Federal Reserve released the minutes of the August 9th Federal Open Market Committee meeting. The Fed boosted the outlook for economic growth for 2005 but lowered growth projection in 2006. It noted that rising energy prices were adding to inflation pressures, and energy price increases probably would feed through, at least temporarily, to core measures of inflation. In addition, an increase in inflation from recent rates could have “especially adverse effects on longer-run economic performance.”

On housing, the statement noted anecdotal evidence of some cooling in housing markets in some areas. It also noted evidence that some banks have applied tighter standards in real estate lending and have become more cautious in promoting nontraditional mortgage products. The statement added that home price appreciation is expected to slow over time, though the timing and extent of the slowing were uncertain.

The economic reports solicited little reaction in the bond market. Investors seemed to be more concerned with the impact of Hurricane Katrina on crude oil prices, which rose to a record of more than $70 a barrel for a second consecutive day after most of the production in the Gulf of Mexico remained shut down. The yield on 10-year Treasuries fell by seven basis points to 4.10 percent by mid Tuesday afternoon–the lowest rate since early July.

(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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The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.73 percent from 5.78 percent, with points increasing to 1.21 from 1.20 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.  

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.36 percent from 5.41 percent one week earlier, with points remaining at 1.19 (including the origination fee) for 80 percent LTV loans. The average contract interest rate for one-year adjustable-rate mortgages (ARMs) increased to 4.88 percent from 4.84 percent one week earlier, with points increasing to 1.06 from 1.05 (including the origination fee) for 80 percent LTV loans. 

The Market Composite Index stood at 722.5, a decrease of 4.5 percent on a seasonally adjusted basis from 756.2 one week earlier. On an unadjusted basis, the Index decreased by 5.7 percent compared with the previous week but was up by 12.7 percent compared with the same week one year earlier. The four-week moving average for the seasonally-adjusted Market Index is down by 1.0 percent to 746.3 from 753.7.

The seasonally-adjusted Purchase Index decreased by 3.6 percent to 470.6 from 488.4 the previous week. The Purchase Index four-week moving average is down by 1.2 percent to 489.3 from 495.3.

The seasonally adjusted Refinance Index decreased by 5.4 percent to 2187.8 from 2313.9 one week earlier. The four-week moving average for the Refinance Index is down by 0.7 percent to 2240.9 from 2256.6. The refinance share of mortgage activity increased to 43.8 percent of total applications from 43.7 percent the previous week, while the ARM share of activity decreased to 27.8 percent of total applications from 28.1 percent the previous week. 

Other seasonally adjusted index activity included the Conventional Index, which decreased by 4.5 percent to 1088.6 from 1139.7 the previous week, and the Government Index, which decreased by 3.9 percent to 111.6 from 116.1 the previous week. 

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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Freddie Mac’s disaster relief policies provide a number of ways for mortgage servicers to provide borrowers with relief that can help protect their credit ratings and financial interests in their homes. Freddie Mac’s disaster relief policies also strongly encourage servicers to extend several other measures to help affected borrowers with Freddie Mac-owned loans. These include:

• Expediting the release of insurance proceeds to help borrowers secure materials, labor and other resources to repair their homes;
• Waiving assessments of penalties or late fees against borrowers with disaster-damaged homes; and,
• Not reporting forbearance or delinquencies caused by the disaster to the nation's credit bureaus.

Freddie Mac allows servicers additional discretion to reduce or suspend mortgage payments for up to 12 months for borrowers with Freddie Mac-owned mortgages in the declared major-disaster areas. Each case must be individually assessed to determine which alternative will best fit the homeowner's circumstances.

Freddie Mac also announced today that it is donating $50,000 to the American Red Cross to support hurricane relief efforts. 

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The Office of the Comptroller of the Currency's latest edition of its Community Developments newsletter offers various perspectives and strategies on how the revised Home Mortgage Disclosure Act (HMDA) reporting requirements could enhance mortgage-lending opportunities for national banks and their customers.

"Mortgage pricing data, which is reported under the new HMDA rules, can be a beneficial tool for banks committed to shaping financial products and services to fit the needs of all of their customers," said Comptroller of the Currency John Dugan. "This is particularly true when banks partner with experienced housing counseling organizations to improve the creditworthiness and financial savvy of potential homeowners."

The newsletter describes key changes to HMDA and how pricing information can be used to identify mortgage lending opportunities; reviews the OCC's recent mortgage lending guidelines to prevent abusive and predatory lending practices, particularly within third-party loan origination channels; and discusses the advantages to banks of establishing partnerships with housing counseling agencies. This issue also identifies nontraditional ways to establish creditworthiness. 

The newsletter can be accessed by selecting "Community Affairs" on the OCC Internet home page, at www.occ.treas.gov.

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GMAC Mortgage Corp., Horsham, Pa., announced an agreement with NetBank, an online bank. According to the agreement, GMAC Mortgage will service NetBank’s Option ARM mortgages prior to their sale into the secondary market.

NetBank’s Option ARM is an adjustable-rate mortgage that gives borrowers the ability to make one of three possible mortgage payments: a minimum payment, an interest-only payment, or a fully amortizing payment, based on either a 15-, 30- or 40-year term, depending on the product.

In addition to their servicing relationship, NetBank intends to sell Option ARM loans to other GMAC Mortgage clients.
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Adam Fox, director of the CMBS group at Fitch Ratings, New York, said although contacting borrowers who invested in the disaster area have proven "difficult," the ratings agency continues to assess ramifications Hurricane Katrina will have, both on CMBS [commercial mortgage backed securities] transactions with significant property concentrations in the disaster area, and on the sector overall.

“So far, 18 Fitch-rated CMBS transactions with property concentrations of [more than] five percent in Louisiana and Mississippi have been identified, 11 of which are a concern to Fitch because of limited or no credit enhancement to support the Fitch-rated classes,” Fox said.

Standard & Poor's, New York, has not yet made an official announcement regarding commercial property intetrests.

President Bush declared the region a "major disaster" and ordered federal aid to supplement state and local recovery efforts in the areas struck by Katrina. Federal funds are being made available to include grants for temporary housing and home repairs, low-cost loans to cover uninsured property losses, and other programs to help individuals and business owners recover from the effects of the disaster.

Federal funding is also available to state and local governments, and certain private nonprofit organizations, eligible for cost-sharing in counties throughout the region for debris removal and emergency protective measures, including direct federal assistance.

Despite Katrina’s severity, Lloyd's insurance said the insurance market is "well-equipped" to manage the financial impact of a catastrophe on this scale. "Lloyd's expects to receive significant insurance claims as a result of Hurricane Katrina, predominantly in relation to offshore energy installations in the Gulf, property damage and business interruption," the company said in a statement. "Clearly Katrina had a major impact on businesses and communities in the Gulf Region of the U.S. Lloyd's priority now will be to assess and settle claims as speedily as possible, to help the reconstruction of that area."

Lloyd's asked all its insurers to supply details of the likely impact on their businesses, by September 12. "Those returns will allow us to give more information about the market's overall exposure," the company said.

The National Aeronautics Space Administration's (NASA's)  Marshall Space Flight Center in Huntsville, Ala.--more than 200 miles inland--sustained minor damage. Initial damage assessments indicate some buildings at its Stennis Space Center sustained water and roof damage, but the exact extent has not been determined. At the Michoud Space Center, which makes the space shuttle's external fuel tanks, several buildings suffered window and roof damage.

The American Bar Association (ABA) said its Young Lawyers Division and lawyers from several ABA sections will assist hurricane victims in the coming days and weeks with insurance claims, home repair contracts, wills and other documents and related issues.
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Michael Elmore, senior vice president and senior director at NorthMarq’s Los Angeles office, arranged $46.5 million in permanent refinancing for a portfolio of three apartment communities throughout Los Angeles and Orange counties. Advanced Real Estate Services Inc., Lake Forest, Calif., owned and operated the properties.

Advanced Real Estate Services is financing an average interest rate of 5.29 percent for a 10-year term and a 30-year amortization. The refinanced portfolio consists of 429 apartment units and includes more than 375,000 net rentable square feet situated on 18 acres of land. Each complex has several floor plans that range anywhere from studio to three-bedroom units.

Richard Julian, president of Advanced Real Estate Services Inc., contracted with NorthMarq Capital, Inc. to consolidate debt and raise funds to acquire additional properties in the Southland. As a result of this refinance, Julian generated $26 million in cash and, with leverage, created $100 million for future multifamily acquisitions in addition to existing investor funds. Advanced Real Estate holds nearly 4,500 units in Southern California and hopes to grow that number to 6,000 units in the next two years.

In Yorba Linda, Calif., Bruce Whipple, vice president in NorthMarq’s New York City regional office, worked with Joel Coykendall, senior vice president in NorthMarq’s Jacksonville regional office, and Rob Hervey, senior vice president in NorthMarq’s Los Angeles regional office, to arrange a floating rate bridge loan financing of $96 million for The Canyons, a 296-unit multifamily property.

The property encompasses 362,544 square feet and will soon be converted into condominiums. Financing, based on a three-year term, has an interest only amortization schedule and was arranged for the borrower, Montecito Yorba Canyons LLC. The securitized loan will go through NorthMarq’s correspondent relationship with Column Financial (a subsidiary of CS First Boston), Atlanta.

“Column Financial worked on this transaction as part of a three-property acquisition and financed another loan of approximately $89 million,” Whipple said. “The spread was reduced by five basis points as a result of the second loan.”

NorthMarq arranged first mortgage construction financing of $67 million, plus mezzanine financing of $10 million for The Place at Channelside in Tampa, Fla.

Financing for the 245-unit mid-rise condominium project was arranged for the borrower, Key Developers LLC by NorthMarq’s Tampa office.

Scott Davis, vice president in the Tampa regional office of NorthMarq Capital Inc., arranged the financing. The property will be developed in the Channelside district located on the eastern boundary of the Tampa Central Business District (CBD). “This superior project has enjoyed overwhelming market acceptance as evidenced by the fact that it is 95 percent pre-sold,” Davis said.

Meanwhile, Northmarq arranged first mortgage construction financing of $33.87 million, plus mezzanine financing of $5 million for The Residence at Windward Passage in Clearwater Beach, Fla. Financing for the 55-unit luxury condominium project was based on a 24-month term and was arranged for the borrower, Windward Passage Condominium LLC by NorthMarq through its relationships with national construction lenders and international mezzanine/equity funds.

Bob Hernandez, senior vice president and managing director in the Tampa office, worked to arrange the loan.
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Hear from a diverse group of leaders who understand the intricacies of the real estate finance industry.  These sessions focus on government housing programs, diversity, emerging markets, and key legislative and regulatory issues.
  
Monday, October 24, 2:00 p.m.-3:15 p.m.
What's Going on with the Government Housing Programs?
Hear from and ask questions of program leaders as they work to create more affordable housing opportunities for all Americans while protecting consumers from mortgage fraud and abuse.
 
Mortgage Fraud Against Lenders: The Growing Threat to Lenders and Homeowners
The real estate finance industry has proven to be a backbone of the U.S. economy and homeownership is one of the keys to wealth for American families. Yet the fraudulent acts of a few can threaten the stability of the system for all. Mortgage fraud against lenders can be financially devastating to lenders and to consumers-putting the American dream of homeownership at risk.  This roundtable discussion focuses on the status of mortgage fraud and where the industry and government need to go next in combating this threat.
 
3:30 p.m.-4:45 p.m.
Why Diversity Matters: Important Business Rules and Reasons
Educating managers and staff on working effectively in a diverse environment helps everyone prevent discrimination and promote inclusiveness. There is evidence that managing a diverse work force well can contribute to increased staff retention and productivity. Join us for this roundtable discussion as we examine the issues surrounding diversity and share ideas that work.
 
Tuesday, October 25, 2:45 p.m.-4:00 p.m.
Customer Retention in a Shrinking Marketplace
As the refinancing tide has ebbed lenders have begun the search for new ways to increase production volumes and retain customers. Some of today's successful lenders are focused on effectively reducing portfolio runoff while others are adding multiple channels to capture greater market share. If lenders wish to hold on to profits generated through a healthy portfolio, figuring out ways to retain those borrowers should be a core initiative.

Emerging Markets Lending: Best Practices and Challenges
As population demographics change, the understanding of emerging markets plays a more vital role in the mortgage industry. Join our panel to learn about developing and executing effective strategies. Better understand challenges and best practices for reaching this increasingly important segment of our population.

Legislative and Regulatory Update
This panel session addresses the latest developments facing the industry on Capitol Hill and in the Bush Administration such as oversight reform of the Government Sponsored Enterprises, revitalization of the Federal Housing Administration, greater consumer protections to combat predatory lending, simplifying the mortgage process through RESPA reform, and other pressing legislative and regulatory issues.
 
11:00 a.m.-12:15 p.m.
Differentiating your "On-Brand" Experience for Improved Margin and Market Share
The greatest profitability in any industry comes from differentiation of services from those of your competitors. A buyer advocacy marketing and fulfillment program can bring greater market share, better consumer branding and higher quality margins. Panelists discuss innovative solutions for balancing the need for safety and soundness of valuation systems and at the same time addressing the profit and expansion of the mortgage lending business.

Register Today to hear about the latest Business Strategies
Join the largest gathering of residential real estate finance professionals at MBA's 92nd Annual Convention & Expo 2005.  The convention offers you strategies so you can adapt and adjust your business to thrive in a constantly changing marketplace.  While providing opportunities to network with your peers, the convention also offers the opportunity to gather valuable information on innovative business practices, learn about winning products and services, get updates on the latest technology, and to meet and exchange ideas with industry leaders.

For more information, visit the Convention Web Site at http://events.mortgagebankers.org/92nd_Annual/default.html.
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Miami-based Popular Mortgage was founded in 1995 and has grown right along with its hometown's residential boom. Popular Mortgage's core business is the financing of home purchases. Borrowers are referred to the company primarily by real estate professionals, builders and title companies.

Popular Mortgage is an FHA/VA direct endorsement and conventional lender that processes, underwrites, approves and funds the loan. The company also has an established home improvement and equity mortgage division. With 100-plus employees, the lender closes 200 to 300 loans per month using MBS ProClose doc prep software.

Popular Mortgage's Builder Division guides the builder and subdivision through all phases of FHA approval, including the master appraisal report (MAR), which secures case numbers for all lots in the project, facilitating the provision of "end-loans" to homebuyers. Bi-Monthly reports are generated to update builders on all loan approvals. Loan closing takes place within 24 hours after receipt of the "certificate of occupancy."

According to Popular Mortgage information technology officer Richard Lackey, "Working with residential developers has been our niche. There were several times when we were the leading FHA lender in the Miami area."

Challenge:
Popular Mortgage recognized the need to better manage its title company receipts in order to shrink collection times and eliminate the risk of lost revenues. Popular Mortgage wanted to build a proprietary, post-closing and accounting program to track title company receipts, manage short-term loan service and maintain workflow through the sale of the loan.

Solution:
Popular Mortgage engineered its back-office system to work from the database tracking function already built into the MBS ProClose doc prep system. According to Lackey, "One of the most attractive features of the MBS ProClose doc prep program is that customer data is stored on the customer-side of the firewall. And MBS ProClose makes it easy for customers to use that data to enhance back-office business functions."

The MBS ProClose IT support staff works with clients to provide custom access to loan data in a format that works for the customer's specific strategic needs-from custom-designed monthly reports to the transfer of raw data into a proprietary back-office software program.

"If you close 200-300 loans per month, and somebody forgets to send you funds that are due from the title company, it could slip through the cracks because of the sheer volume of information we are dealing with," Lackey said. "Based on the data tables provided by ProClose, our system can identify down to the penny money that's due to us. We have reduced the time to resolve those shortages from weeks to days."

A typical lender could have $2,000 to $3,000 in pent-up cash flow if title receipts are poorly managed. And, as Lackey pointed out, "You still have to make payroll and commissions."

"It's been a great help for us in gaining control of that aspect of the business," Lackey added. "Every mortgage lender has to manage this process, or you will get eaten alive. It's an area that needs to be accounted for."

In addition to tracking title receipts, Popular Mortgage taps into the MBS ProClose data tables in order to provide short-term loan service and to manage the overall workflow through post-closing.

ProClose's robust tracking database-combined with the fact that all of the lender's proprietary data resides on the client side of the firewall-sealed the deal for Lackey. He was also impressed with MBS ProClose's willingness to add fields to their tracking database on demand and with fast turnaround on such projects.

"We asked for a data element to be added to one of the forms on our loan origination software. It took another vendor six months to make that request. ProClose could accommodate similar requests in two weeks. Six months in any business client is unacceptable."

According to MBS ProClose software development manager Devin Mitchell, the ProClose tables capability is several databases that sort information, including closing data, specifically borrow information, fees, closing dates, lender information, loan details such as disbursement date, first payment date, interest rate, anything that goes into a closing document. The information is quite extensive.

"A lot of our customers run reports off of our data, which we create for them," said Mitchell.

"The closed loan report is the most basic and typical. It is run monthly, and includes closing date, disbursement date, lender and borrower information, loan program, interest rate, and loan amount and can add things to it like type of property and occupancy date."

"We design unique reports per our customers' requirements that include: loan data report that holds basic data but can be created with a lot of custom fields. We have a huge data dictionary that stores every kind of information that we capture: such as buyer first name. We have all sorts of information that reports by a particular number, reporting database and data dictionary, sometimes add data to."

The Popular Mortgage report required ProClose to add about 20 fields to the reporting database. Each one of those additions was done by way of a script. So the reporting database looks at ProClose in the way that the script needs it to. Information from loans gets captured in a flat file.

"MBS ProClose does a lot of data exporting for its customers," Lackey said. "For example, a customer might have a LOS (loan origination system) system and they would export data to a flat file and then customer would give to vendor for LOS system use."

(Views expressed in case studies do not necessarily reflect the views or policies of the Mortgage Bankers Association, nor does it connote a product endorsement. MBA NewsLink welcomes case studies of mortgage products and services; inquiries should be sent to Mike Sorohan, editor, at msorohan@mortgagebankers.org.)
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