The seasonally-adjusted purchase index increased by 6.1 percent to 499.1 from 470.6 the previous week whereas the refinance index increased by 7.7 percent to 2357.1 from 2187.8 one week earlier. Other seasonally adjusted index activity includes the conventional index, which increased 6.7 percent to 1161.1 from 1088.6 the previous week, and the government index, which decreased 9.1 percent to 121.7 from 111.6 the previous week.

“While the volume of both ARM [adjustable rate mortgage] applications and fixed-rate applications increased from last week, 0.4 percent and 7.4 percent, respectively, the year-over-year trend is a different story,” said Michael Cevarr , MBA's director of member surveys.  “Compared with one year ago, the volume of ARM applications is down 9.9 percent, whereas the number of fixed-rate mortgage applications is up 22.5 percent.”

The four week moving average for the seasonally-adjusted Market Index is up 0.9 percent to 752.9 from 746.3.  The four week moving average is up 0.1 percent to 489.4 from 489.3 for the purchase index while this average is up 1.9 percent to 2284.6 from 2240.9 for the refinance index.

The refinance share of mortgage activity increased to 44.8 percent of total applications from 43.8 percent the previous week.  The ARM share of activity decreased to 26.5 percent of total applications from 27.8 percent the previous week. 

The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.64 percent from 5.73 percent on week earlier, with points decreasing to 1.13 from 1.21 (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 5.18 percent from 5.36 percent one week earlier, with points decreasing to 1.14 from 1.19 (including the origination fee) for 80 percent LTV loans. 

The average contract interest rate for one-year ARMs decreased to 4.81 percent from 4.88 percent one week earlier, with points decreasing to 1.05 from 1.06 (including the origination fee) for 80 percent LTV loans.
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Experts estimate Hurricane Katrina’s insurance damages at more than $25 billion, according to a report, “U.S. Economic Update: Impact from Katrina Big, But How Big,” from New York–based Standard & Poor’s. In 1992, Hurricane Andrew's insurance damages were nearly $21 billion.

The number of housing units destroyed (made uninhabitable and beyond economically justified repair) was estimated at 28,000 from Hurricane Andrew. The National Association of Home Builders (NAHB) expects Katrina's numbers, from damages in Louisiana, Mississippi and Alabama, as well as from flooding in New Orleans and Mobile, to dwarf Andrew’s destruction of homes.

The result will likely impact the supply and demand for building materials, NAHB said. The affected areas have a significant number of wood product facilities that have been damaged or destroyed. Also, NAHB said imports of building materials will be disrupted because of the closure of the Port of New Orleans, the fifth-largest port in the world and the top destination of imported cement and a number of other building materials. Cement imports, in particular, involve the use of specialized terminal facilities and the New Orleans and Mobile customs districts reported nearly 12 percent of national cement imports in 2004, the NAHB said.

According to Standard & Poor’s, material and labor shortages could delay rebuilding. Lumber prices jumped and other building materials, particularly roof shingles, were already in short supply nationally because of last year’s hurricanes in Florida and another strong housing market year.

“From July 1992 to September 1992, as a consequence of Hurricane Andrew, the average price for plywood increased from roughly $222 per 1,000 square feet to $321, and the price of Southern pine framing lumber rose from $264 per 1,000 board feet to $308. The hurricanes in 2004 did not trigger a similar increase and prices fell during the relevant period after soaring during the preceding year,” NAHB said. “The combination of greater (partly speculative) demand and disrupted supply produced a spike in lumber and panel prices in the final days of august. With production already running at full capacity for wood panels, further increases for those products, as well as for roofing are likely.”

According to another Standard & Poor’s report, “Hurricane Katrina’s Destructive Aftermath Leaves Insurers Awash with Uncertainty,” the insurance industry is already encountering difficulty in determining what its insured losses are. Claims adjusters will not be able to make estimates as quickly as they did after the storms in Florida in 2004 because of the flooding from Hurricane Katrina.

Meanwhile, model estimates for marine losses are not nearly as advanced and consistently applied as those for property lines, Standard & Poor’s said. There will be claims for business-interruption losses as well as for physical damages, as well. Other unclear areas include how flood losses will be allocated among insurers, reinsurers and the National Flood Insurance Program (NFIP). Traditionally, water damage from hurricanes is only covered if it is wind-driven, Standard & Poor’s said. Claims adjusters could find it difficult to differentiate wind-driven water damage from true flooding.

One potential caveat from the hurricane is that Standard & Poor’s estimates after the current quarter, the impact on GDP is positive because of the rebuilding activity. The private rebuilding will be paid in part through the insurance benefits and in part through other income or borrowing, including low-rate federal loans and grants. Cash availability is not a major problem and the cost of capital for rebuilding will be very low because of the federal program, Standard & Poor’s said.

However, as Standard & Poor’s said, “At this time, these are only wild guesses.”
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DOCX provides outsourced lien release and assignment services to mortgage lenders, including some of the largest mortgage lenders in the country, according to a Fidelity statement. DOCX also offers a lien release software platform that can be licensed for use in an in-house environment and maintains a national database of county recording office information and recording fee and transfer tax calculators that can be accessed electronically through a calculator called Feewise.

"The acquisition of DOCX enhances the scale of our lien release capabilities and provides access to a marquee customer base," said FNF Executive Vice President Ernest Smith.  "It also provides a viable in-house software platform that can now be provided to those potential customers who operate through an in-house lien release model. The Feewise calculator is also a great tool that can be used by our title operations in automatically calculating closing fees."

"We are very excited about the acquisition and the potential to introduce our solutions to the marketplace thru a seamless mechanism," said DOCX President Lorraine O'Reilly Brown, CMB.  "Ultimately, this combination provides our clients with the most comprehensive solution, offering the greatest value in terms of a total cost of ownership."

FNF, number 261 on the Fortune 500, is a provider of products and outsourced services and products to financial institutions and the real estate industry. FNF had total revenue of nearly $8.3 billion and earned more than $740 million in 2004, with cash flow from operations of nearly $1.2 billion for that same period. 

FNF is the nation's largest title insurance company, with nearly 31 percent national market share, and is also a provider of other specialty insurance products, including flood insurance, homeowners insurance and home warranty insurance. Through its majority-owned subsidiary Fidelity National Information Services Inc., also provides technology services, processing services and information services to the financial services and real estate industries. FIS' software processes nearly 50 percent of all U. S. residential mortgages, it has processing and technology relationships with 45 of the top 50 U.S. banks and more than 2,800 small and mid-sized U.S. financial institutions and it has clients in more than 50 countries who rely on its processing and outsourcing products and services. 

More information about FNF and the DOCX acquisition can be found at www.fnf.com and www.fidelityinfoservices.com.
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(Bob White is president of Real Capital Analytics ).

While the capital markets for each are unique, the commercial and housing markets are directly linked by the current condo craze. In the past year, “Condomania” claimed more than 120,000 rental units. Condo converters have also acquired more than 22 million square feet of industrial and office space over the past year; nearly 75 percent was lost to residential conversion or redevelopment, and 25 percent was taken by the growing number of commercial condo converters.

With the exception of residential condo conversions, the commercial investment market is not directly exposed to housing prices, but the indirect fallout could be significant. If the housing market falls, the general perception of real estate as a preferred investment alternative could be at risk. After all, this current perception has been responsible for much of the capital flowing into real estate this cycle. For example, if one loses money on a condo at the beach, they will have lost money on a “real estate investment,” without regard to it being a residential or a commercial property.

Fortunately, most major investors realize that making a clear distinction between the commercial and the residential markets is important. While the two markets are linked, they are also independent. Strong investment demand for commercial real estate may continue even if the housing market cools.

APARTMENTS
Sales of significant apartment communities did not slow at all this summer, with more than $5.6 billion of properties closing in July. Volume has already topped $40 billion this year, up $12 billion from the same period last year.

This increase is largely due to condo conversions, which totaled just more than $12 billion at the end of July, with another $2 billion reported in contract. At the current rate of sales activity, another $50 billion of apartments could sell by year-end. The number of new offerings remains robust totaling $20 billion more at the end of July than at the same point last year. In fact, July’s nearly $5.8 billion of new apartment offerings is the second-highest on record.

Despite the rapid rise in supply, investor demand remains deep and apparently unsatisfied. The bid-ask spread remains tight as sellers are achieving an average of more than 96 percent of asking prices. Cap rates average 6.25 percent nationally and prices, which now average well over $100,000 per unit, continue to rise.

OFFICE
Sales of significant office properties barely slowed this summer, with $7.0 billion of properties closing in July. Volume has already topped $51 billion this year, up $15 billion from the same period last year. At the current rate of sales activity, another $50 billion of properties could sell by year-end. The volume of new offerings remains robust, totaling $18.5 billion more than at the same period last year.

Despite the sudden increase of supply, investor demand remains deep and apparently unsatisfied. The bid-ask spread remains tight as sellers are achieving an average of more than 97 percent of asking price. In addition, cap rates continue to fall as prices rise. With more sellers, balance has improved between supply and investor demand. In addition, pricing expectations between buyers and sellers have rarely been more aligned. The result is an extremely liquid and competitive marketplace.

INDUSTRIAL
Robust sales of industrial properties paused in July as only $1.6 billion closed, the lowest monthly volume since July last year. Despite this seasonal dip, the industrial sector has posted the greatest gains among core property types year-to-date, with more than $17 billion of industrial properties selling, up by $8 billion from the same period in 2004. Nearly $3 billion of transactions were reported in contract at the end of July. At the current rate of sales activity, total industrial properties sold in 2005 could approach $40 billion.  

While the pace of sales slowed in July, new offerings were unexpectedly heavy, totaling $2 billion, and exceeded closings for the third time this year. New offerings year-to-date total $8 billion more than at the same point last year, but this additional supply is still outstripped by investor demand. Buyers are paying 95 percent of asking prices, only slightly lower than the same time last year. Cap rates continue to fall and prices to rise.

RETAIL
Sales of significant retail properties totaled almost $2.5 billion last month, off 15 percent from July last year. For the third time this year, volume fell below 2004 levels. Still, sales volume is up 10 percent on a year-to-date basis, and totaled $25.5 billion at the end of July.  Also for the third month this year, the volume of new offerings exceeded closings. Over $2.6 billion of retail properties were listed for sale in July, four times the amount one year ago.

Despite the increasing supply of offerings, investor demand remains deep and apparently unsatisfied. The bid-ask spread remains tight as sellers are achieving an average of more than 96 percent of asking prices. In addition, cap rates continue to fall as prices rise.  While the investment market for retail properties remains hot, it is starting to lose some steam. Investors are increasingly drawn to the office, industrial and apartment sectors, which they perceive as offering greater upside potential.

(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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Lamar-Sixth Austin I Limited

John Fenoglio of Live Oak Capital arranged the permanent financing. He said John Hancock locked the interest rate 18 months prior to funding and “met the borrower’s needs.” Live Oak Capital, Ltd. will service the loan as a mortgage loan correspondent for John Hancock Life Insurance Company. 

The property anchors the Market District, an emerging retail, residential and office destination in the western part of Austin’s central business district. A 30,000 square foot amphitheater public gathering space that is designed as a live music or speaking engagement venue is on the roof of The Whole Foods Market store. The store’s block in downtown Austin features local art, culture and community elements designed to create a retail and entertainment destination for Austin and its surroundings. 

HKS Inc., Dallas, designed the project and the general contractor was Hensel Phelps Construction Co., based in Colorado, and the construction consultant was CD Construction Consulting of Austin.

Live Oak Capital Ltd. arranged permanent financing for Pine Tree Center in Tyler, Texas and Webster Plaza in Webster, Texas with CIBC in New York.  The $2.75 milliion Pine Tree loan carries a fixed interest rate of 5.24 percent at a 10-year term amortized over 30 years.  The Webster Plaza loan for $6.52 million has a fixed interest rate of 5.19 percent at a 10-year term amortized for more than 30 years.

The 94 percent leased Pine Tree Center consists of 19,160 square feet and was built in 2004. The tenants include Cato, Sally’s Beauty Supply, Gamestop, The Cash Store, Wireless To Go, Direct Insurance, Curves, UPS Store, Payless Shoes.

Webster Plaza, 96 percent leased, contains 23,820 and was built in 2004.  The tenants include Buffalo Wild Wings, Freebirds, Jamba Juice, Kolache Factory, EB Games, Ben and Jerry’s, Philly Connection, Rocket Town, Texas Apartment Locators and Meador Staffing. 

Greg Young of Live Oak arranged each loan. TM Properties from California purchased each of the properties.
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Handling Fraud Files (http://www.campusmba.org/index.cfm?STRING=content.cfm?section=818), presented by CampusMBA, the education arm of the Mortgage Bankers Association, is a classroom-based course designed specifically for in-house counsel, paralegals, finance and accounting professionals, servicing supervisors and managers, secondary marketing professonials, and quality assurance professionals. Participants will learn about the nuances of dealing with misrepresentation in the lending process with topics solicited from general counsels at several member firms. 

This two-day workshop will take place September 20-21 in San Diego. Through group discussion, case studies and presentation, participants will address how quality assurance documentation, servicing activities, and early intervention all have significant impacts on recovery efforts and successful litigation. Topics include:

• Coordination of Internal Resources: Quality Assurance, Servicing, Secondary, Finance and Legal;

• Repurchase Requests and Demand Letters;

• Civil Litigation & Recovery Options: Who, What, Where, When and How;

• Working With Outside Counsel & Coordination With Other Outside Parties: Investigators, Federal and State Authorities;

• Strengthening Legal Documents to Hold Perpetrators Responsible;

• Exclusionary/Ineligible Lists: Maintenance and Sharing;

• Broker Eligibility and Licensing; and

• Correspondent Due Diligence and Training: Quality Loans Come from Quality Lenders;
 
This workshop will prove to be invaluable to your company’s bottom line. Come to San Diego and learn from industry experts, including Arthur Prieston, CMB, a pioneer in mortgage fraud recovery, members of the law firm of Lanahan & Reilley LLP, and professionals from other MBA member firms.

Attendees of this event will earn four points toward MBA's Certified Mortgage Banker designation.

Registration for MBA Members is $812, $1,015 for Nonmembers. Registration fees include seminar tuition, seminar materials, continental breakfast, and lunch. The course number is E2501766. To register, go to http://store.mortgagebankers.org/ProductDetail.aspx?product_code=E2501766%2fREGIS; to register, go to http://www.campusmba.org/pdf/regform_classroom_2003.pdf; or call (800) 348-8653. For more information, email CampusMBA at campusmbaeducation@mortgagebankers.org.
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The Workshop features valuable sessions, such as "Innovative Membership Strategies," "Legislative and Regulatory Highlights" and "Non-Dues Revenue Solutions." All aim to provide new ways to remedy old challenges. New to the program is a session, "Building for the Future," which addresses changing industry demographics and the need to stay relevant through diversification of members and employees. Also, MBA's public affairs staff presents "Managing Media Relations," using Home Mortgage Disclosure Act (HMDA) data and resulting reports as a test case. 

On October 21, working group breakouts are followed by an integrated recap session. On October 22, executives and managers have the opportunity to interact with their peers and hear from Doug Duncan, MBA's chief economist, who offers an economic forecast and a discussion on trends and their impact on the industry.

Renew acquaintances or make new contacts at the Welcoming Reception, and enjoy the Chairman-Elect Luncheon featuring Regina Lowrie, CMB, the first woman to chair MBA.

MBA appreciates the generous support of the following sponsors: Wells Fargo, MERS, Ameriquest, Lotstein Buckman and Fannie Mae.

Click here to register online. If you have any questions contact Lisa Hazell at lhazell@mortgagebankers.org or (202) 557-2761.
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Pulitzer Prize-winning newspaper columnist George Will keynotes the annual Chairman’s Luncheon, which takes place on Monday, October 24. Will shares his insight of the political players in Washington, D.C., and sheds light on some of our nation's top news and sports stories. Will has been syndicated by The Washington Post since 1974 and is a regular contributing editor of Newsweek magazine.

Tickets for the Chairman’s Luncheon, sponsored by Citi, are $125 per person.

The annual Sports Luncheon, on Tuesday, October 25, features Pat Riley, president and former head coach of the National Basketball Association Miami Heat. Riley is a six-time NBA world champion player and coach, as well as the only head coach in NBA history to capture Coach of the Year honors with three different teams: the Los Angeles Lakers, the New York Knicks and the Miami Heat. He is professional basketball’s second most successful coach; his philosophy is based upon winning, leadership, mastery, change and personal growth, as well as understanding and controlling the shifting dynamics of a team—any team, whether it is a small company, a giant corporation, a city or a group of athletes. His books “Showtime” and “The Winner Within” have appeared on the New York Times bestsellers list.

Pat Riley, President and Former Head Coach of the National Basketball Association's (NBA's) Miami Heat will be the featured speaker at the Sports Luncheon on Tuesday.

Tickets to the Sports Luncheon, sponsored by Bank of America, are $125 per person.

Club MBA, on Tuesday, October 25, features a ‘70s revival night with KC and The Sunshine Band, featuring hits such as Get Down Tonight, That's the Way (I Like It) and Shake Your Booty. Joined by The Sunshine Band, KC's unique fusion of R&B and funk has a hint of a Latin percussion groove.

KC’s last album, "I'll Be There for You," came out in the fall of 2001 and proceeds from the title song, released as a single, were donated to the Sept. 11 relief effort. His work includes sales of 100 million records, nine Grammy nominations, three Grammy Awards and an American Music Award.

Tickets for Club MBA, sponsored by Washington Mutual Home Loans, are $199 per person.

For more information about the ticketed events, go to http://events.mortgagebankers.org/92nd_annual/ticketed_events/. The MBA Annual Convention & Expo Web site is http://events.mortgagebankers.org/92nd_Annual/default.html. Keynote speakers for the Annual Convention include Gen. Colin Powell (Ret.); former President Jimmy Carter and HUD Secretary Alphonso Jackson.
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Daryl Byrd, president and CEO of Iberiabank, Lafayette, La., with 41 offices across the state, said Hurricane Katrina's impact is causing a significant shift in commerce in Louisiana. "The population of metropolitan areas surrounding the affected areas expanded very rapidly,” Byrd said. “Baton Rouge and Lafayette attracted many displaced families, given these communities' quality of life and proximity to New Orleans. We suspect these communities are quickly becoming staging grounds to rebuilding families and businesses. As evidence of this situation, school enrollment opportunities, office space, and quality housing in these communities are being consumed extremely rapidly."

For local banks in Baton Rouge, real estate lending reached its highest level ever in the first quarter of this year, the FDIC said. Prior to Hurricane Katrina, FDIC insured institutions viewed Baton Rouge as a growth market because the city continued to establish new branches in the market following recent mergers and acquisitions. Now, growth appears even more likely. Baton Rouge Mayor Melvin Holden said he expected between 800,000 to 1 million residents in Baton Rouge, up from its original population of 500,000.

Meanwhile, the law firm of Baker, Donelson, Bearman, Caldwell & Berkowitz PC, which operated offices in New Orleans and Mandeville, La., signed a lease for furnished office space in Baton Rouge with plans to start occupying that space and resuming operations this week.

"Our entire law firm has been in a full-court press mode in order to meet the needs of our New Orleans and Mandeville employees and to attend to their immediate concerns - business, family and personal," said Ben Adams, chairman and CEO of the law firm.

Baton Rouge will serve as the firm's central Louisiana office location until a future time when it returns to its Mandeville and New Orleans offices. In addition to the office in Baton Rouge, Baker Donelson will occupy one-third of its Mandeville office space as soon as electrical service is restored in that area. That restoration is anticipated within the next few weeks. Once that is in place, the firm's attorneys and staff will be located in both the Baton Rouge and Mandeville locations. Baker Donelson said it is also in the process of leasing additional space in the same office park in Mandeville.

The FDIC said commercial construction permit activity increased 58 percent in the first quarter of 2005 while residential construction rose 25 percent. “Anecdotal evidence suggests that the up-tick in activity was driven by home and business owners’ desire to undertake construction activity before possible interest rate increases,” the FDIC said.

The first quarter of 2005, job losses in construction, goods-producing and wholesale sectors contributed to 0.7 percent year-over-year growth in employment levels for Baton Rouge. However, that growth was 1.2 percent weaker than the previous year.

Morgan Stanley, New York, said its fixed income insurance analysts anticipate total insured losses from storm damage in New Orleans and surrounding areas is in the range of $9 billion to $25 billion, similar to the $23 billion in damage caused by storms last season and the damage from Hurricane Andrew in 1992 of $21 billion. “Any damage or loss to commercial buildings in CMBS should be covered by P&C [property and casualty] insurance and business interruption insurance,” said Marielle Jan de Beur, primary analyst of fixed income research at Morgan Stanley.  “Master servicer advances also protect CMBS investors against interruptions in bond payments.”
 
Victor Yeung, primary analyst at Morgan Stanley’s who worked with Jan de Beur on the report, said 73 transactions have more than two percent exposure to the areas affected by Katrina and 13 transactions consist of more than 10 percent exposure. “The secondary CMBS market was active this week with more than $4 billion in bid lists trading,” Yeung said. “Bonds on some of the bid lists included mezzanine tranches of transactions with exposure to Hurricane Katrina. Those mezzanine tranches traded with a three to five basis points concession to other mezzanine tranches in the market that have no exposure to the storm. In our view, extension or early prepayment risk [on premium bonds] are the biggest risks to transactions that contain loans suffering damage, rather than principal loss.”
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