Fannie Mae placed mortgage relief provisions for borrowers in Mississippi, Louisiana, Alabama, Florida and other states. Under Fannie Mae’s provisions lenders help borrowers in several ways, including suspending mortgage payments for up to three months, reducing the payments for up to 18 months, or in more severe cases, creating longer loan payback plans. Such assistance is provided on a case-by-case basis, and is designed to meet the individual needs of borrowers.

"What matters most to hurricane victims in those first few days after a storm hits is basic safety and survival, not concerns about making their next mortgage payment," said Pam Johnson, senior vice president and single family credit officer at Fannie Mae. "Fannie Mae has made changes to its insurance requirements that will ease the process for lenders and, more importantly, provide homeowners with much-needed relief."

Fannie Mae's business guidelines advise lenders to counsel borrowers on all possible mortgage payment work-out options, and to inform homeowners of disaster relief available from federal agencies, Fannie Mae said. Payment relief is available for single-family mortgages (including condominiums) serviced by Fannie Mae lenders in areas affected by the hurricane. Holders of Fannie Mae mortgage securities will be paid as usual during the relief period.

Mortgage lenders doing business with Fannie Mae will, according to Fannie Mae's guidelines, determine appropriate relief steps by considering:

• any uninsured losses;
• extended unemployment; and
• extraordinary expenses related to the storms that affect a homeowner's ability to make their mortgage payments.

Fannie Mae also said it has streamlined its procedures for handling insurance proceeds to provide lenders with more discretion in disbursing insurance proceeds. These improved procedures are based primarily upon the status of the mortgage at the time of the disaster and the extent of the damage. The new procedures are applicable for any federal or state declared natural disaster.

In addition, lenders are now required to temporarily discontinue reporting delinquencies to credit bureaus if they are aware that the borrower's delinquency is attributed to hardships because of a natural disaster, Fannie Mae said.

Freddie Mac also implemented several special policies intended to put emergency funds in the pockets of single-family mortgage borrowers.

"We are determined to do all that we can to help the victims of this disaster,"
said Richard Syron, Freddie Mac chairman and CEO. "Therefore, we are instructing our servicers to suspend mortgage collections for the months of September, October and November in some of the key major disaster areas designated by the Federal Emergency Management Agency [FEMA].”

“This temporary suspension will apply to every borrower with a Freddie Mac-owned single-family mortgage in these FEMA designated zones, regardless of the condition of their home," Syron added.

According to Freddie Mac, following the three-month suspension, servicers have the discretion to continue suspending or reducing payments on Freddie Mac-owned mortgages for an additional nine months on a case-by-case basis, depending upon each borrower's specific circumstances, the government-sponsored agency said in an advisory letter sent to Freddie Mac's 2,300 single-family servicers. Servicers must make their determinations before the mortgage's December payment due date, Freddie Mac said.  

Freddie Mac also said the new policies apply only to Freddie Mac-owned loans on homes in major disaster areas designated by FEMA as qualifying for individual assistance. A servicer is the company to which borrowers send their monthly mortgage payments.

Another new policy was implemented to help cash-strapped borrowers gives Freddie Mac servicers the discretion to return September mortgage payments that were already made, but not yet reported to Freddie Mac. Alternatively, the new policy also gives borrowers the option to contact their servicers to request the return of their September payments to assist with short-term financial emergencies. In either case, borrowers will still be required to make all mortgage payments once the temporary suspension period ends, Freddie Mac said.

In cases where borrower payments have been reported, servicers should contact Freddie Mac for additional instructions. Mortgage payments are typically not reported until the 16th of the month in which they are due.

"These temporary measures do not affect Freddie Mac's guarantee on its mortgage Participation Certificates," Syron said. "What's more, by continuing to fulfill our investor obligations while helping America's borrowers get back on their feet forcefully underscores Freddie Mac's capacity to help protect America's housing finance system and the broader national economy from the shock of unexpected events."

Other policy changes made in the advisory letter instructs Freddie Mac servicers:
• Not to report to credit bureaus any reversed and suspended payments on Freddie Mac-owned loans as a result of Hurricane Katrina during the suspension period;
• To suspend all late fees, collection and foreclosure activities in the storm-affected areas during the three-month suspension period;
• That they have the option not to advance interest on any Freddie Mac mortgage granted forbearance under the company's special Hurricane Katrina policies.
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We appreciate your continued interest and support.  And, we look forward to another year of serving you, our valued member.  If you have any questions, please contact Leah Logan , Senior Director of Membership, at (202) 557-2752 or via email at llogan@mortgagebankers.org.
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For Countrywide mortgage customers—800-669-6607—a toll-free hotline has been established for hurricane victims with questions and requests related to their existing Countrywide mortgage. Countrywide will work with every borrower who has lost his or her home and encourages them to call the hotline as soon as possible. For customers who purchased insurance through Countrywide Insurance Services—888-556-8336   provides information on property losses and how to file a claim or ask questions regarding their insurance policies.

The company does not yet have a full assessment of its 24 branches in the affected areas. At this point in time, 15 branches are closed. Countrywide has established contact with most employees in the impacted areas, and both the company and its employees are offering shelter, financial assistance, and most importantly, compassion. Employees in these communities will continue to receive their salaries and benefits during this time. The Countrywide Foundation has a disaster relief fund in place to assist employees who have suffered losses.

****

HSBC North America, Prospect Heights, Ill., announced disaster-relief efforts for the company's customers affected by Hurricane Katrina. The company will allow customers who live in FEMA-designated Individual Assistance disaster areas to delay their payments for 30 days. HSBC North America will also waive late and over-limit fees or other penalties that would normally be assessed. This payment delay will not be reported to credit bureaus as a delinquency.

HSBC North America customers are those served by HFC, Beneficial, HSBC Mortgage Services, HSBC Auto Finance, HSBC Bank USA and HSBC Mortgage Corp., and individuals who hold HSBC-issued retail and credit cards. The company encourages customers who can call to work with them on an individual basis.

HSBC North America will continue to pay employees who work at the company's nine Louisiana and two Alabama HFC and Beneficial lending offices that have been closed. The company is providing hotel accommodations in Houston for employees and their families impacted by the hurricane. HSBC employs nearly 1,000 people in Louisiana, Mississippi, Alabama and the Florida panhandle.

*****

ABN AMRO Mortgage Group, Inc. (AAMG), one of the nation's leading mortgage companies and a subsidiary of Chicago-based LaSalle Bank Corp., is instituting measures to help the more than 50,000 customers who have been impacted by Hurricane Katrina. Until further notice, the following provisions are in place:

• No assessment of late charges
• A waiver of non-sufficient fund fees for checks that do not clear normal bank channels
• No delinquent notices
• No reporting negative credit caused by Hurricane Katrina
• Proactive efforts to offer forbearance on existing loans
• Trained customer service representatives who are prepared to service borrowers impacted by Hurricane Katrina:  8:30 a.m. to 6 p.m., EST, from Monday through Friday at 800-783-8900
• A special after-hours voicemail box, accessed by dialing 800-783-8900; AAMG will respond the next business day.

Meanwhile, LaSalle Bank Corporation created the LaSalle Bank Hurricane Katrina Relief Fund to support humanitarian and reconstruction efforts related to Hurricane Katrina.

The Fund will collect financial contributions from LaSalle Bank and Standard Federal Bank employees with a dollar-for-dollar match up to $500,000 by LaSalle Bank Corporation. Monies raised will be split evenly and donated to the American Red Cross and America's Second Harvest. The Chicago Community Trust, the third largest non-profit community foundation in the U.S., is assisting the Fund.

In addition to fundraising activities, LaSalle Bank Corporation will work with employees who lost homes and personal possessions as a result of Hurricane Katrina by providing assistance that meets individual needs, including relocation from the affected area or shelter and direct financial support.

*****
The total 60-plus delinquency rate and charge-off rate in the U.S. home equity loan sector remained at low levels in May 2005. As in the previous two months, the delinquency rate, as measured by New York–based Moody's Home Equity Index Composite (HEIC), stayed below five percent. Meanwhile the charge-off rate declined to 0.74 percent, a 34 percent decrease on a year-over-year basis.

The strong performance of the HEIC can be attributed to the continued strength of the housing market and robust issuance in the sector. More than double the amount of new home equity pools were securitized in May 2005 compared to May 2004.

****
Cincinnati-based eLynx Ltd., announced San Rafael, Calif.-based Paul Financial LLC, chose eLynxPRO for secure, accelerated loan processing. eLynxPRO is a desktop enterprise product, providing electronic tools for document packaging, delivery and status management.
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As housing providers accommodate new residents, either as new renters or as guests of current residents, apartment firms may find it necessary to adapt their leasing documents, according to NMHC. The organization posted model lease addendums, rental application criteria and a letter to current residents provided by Camden Property Trust as an aid to other firms.

They are posted at www.nmhc.org/Content/ServeContent.cfm?ContentItemID=3559.

*****

OfficeTiger, a provider of onsite-offshore services, reached an agreement to acquire MortgageRamp. The acquisition will add 150 clients to OfficeTiger’s client list and expand its Financial Management Services to include real estate finance support services.

Through its Financial Management Services division, OfficeTiger said it will combine its portfolio objectives in the real estate industry with back office processing for the optimum property operating performance.

As part of the agreement, MortgageRamp will become the Global Real Estate Division of OfficeTiger. Ken Beyer, CEO of MortgageRamp, will continue as CEO of the new division and will report to OfficeTiger co-CEOs, Randolph Altschuler and Joseph Sigelman.

Sigelman said access to equity markets through real estate investment trusts and the rise of loan securitizations have been monumental shifts within the industry, and "the next decade will see the globalization of real estate support services to find the best cross-section of value and talent anywhere in the world.”
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Regulatory risks for the mortgage company are a significant and growing. In recognition of their increasingly important role, CampusMBA, the education arm of the Mortgage Bankers Association,  has developed the Advanced Regulatory Compliance Institute (http://www.campusmba.org/index.cfm?STRING=content.cfm?section=488) to foster the senior compliance officer's development. This two-day program, which takes place September 20-21 in Atlanta, is designed for the seasoned compliance professional.

The program will address important topics in compliance management and compliance performance and will allow peers to share information on what works. The program inlcudes a one-hour session that will cover other timely and relevant topics in compliance. The program will consist of four main topics, covered in three-hour sessions, designed to delve deeper into the important issues of the compliance professional.

The four main topics include:

• Fair Lending Performance: In September, the new and expanded HMDA data will be released. In this section, instructors will look at key issues surrounding the fair lending topic including HMDA data analysis, fair lending testing, and hot topics in fair lending.  

• Regulation Z 401: Like the name implies, this section will take a look at the more difficult questions in Regulation Z. Case studies and peer information sharing will facilitate the learning.  

• AML For Mortgage: Anti-money laundering is clearly a focus of regulators, the congress, and the media. Ensuring your program is on the leading edge of AML for monitoring and reporting is critical.  In this section, instructors will explore how Anti-money laundering applies to all aspects of mortgage banking.  

• Idea Exchange, Best Practices in Compliance Management: This facilitated session will seek to pull best practices from the compliance professionals present in the areas of compliance training, compliance monitoring, and compliance procedures.

Matt Schriner is the lead instructor for the program. Schriner is the managing director of risk management with Alex Sheshunoff Management Services L.P. He has 15 years experience in assessing and managing financial institutions’ risks as a banker, a regulator, and as a consultant. Compliance experts employed by the industry's leading mortgage lenders will also be present to assist in instruction.

Attendees of this event will learn new best practices for strong compliance performance, the most common violations cited by regulators, and the top 10 issues for class action litigation. In addition, attendees will leave with the knowledge needed to build their own quality compliance program.

This program is designed for compliance officers and managers, quality control specialists, consultants, internal auditors, attorneys, operations managers and regulators. Attendees must have five years experience as a compliance professional, or have previously attended CampusMBA's Regulatory Compliance Institute.

Attendees of this event will earn four points toward CampusMBA's Certified Mortgage Banker (http://www.campusmba.org/index.cfm?STRING=cmb_content.cfm&promo_code=IC00007) and Certified Mortgage Technologist (http://www.campusmba.org/index.cfm?STRING=content.cfm?section=142) designations.

Registration for MBA Members is $995, $1,800 for Nonmembers. The registration fee includes all training materials, seminar tuition, refreshment breaks, and lunch on Days 1 and 2. The course number is E2501845. To register, go to http://store.mortgagebankers.org/ProductDetail.aspx?product_code=E2501845%2fREGIS; go to the registration form at 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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(Olivia Fowlie is a senior real estate economist with Property & Portfolio Research in Boston).

It is still too early to know much about the impact on the New Orleans real estate market and what the forecast over the next few years may look like, but we are beginning work on that analysis.

Risk Management Solutions, the world's leading provider of products and services for the quantification and management of catastrophe risks (and a sister company of PPR) estimates that at least 150,000 properties in New Orleans have been flooded, which could cost $25 billion in insured loss and $100 billion in overall loss. This equates to less than one percent of annual U.S. Gross Domestic Product (GDP).

In terms of the overall economic repercussions, much of the focus has been on energy prices, consumer spending, and the future rebuilding effort. The Gulf of Mexico accounts for about 30 percent of the nation's oil production, 20 percent of natural gas production, and 10 percent of the nation's refining capacity. It does not at this point look as if there will be a prolonged shortage of oil and gas. However, the damage to the Gulf Coast's drilling and refining infrastructure is still the real wild card, and the extent of this damage and duration of the setback will largely determine the effects on the national economy. Most concerning is that an extended period of higher oil and gas prices could lower consumer confidence and spending, which has been a pillar of recent economic growth.

Most macroeconomists are expecting rather mild and short-term impacts to national growth, with forecast GDP growth in the second half of 2005 reduced by between 50 and 100 basis points. Economy.com revised its forecast from 4.1 percent down to 3.5 percent in the second half of 2005. However, after this near-term blip, rebuilding efforts will likely push economic growth higher than expected into 2006. Economy.com was calling for 3.5 percent annualized GDP growth in the first half of 2006 before Katrina hit and is now forecasting 3.9 percent growth. In essence, while the path has changed, the overall view for the upcoming 12 months is largely unchanged.

Real Estate Impacts:

The most influential factor impacting commercial real estate will be higher construction costs, which will affect all property types nationally. Massive amounts of steel, lumber, concrete, and construction machinery will be used in rebuilding the Gulf Coast over the next several years. In addition, massive amounts of labor will be required - and this at a point in the U.S. business cycle where labor shortages are increasingly likely.

New construction will be more expensive, projects could face delays, and new development could be slowed - allowing net absorption to soak up vacancy a bit faster. These higher replacement costs also raise the ceiling on values, allowing cap rates some room to move lower.

The second big impact will result from higher energy prices, which will eat into retail spending and stimulate inflation. Higher prices at the pump and in heating homes will pinch consumers' wallets and undermine consumer confidence. Assuming demand for gasoline is inelastic (a safe assumption in the short term and in the U.S. today), a 10 cent increase in gas prices means $1.5 billion extra dollars per month spent at the pump instead of the retail stores. This increase equates to 0.6 percent of monthly retail sales. And remember that gas prices in August climbed by 23 cents over July levels and have surged from there, so the real impact is much higher. Further, the higher costs push up manufacturing and transportation costs, which will eventually be passed on, pressuring inflation and creating a further drag on consumer spending.

As a result, retail NOIs [net operating incomes]  could suffer, and if fewer goods are being sold, the warehouse market could also suffer, as there would be fewer inventories to store. Across the board, higher energy prices will boost expenses in all property types, but these effects are not expected to be devastating.

The underpinnings of the economy are relatively strong, and the consumer should be able to bounce back. As the Gulf Coast's energy infrastructure is repaired and rebuilding begins, prices should moderate, confidence should return, and spending should resume. Remember, oil prices were already near $65 per barrell and gas prices near $3 per gallon before these events.

Another potential impact on the warehouse market is the disruption and damage to the Gulf Coast's warehouse and distribution infrastructure. The Port of New Orleans has been closed, and cargo along the Mississippi River is not running at full capacity, so imports are being diverted to ports in Texas, Florida, and other nearby areas.

While the Port of New Orleans is still in working order, there was significant damage, and over the next few weeks it will be dedicated to military relief vessels. New Orleans and other Gulf ports handle $150 billion in cargo each year, accounting for about a fifth of U.S. imports and exports, per the American Association of Port Authorities and Economy.com. Much of this is grain, shipped from the Midwest down the Mississippi River and then sent abroad. Indeed, more than half of the U.S.'s exported grain departs from the Gulf region, so a delayed disruption here could impact net exports, thereby widening an already monstrous trade deficit.

Other goods that flow through the area include sugar, lumber, and coffee. Shipping via the Mississippi River is the cheapest form of transportation, and to complicate matters, New Orleans has one of the nation's deepest ports, so there are few options for re-routing. As a result, there will certainly be disruptions to the supply chain.

The most likely effect will be an additional nudge to inflation, which will limit real disposable incomes, slow retail spending, and potentially slow demand in the warehouse market. New Orleans is not a major warehouse market, but it is a focal distribution point and severe damage could alter the nation's distribution flow.

Conclusion:

In sum, the economic forecast does not change significantly in the aftermath of Katrina. Economic growth will surely be slower than expected in the near term but will bounce back more strongly as reconstruction occurs. The overall implications for real estate should be quite mild as well. Higher construction costs are inevitable, which will slow new development and raise the valuation ceiling.

The retail and warehouse markets will bear the largest impact, to the extent that consumer spending slows as a result of higher gas and oil prices, and the flow of goods will be interrupted. However, the major risk to this outlook hinges on the extent of the damage to the Gulf's oil infrastructure and the amount of time until the area's production, refining, and distribution capabilities are back to near normal levels, and this is still uncertain. Over the next days and weeks as the damage is analyzed, more light will be shed and more answers will be known.

Sources for this article include PPR; Risk Management Solutions; Economy.com; Wall Street Journal; Global Insight.

(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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