With thousand of people trying to recover from the loss of Hurricane Katrina, how can consumers keep up with mortgage payments during a crisis? Many consumers believe they are not prepared to deal with trigger financial problems that could affect their ability to keep up with mortgage payments and living expenses, a study from Atlanta-based Assurant Solutions said.

The online survey of 2,300 U.S. adults conducted by Harris Interactive, Rochester, N.Y., between Aug. 19 and 23, found 29 percent of homebuyers in the West were more likely than 8 percent in the Northeast, 12 percent in the Midwest and 22 percent in the South to pay above their price range. Northeasters (83 percent) and Midwesterners (80 percent) were more likely to stay within their price range compared to homebuyers in the South (57 percent) or the West (56 percent).

According to Assurant Solutions’ study, homeowners are more anxious about potential personal crises—unexpected job loss, a disabling illness, death, etc.—the more likely they are to buy debt protection.

"Borrowers today face a confluence of anxiety-causing events," said W. Michael Balsley, director, mortgage-debt business development, Assurant Solutions. "So much so, that we were able use the results of this survey to develop an index to measure, track and further analyze their level of anxiety. Our study showed that the respondents who ranked in the top quintile of our 'anxiety index' were twice as likely to purchase a debt protection program than those in the bottom quintile," he said.

Involuntary unemployment topped the list of borrower worries said 38 percent of respondents. According to the study, 15 percent of the respondents fully expect that they or their spouses will lose their jobs at some point over the next three years. Other top ranking worries include disability (29 percent), hospitalization (29 percent) and death of self or spouse (30 percent).

"Even before Hurricane Katrina ravaged the Gulf Coast, people were worried about their jobs," Balsley said. "And the constant talk of a housing 'bubble' continues to raise concerns that heavily-leveraged borrowers could suddenly find themselves in an upside-down position on their loans."

Assurant Solutions said that natural disasters resulted in 24 percent of the respondents. However, concerns about natural disasters probably would be stronger because of Hurricane Katrina, the company said.

Balsley said consumers have a high emotional attachment to their homes. "They care a lot more about paying off the mortgage than their credit cards. A homeowner might carry five or six credit cards, but they have only one mortgage or one HELOC [home equity line of credit]."

Divorce was cited as a major reason that borrowers get into financial difficulties, the study said. The results showed it is not top of mind when consumers are buying homes or entering into new loan agreements with 5 percent of respondents citing it is a worry.

A recent Mortgage Bankers Association White Paper notes that positive economic fundamentals, including 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. Innovative mortgage products have enabled consumers to become homeowners, said MBA Chief Economist Doug Duncan.

Borrowers increase their risk exposure by choosing a product with low initial payments, but greater variability in payments over time, Duncan said. “Borrowers need to carefully evaluate and monitor the incremental additional risk that these innovative new products represent. If you look at all U.S. homeowners, 35 percent own their house outright, with no mortgage. About 50 percent of homeowners have fixed-rate debt only, with no sensitivity to interest rates and payment strain. That leaves about 15 percent, of which about 8 percent are jumbo loans or those who have previously used higher-risk tools. There is about 7 percent whose risk is uncertain.”

Duncan said while there are always market risks, such as a decline or instability in employment, mitigating factors also exist, such as a healthy economy, growing household net worth, a strong banking sector and dispersion of risk.

The Assurant Solutions study, conducted by Opinion Research Corp., Princeton, N.J., took responses from nearly 1,900 consumers who had obtained a new mortgage, refinanced a loan or arranged a home equity line credit or second mortgage during the past 12 months.
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The CQAP program promotes current quality assurance practices, emphasizes industry training and ensures ongoing subject matter expertise through three levels of certification. The certification levels are based on the candidate's experience and knowledge, recognizing core competencies and providing a structured development path.

"We are excited to offer the CQAP designation as part of a strategic initiative by the MBA to develop industry certifications and standards in education and training that result in a stronger, more professional industry," said Mike Ellis, senior vice president of GreenPoint Mortgage and chair of MBA’s Certified Quality Assurance Professional Designation Task Force.

The curriculum is designed to build on an individual's experience and knowledge in the quality assurance arena. To begin the program, candidates should have one or more years of professional quality assurance experience. Candidates then must successfully complete three levels of certification, with each level containing a series of web-, print-, and classroom-based courses. Upon successful completion of the three levels, comprehensive written exams and a sample quality control case study, candidates will be awarded the CQAP.

Enrollment and curriculum for Levels I and II of the Certified Quality Assurance Professional designation are now available. Level III will be available in 2006. For more information, visit www.campusmba.org/cqap, email hzippin@mortgagebankers.org, or call (202) 557-2763.
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• BasePoint Analytics, Carlsbad, Calif.
• Continuity Programs Inc., Walled Lake, Mich.
• Credit Technologies Inc., Novi, Mich.
• CreditXpert Inc., Towson, Md.
• Docprep Services Inc., West Hills, Calif.
• EASI, Roseville, Calif.
• Global Notary Inc., Tustin, Calif.
• Hispanic National Mortgage Association, San Diego
• Hudson & Marshall of Texas Inc., Dallas
• Interthinx, Saint Charles, Mo.
• Kaleidico, Flat Rock, Mich.
• LEADPOINT Inc., Los Angeles
• Maxim Enterprises Inc., Canton, Ohio
• Newfound Risk Solutions Inc., Knoxville, Tenn.
• Platinum Software Solutions, Northridge, Calif.
• Realty Executives, Tampa, Fla.
• The Sharrow Group, Tampa, Fla.
• TrainingPro, Hunt Valley, Md.
• United Title Company National Lenders Service, Englewood, Calif.
• Vendome Group LLC, New York
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eAppraiseIT, Poway, Calif., sees a growing trend of mortgage servicers outsourcing parts of the mortgage insurance cancellation process. To date this year, eAppraiseIT, on behalf of servicers, has processed more than 10,000 requests from consumers to cancel their mortgage insurance, the company said.

Servicers automatically route private mortgage insurance (PMI) cancellation requests from borrowers to eAppraiseIT’s private-label call center. eAppraiseIT then counsels the borrower to help them determine if their loan is eligible for PMI cancellation, advises the borrower of the valuation fee and timing, orders the appropriate valuation and reports the results back to the servicer, which makes the ultimate cancellation decision.

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Gryphon Networks, Norwood, Mass., will provide telephone marketing compliance products to Allied Home Mortgage Capital Corp. (AHMCC), Houston. Using Guardian, Allied Home Mortgage Capital Corp. can ensure its lead lists are in compliance with all state, federal and in-house Do-Not-Call (DNC) regulations.

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Fidelity National Real Estate Solutions’ MLS Systems and Solutions group, a division of Fidelity National Financial Inc., Jacksonville, Fla., announced a joint marketing and preferred provider agreement offering its customers the opportunity to deploy Clareity Security’s SAFEMLS products.

Clareity Security’s SAFEMLS product allows MLS organizations assurance that only legitimate users are able to access the MLS system by requiring them to use a one-time use password generated by a token device to access the MLS system.
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Hurricane Ophelia arrived off the Florida Atlantic coast on the final day of a "Time of the Essence" contract and the day the closing was already scheduled, said Kathleen McSharry, senior managing director of Singer Bassuk Organization (SBO), New York.

"Coming on the heels of Hurricane Katrina’s devastation of the Gulf Coast, just hours before funding, the casualty insurer refused to provide insurance that would cover the potential storm damage from Ophelia and the closing had to be delayed," McSharry said. "We all assumed the storm would pass within a day but Ophelia chose to stall off the coast and, to everyone’s chagrin, just sat for five long days.”

Ophelia eventually moved far enough to the north for the insurance companies to issue the proper certificates and the loan closed.

The 35-building, 522-unit complex, built in stages between 1973 and 1991, will be converted to middle market condominiums after the completion of extensive common area rehabilitation. Average sales prices are expected to be around $300,000.

The acquisition mortgage was provided by CW Capital, Needham, Mass., through its team of Marc Young and Mike Cotler. SBO has completed financing for more than 16,000 apartment unit conversions in the U.S.
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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.

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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Jean-Michel Six, chief European economist at S&P, said the United Kingdom, Sweden, Finland and Denmark stand out as proficient housing markets, but he expects cycles to be more evenly spread across Europe in the future, particularly Western Europe. “It is partly due to the demographic factor but also to the degree of the sophistication of banking systems for financial institutions to offer more variety of loans and borrowing products than would be the case in the rest of Europe,” he said.

In southern Europe, banks traditionally have been a bit more conservative in their lending policies than in the Nordic or U.K. banks, Six said. Demographics, immigration and lower interest rates all play a role in Europe’s housing expansion.

“The number of households is actually rising, creating more demand for housing,” Six said. “In countries [such as] Ireland or Spain, we have had a net inflow of immigration for at least 10 years now creating, again, more demand on the housing market.”

Similar to the U.S., Europe has seen lower interest rates and easier access to credit with the introduction of the Euro. “The loan-to value (LTV) ratio has gone down significantly in most countries allowing more first time buyers to get into the market,” Six said, as the proportion of variable rate loans increase in Europe.

The good news against a bubble for Europe, however, is that a soft landing has started to materialize in most European countries, such as in Ireland and U.K., which were subjects of significant worry in Europe, Six said. “We have seen price inflation declining in those countries and now prices have been flattening and are probably going to drop in certain regions showing that, again, this soft landing is materializing,” Six noted.

He does not expect European interest rates to go up in the next 12 months but that they will go further down in Ireland and the U.K. and Scandinavia and Eastern European countries. “The European housing markets point to a fairly reassuring scenario where a soft landing is the order of the day in most markets right now,” Six said.

Unlike Europe, S&P analysts say Americans do not stay in their houses for long periods of time and, for that reason, take advantage of five and seven year interest only loans. “I’m not terribly worried about the interest-only mortgages [in the U.S.],” said David Wyss, chief economist at S&P. “What does bother me are the low downpayment mortgages. I think that is a much better risk…And some of the option ARMs that allow negative amortization also scare me.”

Victoria Wagner, bank credit analyst at S&P, said interest-only loans and loan-to-values pushed to higher levels than in previous mortgage cycles are examples of a new band of products untested in prior mortgage cycles. “We think it is elevating the risk of default in most mortgage portfolios,” Wagner said.

She noted that the market share of subprime lending has risen over the last year and heightened the risk in lending practices and “the element of underwriting taking place in the subprime market.”

According to an S&P stress test, financial institutions with greatest exposure to construction losses faced the greatest risk of loss in the residential loan portfolios. “The degree of liquidity in the secondary market will play a hand in providing [financial institutions] a necessary resource to manage their credit risk exposure should a housing bubble burst occur on a regional basis,” Wagner said.

Mortgage insurance also provides a backstop. Robert Partridge, insurance credit analyst at S&P, said he would expect mortgage insurance (MI) companies to remain in the AA category under the worst scenario. He noted, however, that MI companies are concerned about investment properties. “They do limit their portfolios,” Partridge said. “The portfolios are limited in the low single digits at this point for all companies. It is an area of high risk but they are concerned about it.”

Nationally, incomes are growing by 6 percent a year and, if home prices flatten out for five years, that would bring the home price to income ratio back to its historical average, Wyss said. While the best-case scenario is that home prices stop going up, the worst case scenario would be a 35 percent drop for the normal ratio of home price to income. In New York, it is at nearly 9 percent but, historically, it is 5.7 percent.

According to S&P researchers, the 10 lowest price-per-income cities in the U.S. are in Indiana, Illinois, Upstate New York and Ohio . “Those house prices have not gone up the way they have nationally, and the price-to-income ratios still look very affordable,” Wyss said. “Witchita is still below 2 [percent].”

Meanwhile, higher second home prices do not concern Wyss because the second homes are generally for retirement purposes. “The baby boomers are in their fifties and they’re buying second homes,” Wyss said.
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