The survey also provided evidence of the increased popularity of non-traditional products such as Interest-Only (IO), Option ARM and Alt-A mortgages. The MBA survey covers single-family mortgage originations during the first and second quarters of this year.

The MBA survey, which includes data from more than half of the mortgages originated last year, showed that the dollar volume of first-mortgage originations increased by 10 percent from the second half of 2004 through June. The survey provided evidence of a shift in consumer demand from ARM products to IO and Alt-A products.

While the ARM (excluding IOs) share of originations decreased from 46 percent to 36 percent, the share of originations that were IO loans increased from 17 percent to 23 percent and the share of originations that were Alt-A loans increased from 8 percent to 11 percent.
 
"With the difference in ARM rates and fixed rates narrowing, consumers have shifted from traditional ARMs to nontraditional products such as Option ARMs and Interest-Only loans." said Doug Duncan, MBA's chief economist and senior vice president. "While these new products provide consumers with a wide range of choices to meet their cash flow needs and risk tolerances, borrowers need to be vigilant to ensure that they prudently measure and manage the additional risk of these new products."

Key findings of the survey include the following:

• More than 9 of 10 interest-only loans originated during the first half this year are adjustable-rate products; the remaining loans were fixed rate products.

• Among all survey respondents, option ARM originations were 7 percent of dollar originations and 4 percent of the loan count during the first half of 2005. These percentages are likely understated as many survey respondents did not report their option ARM volume. Among survey respondents that did report option ARM data, option ARM loans comprised 16 percent of their dollar originations and 10 percent of their loan count.

• The vast majority of loans (88 percent) in the first half were for owner-occupied homes, but the percentage of loans for nonowner-occupied properties was significant (12 percent). This finding is consistent with the 2004 Home Mortgage Disclosure Act data, which revealed that more than 11 percent of 2004 originations were for nonowner-occupied properties.

• While nearly half (48 percent) of all loans originated were agency-eligible, they represented only 38 percent of the origination dollar volume. Agency-eligible loans are mortgage loans which conform to the size and credit quality guidelines and would be available for sale to Fannie Mae and Freddie Mac under any of their loan programs.  

• From the second half of 2004 to the first half of 2005, reverse mortgage originations increased by 28 percent, with FHA's Home Equity Conversion Mortgages (HECMs) increasing by 31 percent and other reverse mortgages up by 8 percent.

• Compared with the last half of 2004, the first half of 2005 origination volume of all second mortgages increased by 12 percent; closed-end seconds increased by 37 percent and open-end seconds or home equity lines of credit (HELOCs) increased by 20 percent (based on companies submitting data for both time periods).

• In the first half of 2005, 82 percent of second mortgage originations were HELOC loans compared with 18 percent for closed-end loans. HELOC origination volume refers to the size of the line, not the drawn amount.

The survey included more than 110 companies, including the top 12 loan originators and 25 of the top 30 loan originators. Based on internal market estimates, sample coverage included more than 50 percent of total market originations of first and second mortgages. This survey collected detailed information on origination of first and second mortgages, including for the first time origination data on option ARMs, interest only adjustable and fixed breakouts, occupancy status (including second home and investment property information) and agency eligibility.

All trends were based on data from repeater companies—companies that reported data for both the second half of 2004 and first half of 2005. Detailed survey results from the MBA study are only available to participants.
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The average contract interest rate for 30-year fixed-rate mortgages fell by 3 basis points to 6.06 percent from 6.09 percent on week earlier, with points decreasing to 1.21 from 1.29 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.  

The average contract interest rate for 15-year fixed-rate mortgages fell by 5 basis points to 5.57 percent from 5.62 percent, with points increasing to 1.30 from 1.29 (including the origination fee) for 80 percent LTV loans. However, the average contract interest rate for one-year adjustable-rate mortgages (ARMs) increased, to 5.37 percent from 5.34 percent one week earlier, with points remaining at 1.00 (including the origination fee) for 80 percent LTV loans. 

The seasonally adjusted Market Composite Index fell by 7.9 percent to 679.1, from 737.5 one week earlier. On an unadjusted basis, the Index increased by 2.2 percent compared with the previous week but was down by 3.7 percent compared with the same week one year earlier. The four-week moving average for the seasonally-adjusted Market Index is down by 1.5 percent to 706.2 from 716.8. 

The seasonally-adjusted Purchase Index decreased by 7.4 percent to 466.4 from 503.9 the previous week. The four-week moving average for the Purchase Index is down by 0.9 percent to 478.4 from 482.6.

The seasonally adjusted Refinance Index fell by 8.5 percent to 1916.8 from 2095.7 one week earlier. The four-week moving average for the Refinance Index is down by 2.3 percent to 2031.2 from 2078.7. The refinance share of mortgage activity decreased to 42.5 percent of total applications from 42.8 percent the previous week, while the ARM share of activity increased to 29.5 percent of total applications from 29.3 percent the previous week. 

Other seasonally adjusted index activity includes the Conventional Index, which decreased by 8.1 percent to 1014.3 from 1103.8 the previous week; and the Government Index, which decreased by 4.9 percent to 120.1 from 126.3 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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These numbers are consistent with anecdotal evidence in the latest Beige Book—a summary of reports of regional economic activity by the Federal Reserve’s 12 regional bank districts—noting that “homes are taking longer to sell” in some markets. The Beige Book also states that reports of slowing demand for homes “have become somewhat more common.”

House price gains continue to be high but decelerated from August. The median total existing house price rose by 13.4 percent to $212,000, slowing from 15.8 percent in August. A relatively more rapid buildup of condo inventories than single-family inventories is slowing the condo price appreciation. After four years of outpacing single-family appreciation, year-ago condo price gain slowed to 8.9 percent from 13.0 percent in August. This marks the first single-digit year-over-year gain since September 2001 and the third consecutive month that single-family home price appreciation has outpaced that for condos.

While the two hurricanes resulted in a net increase in home sales in the South, they have eroded consumer confidence. The Conference Board’s Consumer Confidence Index fell to 85.0 in October from 87.5 in September. The decline comes on the heels of last month's 18-point slide, taking the index to a two-year low. Another survey of consumer attitudes, the University of Michigan Consumer Sentiment Index, also did not rebound in October after a significant decline in September. Recent lower prices for retail gasoline bode well for confidence going forward, however. 

Long-term yields rose by 6 basis points on Monday, following the nomination of Ben Bernanke to succeed Fed Chairman Alan Greenspan. Treasury yields continued to rise on Tuesday on expectations that the Federal Reserve will be more aggressive in raising interest rates through next year. The 10-year yield hovered around 4.50 percent by Tuesday afternoon—five basis points above Monday’s rate.

(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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Green brings to MBA an 18-year career in association management and real estate consulting.  At the National Association of Realtors, he worked in the research, government affairs, international and commercial divisions.  He has worked for national consulting firms such as Deloitte and Touche and Robert Charles Lesser and Co.  Prior to coming to MBA, he was employed by Convergence Analytics LLC. 

Green can be reached at ggreen@mortgagebankers.org or (202) 557-2840. 

MBA also appointed Gretchen Littlefield as manager of MORPAC, the association’s political action committee. She will be responsible for implementing MORPAC programs and services and coordinating MORPAC events and other activities.

Littlefield comes to MBA from America Coming Together, where she was the grassroots fundraising director, raising more than $7million in direct mail contributions. Before that, she was at O’Brien, McConnell & Pearson, a direct mail house where she managed direct-mail fundraising for the Democratic National Committee and the Clinton Library.

Littlefield can be reached at glittlefield@mortgagebankers.org; or (202) 557-2826.

HUD swore in Kim Kendrick as assistant secretary for fair housing and equal opportunity and Keith Gottfried as general counsel. Both had been nominated earlier by President George W. Bush and were approved by the Senate during confirmation hearings.

Kendrick served previously as senior counselor to HUD Secretary Alphonso Jackson and worked previously at the District of Columbia Housing Authority. She will be responsible for enforcing laws that prohibit discrimination in housing.

Gottfried will serve as HUD’s chief legal officer and senior legal advisor on all aspects of federal housing and urban development laws, regulations and policies. He will also lead HUD’s Office of General Counsel. From 2000 to 2004, Gottfried served in senior executive positions at Borland Software Corp., Scotts Valley, Calif.; before that, he was a corporate attorney in the New York office of the law firm Skadden, Arps, Slate, Meagher & Flom LLP.

Arbor Commercial Mortgage LLC, Uniondale, N.Y., promoted Ronald Arena to assistant vice president of secondary markets, responsible for overseeing the company’s commercial loan rate lock process and transaction closings.

Arena joined Arbor in 2002 and has served as director of operations and capital markets; director of sales administration; and most recently as director of asset management.

Sperry Van Ness, Irvine, Calif., appointed Izzy Sanchez as senior advisor in the company’s Orange County office. With eight years of commercial real estate experience, Sanchez specializes in the sale of apartment buildings. Prior to joining Sperry Van Ness, Sanchez served as senior investment associate for Marcus & Millichap.

Sperry Van Ness also named S. Adams Sausser and Sam Lewin, CCIM, as senior advisors.  They will work out of the company’s Prescott, Ariz., office.

Sausser specializes in the sale of multi-family, office and industrial properties.  Prior to joining Sperry Van Ness, he owned Commercial Real Estate Service Advisors (CRESA) Group.  Previously, he served as senior associate for Grubb & Ellis. 

Lewin has eight years of commercial real estate experience and specializes in the sale of multi-family, office and land for development. Prior to joining Sperry Van Ness, Lewin served as commercial advisor for West USA; previously, he worked as commercial agent for Prudential Foothills.

Sperry Van Ness also named Douglas Carter as senior advisor, based in the company’s Colorado Springs, Colo., office.

With 24 years of commercial real estate experience, Carter specializes in the sale of apartment buildings in Colorado Springs. Prior to joining Sperry Van Ness, Carter owned Doug Carter LLC, and previously served as senior marketing consultant for Grubb & Ellis/Palmer McAllister and Hendricks & Partners. 

Chase Home Finance, Iselin, N.J., a subsidiary of JPMorgan Chase & Co., appointed Shari Prior as B2B home equity marketing project manager. She will support the annual B2B home equity marketing budget, including development, implementation and project oversight of various customer acquisition and retention marketing initiatives.

Prior has more than 10 years of project management experience in the financial services industry, including accounting, database management, trade show coordination and authoring/developing corporate Internet and intranet Web sites. Before joining Chase Home Finance, Prior held various marketing and business specialist positions for major national banks and financial services companies.

Hall Financial Group, Frisco, Texas, promoted David Nachman to vice president. Nachman joined the company’s real estate structured finance team as an asset manager and financial analyst in 2003.

Valocity, Memphis, Tenn., named Jeff Cole as key account specialist for the company’s sales and client services, working with business development, accounting and customer service on client development and serving as the primary liaison with clients.

Prior to his appointment, Cole was Valocity’s program representative, working on new business development initiatives.
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A $1.7 million fixed-rate loan for an owner-occupied office and a $3 million fixed-rate loan for a multi-tenant office building, both Greenville, S.C. properties, were arranged by Bryson Thomason, president at PMC. The multi-tenant office contains nearly 46,000 leaseable square feet.

Thomason also arranged a $961,000 fixed-rate loan for a Verizon Wireless retail store in Houston.

Denton Burnette, senior vice president at PMC, arranged and closed $7.8 million, including a $4.1 million, fixed-rate loan for the Innovate Building. The 45,000 square foot office building is located in downtown Greenville, S.C. A $1.5 million, fixed-rate loan for the Caine Company Office Building is also in Greenville. Burnette arranged two loans totaling $2.2 million for John Perkins Industries in Greenville: an office/warehouse property containing 192,000 square feet and warehouse facility containing 59,000 square feet.
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The CDL Awards program, launched in August, recognizes mortgage banking companies that successfully incorporate diversity initiatives into their everyday business practices. Awards were given in two categories: Best Overall Corporate Diversity Program, recognizing the corporate diversity programs within real estate finance companies that best exemplify innovation and effectiveness; and Diversity Champion of the Year , recognizing an industry professional who facilitates, advocates and promotes diversity within the industry, his or her company and the community.

The winners are:

Best Overall Corporate Diversity Program Award: National
• IndyMac Bank, Pasadena, Calif. IndyMac’s Diversity Program has eight essential components that include a steadfast corporate-wide support for diversity as a core value. Employees have recognized the importance of and embraced the diversity initiative. In fact, diversity received the second-highest favorability rating among the company’s 10 corporate values—a testament to the strength of Indy Mac’s program.

• Irwin Mortgage, Fishers, Ind. Led by its Diversity Advisory Council and vice president of diversity, Irwin Mortgage’s diversity program helps employees value the diversity of others, evaluate their own cultures, become conscious of the dynamics of cultural interactions, institutionalize their cultural knowledge and use this knowledge to improve service to their customers.

Best Overall Corporate Diversity Program Award: Regional
• Financial Dimensions Inc., Pittsburgh. Through its Regional Diversity Outreach Initiative , Financial Dimensions has created an interdisciplinary collaboration with diversity, housing and academic partners benefiting the organization, the region and the industry. This initiative consists of several key elements: mentoring and coalition building; activation, educational and mobilization programs; advocacy for business access, educational forums, workshops and mentoring; affordable housing; and workshops and seminars.

Diversity Champion of the Year
• Elmer Davis Jr. of Financial Dimensions Inc. Davis has been in the mortgage industry for more than 22 years. He developed the Regional Diversity Outreach Initiat ive when he joined FDI in 2004. Under his direction, FDI achieved its goal of attracting and retaining a workforce made up of 13-15 percent diverse employees, including a diverse executive committee. His vision toward advancing economic parity and diverse representation extends to the entire region.

“Business success cannot be achieved without a workforce that feels appreciated and respected by the companies for which they work,” said Jonathan Kempner , president and CEO of MBA.  “The recipients of the 2005 CDL Awards are shining examples of the benefits that are reaped when companies and individuals are committed to promoting diversity in our industry. I commend them all.”

The judging panel consisted of representatives from MBA’s Commercial and Residential membership, the chair of the MBA Diversity Task Force, a representative from the U.S. Department of Education and a representative from Department of Finance at Howard University.

To learn more, visit www.campusmba.org/CDLawards, or contact Krista Sabol at (202) 557-2794 or ksabol@mortgagebankers.org. For more information on CampusMBA, winner of the 2004 Best Virtual Corporate University/Best Use of Technology CUBIC Award, visit www.campusmba.org or call (800) 348-8653.
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The MISMO eMortgage Guide is intended to educate the mortgage industry about the business as well as (high-level) technical aspects of eMortgage implementations and their potential benefits. This tool provides the next step of eMortgage efficiencies to the lending community.

"This guide is intended to be an executive-level guide addressing all aspects of eMortgage implementations—key concepts, benefits and ROI, legal background, and industry best practices for the various steps of an eMortgage implementation," said Igor Derensteyn, vice chair of the eMortgage Workgroup and senior vice president of eMortgage technologies at Countrywide Corp., Calabasas, Calif. "Many of the workgroup members who created this guide are experts and have generously contributed their knowledge to this release."

This guide provides an overview of the eMortgage landscape as it exists today, including:

• Benefits of eMortgages;

• Key industry standards and concepts;

• Underlying legal framework and concepts;

• General guidance for best practices; and

• Sources of additional information to get started.

The mortgage industry is slowly but steadily moving forward on eMortgage development and implementation because the resulting paperless processes will provide significant savings of time and money for business and ultimately for consumers. MBA's Board of Directors recently endorsed the adoption, by the industry, of residential and commercial eMortgages.

MISMO standards are critical to achieving eMortgage adoption across the industry. During the transition from paper to eMortgages, both individual loans and loan pools may be hybrid, using combinations of paper, imaging and electronic documents. This guide provides a reference tool to help you move forward toward a standardized eMortgage environment.

This product was developed by the volunteer participants of the MISMO eMortgage Workgroup, which was established in January 2001 to develop standards, specifications and guidelines toward fully electronic (paperless) mortgages that correspond to the Electronic Signatures in Global and National Commerce Act (E-SIGN) and the Uniform Electronic Transactions Act (UETA) legislation enacted by the U.S. government in 1999 and 2000.

MISMO is dedicated to developing, promoting, and maintaining, through an open process, voluntary electronic commerce standards and best practices for the commercial and residential mortgage industries.

The eMortgage Guide will be posted shortly at www.mismo.org.
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• The yield curve has “flattened significantly” since the beginning of the year, with the spread between fixed and adjustable rate mortgages declining by nearly 50 basis points to about 120 basis points be mid-October. “The share of adjustable rate mortgages has declined this year as well and we project the decline in the share will continue through the middle of next year,” Duncan said. “The share is projected to rise again in late 2006 and 2008 as a significant number of hybrid adjustable rate mortgages reach their reset and are refinanced.”

• Total existing-home sales for 2005 will increase by 3.7 percent relative to 2004 to a record level in 2005, but will pull back by about 3.5 percent in 2006 and decline by another 5 percent in 2007.  New-home sales will rise by nearly 5 percent to a record high in 2005, and will slip by 3 percent in 2006 and about another 4 percent in 2007. “We will start to see some decline in sales next year,” Duncan said. “We are prepared to say we have peaked.”

• Existing home price appreciation is expected to be very strong this year, with gains in median existing home prices accelerating to 10.8 percent during 2005. Increases in new home prices are projected to be significantly slower, with median home price gains significantly moderating to 3.8 percent.  Price gains in 2006 and 2007 are expected to continue to be healthy but at a more sustainable pace of about 5 percent.

• Residential mortgage originations for purchase loans will reach to $1.49 trillion in 2005 and will edge down to $1.47 trillion in 2006 and $1.46 trillion in 2007. Residential refinance loans will total $1.28 trillion in 2005 and then decline to $785 billion in 2006 and $689 billion in 2007.

• Total residential mortgage production in 2005 will be $2.78 trillion, the third-highest level ever.

Upside and downside risks exist to this forecast, Duncan noted. “On the upside, rebuilding could boost growth next year by more than projected. On the downside, higher oil prices, higher core inflation or more aggressive tightening by the Fed could result in a slower economic growth than projected,” he said.

MBA revised our estimate of total mortgage originations in 2004 to reflect newly released data from the Home Mortgage Disclosure Act (HMDA) and the MBA Survey of Mortgage Originations.
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