The federal agencies—the Federal Reserve; the Office of the Comptroller of the Currency; the Office of Thrift Supervision; the Federal Deposit Insurance Corp. and the National Credit Union Administration—said the updated policy statement, which replaces a 1993 policy statement on the ALLL, ensures consistency with generally accepted accounting principles (GAAP) and post-1993 supervisory guidance.

“An assessment of the appropriateness of the ALLL is critical to the safety and soundness of a financial institution, especially in today’s uncertain economic environment and when concentrations in untested loan products are present,” the agencies said.

SGC said the updated guidance “will force some banks to bolster loan loss reserves. Any effort to increase loan loss reserves would come at the expense of quarterly earnings.”

SGC noted that loan loss reserves for financial institutions “have been falling for years,” and that the industry in the third quarter had loan loss reserves of 1.09 percent of total loans and leases—the lowest level since the second quarter of 1985.

“We believe that regulators would like to see banks bolster loan loss reserves,” SGC said. “Many banks today are concentrated in commercial real estate lending, especially construction and development lending. CRE loan problems traditionally are the top cause for bank failures. In addition, banks have been expanding the use of nontraditional mortgage products, which have an unproven track record for repayment.”

According to the ALLL, each institution has a responsibility for developing, maintaining and documenting a comprehensive, systematic and consistently applied process appropriate to its size and the nature, scope and risk of its lending activities for determining the amounts of the ALLL and the provision for loan and lease losses. “To fulfill this responsibility, each institution should ensure controls are in place to consistently determine the ALLL in accordance with GAAP, the institution’s stated policies and procedures, management’s best judgment and relevant supervisory guidance,” the agencies said.

“Consistent with longstanding supervisory guidance, institutions must maintain an ALLL at a level that is appropriate to cover estimated credit losses on individually evaluated loans determined to be impaired as well as estimated credit losses inherent in the remainder of the loan and lease portfolio,” the agencies said. “Estimates of credit losses should reflect consideration of all significant factors that affect the collectibility of the portfolio as of the evaluation date. Arriving at an appropriate allowance involves a high degree of management judgment and results in a range of estimated losses. Accordingly, prudent, conservative, but not excessive, loan loss allowances that represent management’s best estimate from within an acceptable range of estimated losses are appropriate.”

SGC noted that financial institutions have used a 1999 agreement with the Securities and Exchange Commission that was intended to prevent loan loss reserves from being used as an earnings management tool. “Auditors have used that agreement—as well as follow-up comments from the Public Company Accounting Oversight Board—to push banks to lower reserves. We believe that some banks welcomed the push back as it provided the excuse needed to reduce reserves, which conveniently resulted in higher quarterly earnings.”

SGC said the guidance will likely spur banks to change their ways. “We believe the answer is ‘yes.’ This policy statement provides the blueprint for examiners to go after banks that continue to run down loan loss reserve levels. It puts the burden on bank boards to enforce loan loss reserving. In this era of Sarbanes-Oxley and internal controls, we suspect boards will take that job seriously. Plus, the credit cycle has turned. That alone will force changes.”
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FNC’s real estate collateral management systems will bring HomeSafe’s inspection technology to lenders and appraisers who require a more in-depth look at a particular property. HomeSafe inspectors use customized infrared cameras and acoustic equipment to, in effect, see and hear through walls, floors and ceilings. The technology shows inspectors water damage, electrical hot spots, energy loss, structural concerns and termite infestations that are invisible to the naked eye.

eLynx Deploys Paperless Service for Countrywide, CitiMortgage
eLynx, Cincinnati, a portfolio company of American Capital Strategies Ltd., and a provider of a network of e-services for the financial services industry, announced that Pulaski Bank is using the company’s SwiftSend Investor Delivery service to electronically submit loans to investors, including CitiMortgage and Countrywide.

The Web-based service enables lenders to securely package, convert and submit imaged loans to investors, formatted to individual institution specifications. 

GMAC to Provide Interim Subservicing for Metrocities Mortgage
GMAC Mortgage LLC, Horsham, Pa., announced it will handle interim subservicing for Sherman Oaks, Calif.-based Metrocities Mortgage LLC. GMAC Mortgage will provide interim subservicing for the company’s line of first mortgages, closed-end seconds and HELOCs.
 
McDonald Computer Corp.’s Platform Integrates Reverse Mortgage Servicing Capabilities 
McDonald Computer Corp., Southfield, Mich., a provider of automated servicing technology for the mortgage banking industry, announced integration of a reverse mortgage servicing component into its flagship product, Servicing/T.I.M.E.
 
Servicing/T.I.M.E is an automated online, real-time servicing system that can be used as a service bureau or an in-house system. It can process all loan products and is updated to remain in sync with current technology and industry trends. McDonald Computer Corp.’s reverse mortgage servicing component services all types of reverse mortgages including the Home Equity Conversion Mortgage, a Federal Housing Administration-insured mortgage.

SecoLink Offers Compliance-Ready Appraisal Services
SecoLink Settlement Services LLC, Buffalo, N.Y., an affiliate of KeyBank USA and provider of title-related products, appraisal, flood and settlement services, extended its product offerings to clients outside of the Key family of businesses. Originally built as an affiliate to manage KeyBank’s mortgage settlement services, SecoLink is seeking to grow its business to providing mortgage lenders and originators with regulation compliant appraisal services. 

Web-based Service Connects Struggling Homeowners to Help in Crisis
MortgageKeeper Referral Services Inc., Ithaca, N.Y., announced NonprofitReferral.org, a Web-based subscription service that provides connection to local services, charities and programs for mortgage lending loss mitigation departments and independent nonprofits offering foreclosure prevention counseling.

The Web site offers referral information, such as home repair, utility payment assistance, legal services, and job training, for 15 high-risk foreclosure cities across the U.S. The service employs experts with local knowledge to review the data, and verifies and maintains data to ensure the most accurate referral information.

Klik Technologies Goes National
Klik Technologies, New York City, a business transaction processing outsourcer, announced plans to expand local processing in Jacksonville, Fla.; Dallas; and Los Angeles in 2007.

Klik will be partner with national and regional banks, as well as directly servicing clients in each new market.

1st Metropolitan Mortgage Adds to Preferred Lenders/Vendors Program
1st Metropolitan Mortgage, Charlotte, N.C.,  a division of Empire Equity Group, has added two additional lenders and three service providers to its Preferred Lenders and Vendors Programs (PLVP). Aegis Mortgage Corp. and Credit Suisse Bank have been approved as preferred lenders, and Ellie Mae, Richmond Title and Turning Point have been approved as preferred vendors.

The preferred program aligns individual branches with select partners and uses collective buying power to negotiate preferred service levels and pricing incentives that a single branch may not otherwise benefit. Each branch has the option to choose the lenders that can offer the best product for each origination. They can also select the service providers that best meet their needs.

InWare Releases Universal Version of Title Software
InWare, Cleveland, Ohio, released a universal version of InTitle, its flagship real estate software. InTitle provides title insurance companies the opportunity to market their services directly to home buyers while delivering traditionally bulky home closing documents electronically on a compact CD.

InTitle provides marketing collateral with Flash animation and tabbed organization. Customizable templates allow users to change the look and feel of the final CD without development costs. Users can pick colors, images and background music or add custom narration.
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European employers in 11 of 12 countries said they would boost year-over-year hiring activity, with employers in Germany reporting a second consecutive quarter of positive job prospects, according to quarterly data from nearly 50,000 employers across 27 countries and territories.

"The German labor market appears to be gaining momentum with a second consecutive quarter of healthier job prospects ahead, while employers in Singapore and India are set to accelerate hiring considerably from 12 months ago," Joerres said.

Manpower Inc. noted the first quarter of the year is historically a slow period for hiring in many countries, as holiday workers finish their assignments and colder winter months inhibit work in the northern hemisphere in industries such as agriculture, construction and tourism.

Manpower expects the hiring pace to be similar from one year ago in Canada, Mexico and the U.S. with some caution in certain sectors of the U.S.

"Although the overall hiring outlook remains healthy in the U.S., we are seeing a little more caution by employers, especially in the construction, manufacturing-durables and finance/insurance/real estate sectors, where hiring is expected to slow from both the fourth quarter and one year ago," Joerres said.

U.S. caution is contrasted by optimism across the Europe, Middle East and Africa (EMEA) region as job prospects appear strongest in South Africa, Ireland, Spain, the United Kingdom, Sweden and Belgium, particularly in the financial, transportation and communication sectors. The weakest countries for hiring are Italy and Norway with expectations for Norway's weakest first quarter in two years.

"The EMEA region shows notable strength in the transport & communication and finance/insurance/real estate sectors where there should be ample opportunities for job seekers throughout the region," Joerres said. "On the upside, U.S. employers in the services sector, as well as those in Mexico and Canada, say they will continue their strong pace of hiring. Notably, the Mexican labor market continues a strong steady growth trend that began in third quarter of 2004."

However, large U.S. metropolitan areas tend to be a reflection of economic expansion outside of the U.S., according to Peter Kozel, executive managing director of research and real estate strategies at Newman Knight Frank Global Real Estate Advisors, New York City.

"The large metro areas are gateways to the international economy and commerce. Therefore, these markets benefit relatively more from the fact that many large countries outside the U.S. are growing very rapidly. By all accounts, this shape of global growth will contiinue in 2007 and beyond, indicating that the relative performance patterns experienced over the last few years among the U.S. regional markets will also continue," Kozel said in Continued Gains in 2007, an office property market outlook report from Newman Knight Frank. The report also said the office sector would continue to improve in 2007 but at a slower pace.

Manpower's survey said hiring prospects remain strong in the Asia Pacific region although slightly weaker than three months ago. Compared to the first quarter this year, hiring should improve in seven of eight countries and territories surveyed, according to Joerres. Hiring expectations are strongest in Singapore and India, and weakest in Taiwan. In China, added to the survey for the first time this year, employers are the most optimistic about adding staff in Beijing and least optimistic in Wuhan.

"The finance/insurance/real estate sector is the driving force in this quarter's significantly improved employment outlook for Singapore. However, employers across all industry sectors expect to accelerate hiring from 12 months ago in a very tight market for talent," Joerres said. "The strong outlook in the Japanese market is being fueled, in part, by the wholesale/retail trade sector and in India there is notable improvement reported in the mining & construction sector, where employers expect to more than double the pace of hiring from one year ago."
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The loan was arranged by Jim Kirkpatrick of Live Oak Capital through New York City-based Guardian Life Insurance Company of America, a Live Oak Capital Ltd. correspondent lender.

“The highlight of this loan is the one-time close with a fixed interest rate for the full term of the loan,” Kirkpatrick said.

The Fairmont Museum District is being developed by Long Reach Associates Ltd LLC, a firm specializing in the development and management of luxury apartment communities. Steinberg Design Collaborative LLP designed a podium structure of four floors of apartments above a two level parking garage. Davis Brothers Construction Ltd. is the general contractor.

Phase One will consist of 236 units with an average size of 900 square feet. The luxury property will feature custom wood cabinetry, gourmet kitchen islands with granite countertops, a resort style pool and out door living areas with fireplaces.

The Fairmont Museum District will be developed on the southwest corner of Dunlavy Street and Richmond Avenue in the heart of the Museum District near the Medical Center, downtown and the Galleria.
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Today's mortgage industry leaders can't afford to operate in the current business environment with obsolete ideas. It takes creative thinking at every level to move your production team forward. Companies need innovative thinkers in building their sales team and formulating their strategic plans; people able to bring forward ideas that differ from traditional business practices. The Residential Loan Production Conference answers these questions and more:

• How do we maintain or increase our profitability in tight market?
• How should we align staffing to fit the changing environment?
• How do changes in employer attitudes and interests affect recruiting?
• Where can I get the planning and performance tools to make the right decisions?
• How do we build a production team and business model that responds effectively to emerging industry trends?

Developing an effective sales and marketing plan is best achieved when you include the perspective of all your key staff. Invite your executive staff to this meeting so that they can gain the fresh insights necessary to be successful in today's fast-paced mortgage banking environment. Discover alternative sales approaches; evaluate new strategies, products and cutting-edge technology; and examine the current and future economic environment affecting the real estate finance industry.

This premier industry event is where you can hear from residential industry experts associated with developments in the areas of:

• Innovative marketing strategies;
• Customer relationship management;
• Origination systems for retail, wholesale production;
• Finding mortgage capital;
• Preventing mortgage fraud; and 
• Sales techniques.

Also visit the exhibit hall to see the latest developments in technology and other products to help you work more efficiently and effectively.

Who Should Attend:

• Retail, wholesale and correspondent lenders
• Loan Officers responsible for all facets of mortgage production and sales
• Prime and Sub-Prime Lenders
• Technology vendors
• Brokers and executives involved in the development and implementation of their organization's strategic plan
• Brokers and executives who are responsible for production/sales and servicing through the use of new products and technology

The conference takes place at the Century Plaza Hyatt Regency. For more information, visit the hotel’s Web site, http://centuryplaza.hyatt.com/hyatt/hotels/index.jsp.

To download the Conference brochure, go to www.mortgagebankers.org/files/conferences/pdf/M2702066_brochure.pdf.

For speaking opportunities, contact Norman Edwards at nedwards@mortgagebankers.org or call (202) 557-2793. Conference sponsorships are also available, but space is limited. For more information, download the sponsorship brochure at www.mortgagebankers.org/files/conferences/pdf/M2702066_sponsorbrochure.pdf and/or contact Mark Brady at mbrady@mortgagebankers.org or call (202) 557-2790.
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Eleven hard and fretful months in 2006 have come and gone in an industry plagued by uncertainty and insecurity. For some of us, December brings out a jovial spirit of warmth and compassion to help those less fortunate in our society and communities. For mortgage decision makers and executives, it must feel like they are looking into the eyes of the “ghost of Christmas yet to be.” 

So much unknown and fear as to what should be done to get beyond the quandary of “where do I invest?” “How can we become even leaner, while increasing back-office productivity and pipeline production?” More importantly, “What level of staffing and retention should be adopted for 2007?” 

The challenge for mortgage professionals is that in times of change and uncertainty, those “proven” models that helped our organizations realize profit, growth and market share may no longer be appropriate. Just as our staffing adjustments have historically lagged our quarterly reporting and results (e.g., production overcapacity), our organizational preparation and projection efforts lack a robust forecasting model grounded against the new market circumstances.

Matt Johnston, CEO of Workway, states, “In the past, mortgage lenders have hired people on a permanent basis. However, with every refinancing boom, they need to hire fewer people on a permanent basis and more temporary workers in order to manage their fixed and variable costs. Employers need to analyze the people they work with and determine if the staff on hand is doing what they need.” 

Lacking omnipresent insight, industry leaders and organizations must assess and project their needs utilizing a combination of proven and quantitative cross-industry disciplines, at the same time as enhancing these with measurable internal relationship management disciplines and continuous process improvements. 

• Ensuring Quality and Consistency: While a certain amount of staffing reduction and turnover is healthy for new ideas and growth, a key challenge for an organization is determining what levels are acceptable before production and throughput are compromised. With our industry’s staffing models (and needs) getting increasingly specialized, there is considerable risk both operationally and financially that will be implicit within given functional roles should cutbacks be required or with attrition. What are the key roles and personnel within your organizational core processes and what are you doing to actively retain and grow them?

• Education and Training Investments: It’s an area we’ve talked about for decades yet it often time yields the least return. This unpopular assessment is a direct result of poorly understood and essential personnel improvement actions and programs that directly correlate to measurable organizational objectives. As a result, executives and organizations in challenging times, forego all but regulatory and compliance needs resulting in stale personnel and lack of innovative ideas to improve operational performance. To ensure continued advancement of personnel and organizational adaptation, what programs will be needed to directly impact performance and results? What is the measurement process and is it organizationally accepted?

• Streamlining of HR and Sourcing Processes: As the mortgage industry struggles with the effects of globalization and sourcing models, a recent poll conducted by IMD on “Setting the 2007 Corporate Agenda” clearly shows that staffing is the number one concern for organizations around the world. However, a key and often unrecognized challenge is the archaic and inefficient internal functions that serve in staff identification, management, and retention. These often fragmented and inefficient processes should be a key priority for those organizations struggling with “what to do about our personnel resources.” The options for improvement include:

   Human capital management programs;
   Automation, technology and systems;
   Adoption of best-practices and lessons learned from others; and even
   Shared services or outsourcing of functions within the entire value-chain. 

Johnston emphasizes, “In the employment arena, it is going to become increasingly important, not only in 2007 but going forward, to put emphasis on how to hire and train people. A distinct minority or mortgage lenders currently have employment and training processes and about half of mortgage companies will put these into place by next year. In order to establish these rules, companies must make sure senior management understands the importance and the consequences of poor leadership and a lack of strategic planning when it comes to human resources issues. Additionally, mortgage lenders must install practices where they can put a metric on each of their employees to see if they are getting what they are paying for and push the metrics so that it encourages employees to be more productive.”

Alas, without a “magic happens here” button, we need to map out a flexible change approach that is grounded in realistic forecasts. Our organizational ability to not only survive but prosper in times of uncertainty is definitively linked to our personnel. Therefore, a forceful and comprehensive approach to staffing must be a top priority for 2007—one that is accommodating but defined. Just as in the “ghosts of fiscal years” past, we don’t want to be shown these avoidable errors by our replacements or acquiring organizations.

(The views expressed do not necessarily reflect the views or policies of the Mortgage Bankers Association. MBA NewsLink welcomes your contributions. Articles and inquiries should be submitted to Mike Sorohan, editor, at msorohan@mortgagebankers.org.)
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