Providing borrowers with appropriate loan products to suit their needs is the ultimate purpose of valuations, and survey results show lack in professionalism and a need for more education among appraisers to improve the valuation process.

“Chief appraisers face two opposing situations—on the one hand, they need to ensure quality appraisals and keep fraud and bad appraisals out of the institution. That’s what regulators expect. On the other hand, they are responsible for producing volumes of loans,” said Vicky Cassens Zillioux, mortgage lending consultant for Strategic Development Worldwide, San Diego, which conducted the survey. “Chief appraisers are at the front line and see a lot that comes from all different directions.”

The survey focused appraisal quality and independence, appraisal management companies, technology, valuation products and valuation fraud. It had a sample size more than 100 chief appraisers from different types of institutions, including those that deal in retail, wholesale and the secondary market.

“We looked for those who touched different parts of the chief appraisers world to make the survey as holistic as possible, including appraisal software and fraud-prevention companies,” said Cassens Zillioux. “The questions were designed to address future thinking in terms of where the profession is going and what issues and solutions exist.”

The outcomes of the survey suggested enforcing more guidelines in ordering appraisals and having clearer channels of communications. Striving for unbiased and professional perspectives on the properties, combined with education and training were also emphasized. As regulation and markets change, chief appraisers felt automated valuation products require further training and testing to keep pace with changing environments. 

Furthermore, the secondary market also requires a different set of requirements, interests and concerns that should be understood by appraisers. The group also found appraisal management systems that collected were a priority and had not yet been implemented in the valuation process.

“It all boils down to the problem of a lack of professionalism which then could translate to appraisers being more easily influenced by other things,” said Cassens Zillioux. “There is coursework and mentorship available for them to education themselves more. Training is critical for everyone because one appraiser will train another appraiser and the goal is to ensure a pass of good information and solid skills. Ultimately, if the appraisers aren’t well-informed, they aren’t going to understand what’s going on.”
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I distinctly remember the date that I decided to pursue the CMB designation. It was in college. I was sitting in a criminology class, daydreaming. I envisioned the time when I would run the Default Management Group in a local bank….

Or not. No, the path to a CMB designation was nowhere in sight during my college days. Actually, I wanted to be a North Carolina Highway Patrol officer—that person in uniform who keeps the highways safe and protects the state’s citizens and travelers. Like many mortgage professionals, it was by circumstance that I began a career in the industry.

I thought I had my future all figured out. I worked part-time as a teller at a local bank to put myself through school, thinking law enforcement was in the cards. My grandparents not-so-secretly hoped that I would continue a banking career—feelings which I credit to a strong family preservation instinct.

But ambition was the real culprit. During the occasional down-time, I would scan the bank’s internal job board to look for opportunities with job attributes appealing to a college student—money and intrigue not being the least of them. And one day, there it was, Mortgage Loan Delinquency Agent. Jon Burch 007. I would be neither shaken nor stirred. This was the job for me. It has been a crazy ride since then.

While I didn’t join the ranks of Sherlock Holmes, I do suspect most people entering our industry landed here like me—incidentally and happy that they arrived. What other industry has as rich of a history as ours dating back to Anglo-Saxon times before William the Conqueror took England? Who else can claim 500,000 people engaged in the common goal of putting a roof over the heads of more than 300 million Americans? Who doesn’t feel the power of driving the largest financial engine in the world?

The Next Big Thing
To be or not to be a CMB. Why wouldn’t you reach for the pinnacle of industry accomplishment? At 36 years young, I chose to be in the 99.98 percentile of real estate finance professionals to receive the Mortgage Bankers Association’s CMB designation. It was September 2006, and I was number 908 (give or take) in a long line of VIPs—very important professionals.

Rewind to a previous meeting at an MBA-sponsored event. One of my customers and a member of the MBA Residential Board of Governors, Tim Dale, CMB, and I were catching up in San Diego. I paid particular attention to the fact that Tim had his CMB. Sure, the thought of pursuing the designation crossed my mind from time to time, but for some reason I went away from that meeting with an especially strong desire to learn more. I went online to CampusMBA and started to review my MBA transcript. I assembled a plan that provided a timeline and estimated the cost and benefits of pursuing the program. I made a decision that the CMB was my next major professional goal.

From Hipoteca to 저당(권), It’s All a Mortgage to Me
All I needed was a sponsor. Intuitively, I asked Tim. Fortunately, even with his responsibilities and busy schedule, he agreed. Tim served as a mentor and guide. He helped me understand the process, and he was always there when I needed to chat or discuss a topic. For that, I can not thank him enough. One particular piece of wisdom he passed onto me was, “Jon, read as much as you can. Understand all positions of the argument and draw your own conclusions. Be able to support your belief.” So I read every piece of literature, issue paper, MBA study or report that I could get my hands on. When it came time for me to take the written portion of the CMB, I could spell mortgage in 14 different languages. I was a walking, talking MBA Issue Paper.

The written exam was everything I expected it to be. I am not going to say it was easy, but I felt comfortable and prepared. Six hours later, I was done. It is hard to imagine summarizing everything you can about an industry as expansive as ours, but if there is a medium for that, the CMB written exam is it. A few weeks later, Tim called me. I had passed the written portion and accomplished my first unspoken goal: to pass the written exam the first time.

A Habit Worth Having
Talking with people is a virtual requirement in this industry, and it is one of my strengths. I looked forward to the next step, the oral exam. I did not see the oral exam as a test; I saw it as an opportunity to get together with peers and discuss relevant issues. Tim had done an excellent job in preparing me for those discussions during lunches that we shared throughout this process. I was relieved, though, when the CMB panel called me back in to congratulate me and provide me with a letter and CMB pin.

To me the CMB is a recognition of industry knowledge and commitment. It is not just another milestone or a plaque for the wall. It is a habit that you naturally live and breathe. It just so happens that this habit also helps to protect people through compliance with the MBA Canon of Ethics. Directly or indirectly, I help people get into their first home or upgrade to their next.

I occasionally find myself daydreaming, writing that big fat ticket to a speeder who flew by me on I-95 at 90 mph. But, with all the craziness, landing in the real estate finance profession has provided me with a wealth of opportunities, a strong network of peers, an ethical bearing and a sense of contributing to a greater good.

To be or not to be a CMB? Why wouldn’t you?

CampusMBA designations and certificates serve a dual purpose—they tell the world what you've accomplished in your chosen profession and they put you on the path to career advancement.

For more information about CampusMBA designations, visit www.campusmba.org/IndustryDesignations.
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One purpose of the field trip is to show how business operations, commercial networks, transportation systems, communities and communications could be affected by future earthquakes. More than a dozen active researchers in geoscience and earthquake engineering will travel with the group and make presentations along the way. The field trip will also offer an opportunity for exchange between the research community and real-world business practice. Owners, developers and lenders are encouraged to participate.

Participants will also gain insight into earthquake-risk management solutions that are currently available, but not often used, in the central U.S.  For example, earthquake-resistant design is often omitted from new construction in the region because of widespread misconception that it adds cost to development. Field trip participants will learn that prudent earthquake-resistant design actually offers a key benefit: a positive change from a “cost item” to “value added.”

The field trip route includes the Memphis metro area, northeast Arkansas, southeast Missouri, southern Illinois and western Kentucky and Tennessee. Participants will see evidence of the 1811-12 New Madrid earthquakes that is still visible. Those earthquakes, estimated to be around magnitude 7.5, were felt throughout the eastern two-thirds of the country and caused damage in Georgia, the Carolinas and Washington, D.C.  A similar event today would be devastating to the region affected as well as disrupt the national economy and negatively affect worldwide trade.

Cost to each field trip participant is $550, which includes one night, single-occupancy hotel lodging, four meals and round-trip transportation from Memphis via air-conditioned motor coach. Transportation to and from participants’ home city is not included.  The field trip is subsidized by the U.S. Geological Survey.

A similar field trip took place in May 2005. A summary report to the U.S. Geological Survey is available at http://earthquake.usgs.gov/research/external/reports/05HQGR0014.pdf.

Those interested in participating in this field trip should contact Phyllis Steckel at 636/239-4013 or email psteckel@charter.net by May 10. Because of logistical constraint, the field trip is limited to 35 participants.
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ASTM International—originally known as the American Society for Testing and Materials—made revisions on E2026, Standard Guide for the Seismic Risk Assessment of Building and developed the new seismic risk assessment standard XA. The group voted on and approved E2026 revisions, and the new XA standard, which take effect in 45 to 60 days.

“This will help to streamline the lending due diligence process,” said Deborah McKinnon, vice president and acting head of the commercial/multifamily group at the Mortgage Bankers Association. “The approval of these standards corresponds with anticipated publication of the Seismic Working Group's Seismic Handbook which is intended to demystify how seismic studies are performed and provide instruction on incorporating the revised ASTM standards into seismic reports.”

MBA has been working with ASTM International for the past several years to revise E2026 and develop XA on properties intended for securitization. ASTM International is one of the largest voluntary standards development organizations in the world and is an important source for technical standards for materials, products, systems, and services.

Most lenders require earthquake insurance to be in place for properties that have a significant likelihood of sustaining earthquake damage. The insurance usually amounts to 20 percent of property value. However, the lack of a widely adopted earthquake probable maximum loss (PML) study standards caused a wide variation in earthquake PML study results.

Lenders typically require an earthquake PML study to fund commercial real estate loans made in areas of the country with a significant degree of earthquake activity—zones 3 and 4. The purpose of the PML study is to examine the potential susceptibility of a commercial project to earthquake damage.

(Mark Cobb contributed to this article).
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The community, anchored by a $125-million, 200-acre Villa Muse Studios, was inspired by recent approval in the state House for H.B. 1634, which provides state-funded incentives for film and television production. Lawmakers failed to provide funding for the Texas incentive program created in 2005, but H.B. 1634, introduced by state Democratic Rep. Dawnna Dukes, was approved earlier this month.

"Neighboring states and foreign cities like Toronto are aggressively working to lure Texas filming opportunities away from the state,” Dukes said. “House Bill 1634 will level the playing field for our state in comparison to other film venues.”

Texas' TV, film and video production industry employs nearly 18,000 people each year, but it has lost 4,500 jobs to states with incentive programs, according to Dallas Morning News. Nearly five years since other states started to provide incentives for film production, Texas' share of the regional production market went from 85 percent to 18 percent.

The Villa Muse project would not receive funds appropriated by HB 1634; however, it has secured phase one funding with private equity. In partnership with Austin-based investors Carpenter & Associates Development and Construction Inc., Villa Muse executives secured land for the project as well.

“This is not about a quick exit strategy or about flipping it—it is about building something long-term, said Paul Alvarado-Dykstra, vice president of strategic development of Villa Muse

Jay Podolnick, founder and CEO of Villa Muse, said the planned community will address the needs of thriving creative industries in Texas, while attracting business that has been “out of reach and forced to go elsewhere."

“Villa Muse will give Texas a centralized location where creative talent can come together to cross-pollinate and communicate in a uniquely innovative environment,” Podolnick said.

Meanwhile, an identical companion bill to HB 1634—SB 782—is currently in committee and awaits hearing by the state Senate.

"Providing incentives for the film industry will create new jobs and enhance the role of Texas as a national leader in television and film production,” said Republican State Sen. Robert Deuell. “The Villa Muse project is a textbook example of how the government can effectively use state-funded incentives to promote private industry for the public good.”

Villa Muse executives estimate the overall project would generate nearly 8,000 new jobs upon completion with a capacity for 8,500 residents. One challenge to building the project in Austin, however, is showing comparables without anything that compares to a studio, sound stage or amphitheater of that size in the market.

“As we are developing the project, looking at the larger need and how it fits into the eco-system of the market, it is very much tailor made to some unique events happening in Austin that we do not see happening anywhere else outside of New York and L.A.,” Alvorado-Dykstra said. “There is this convergence of creative industries that have all sprouted up—pretty organically—on their own.”

Indeed, Austin is the third-leading city for creating video games; it is the number two in Texas for advertising, after Dallas; the South by Southwest Music and Film Festival just concluded and the Austin Film Festival this year takes place in October.

“Grindhouse”—the double-feature exploitation film, directed by Quentin Tarantino and Paul Rodriguez, now out in theaters—was entirely filmed in Austin. However, post-production work needed to go back to Hollywood. That would not be the case in Villa Muse.

Phase one of Villa Muse includes the Villa Muse studio with high-end production and post-production facilities for film, television, commercials, music and video games.

Rodriguez showed up at the SXSW Film Festival this year. Prior to that, Tarantino and Rodriguez sponsored a "Grindhouse Trailer Competition" in Austin prior to the film’s release.

In addition to a 50,000 square-foot soundstage, a scoring stage and recording studios, Villa Muse includes plans for the largest outdoor water tank for film production in the United States and an outdoor amphitheater that could hold more than 70,000 people for concerts, which would follow-up on music recorded in the studios.

The Who's Pete Townshend appeared at this year's SXSW Music Festival in March. More than 1,400 acts and more than 8,000 registrants joined the international music festival, which features a variety of acts and music—from pop, jazz, country, blues, reggae, hip hop, electronica—represented on 50 of Austin's stages.

The financial consultant for Villa Muse, Hiten Patel, served as senior vice president and CFO for Children's Place Retails Stores Inc.—a Fortune 400 company—prior to his role at Villa Muse. He was also an investment banker with Credit Suisse First Boston.

The community’s design team, Austin-based Land Design Studio, has experience ranging from master-planned residential communities to downtown revitalizations.

The master-planned residential community would surround the studio campus. Designed to serve as a backlot, neighborhoods will be built in an array of styles to meet a variety of filming needs. Ranging from New York brownstones to Craftsman bungalows to manors and estates, these residences will be open for sale to the public.

Alvarado-Dykstra said the Villa Muse project would provide infrastructure at a “highly competitive cost,” with mid-to-upper level home prices.

"Villa Muse will give creative professionals everything they need to live and work in one area without sacrifice or compromise," Alvardo-Dykstra said.

The entrance to Villa Muse Studios would be at the end of a broad boulevard lined with retail, office, residential and hospitality spaces. At the other end, the boulevard would have a large public park and five to six mixed-use buildings with retail on the ground floor and office spaces above.

“And true to its name, it will be a place to live, work and be inspired," Podolnick said.
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The Phoenix office of Johnson Capital assisted a retail center investment client in the funding of a new fixed-rate loan for $8.35 million, secured by a first lien on more than 39,100 square feet of shops and pad space in Highlands Ranch, Colo.  Goldman Sachs Commercial Mortgage LP, New York, provided the financing for this retail space, which is part of a larger shopping center known as Highlands Ranch Marketplace. 

The Phoenix-based borrower purchased the property in October 2006 using a floating rate bank loan. This new loan paid off the bank financing and covered the costs of the new debt placement. The new loan requires interest-only payments for the entire loan term.

An Albertson’s grocery store anchored the shopping center, but it closed in mid-2006. The space is currently being divided and reconfigured into a Ross Dress for Less store and a Staples office supply store. 
 
The Phoenix office also worked with Goldman Sachs to assist one of its retail center development clients with the funding of a new fixed-rate loan of $2.68 million to secure a first lien on more than 8,300 square feet of retail shops in Glendale, Ariz.  Improvements on the shops are on a pad within a larger shopping center anchored by a Kohl’s department store. 

The subject shops and other portions of the shopping center, known as Desert Glen, were developed by an affiliate of the borrower. Prior to the new loan funding, the shops were unencumbered.  The new loan recapitalized the borrowing entity and covered the costs of the new debt placement. 

Meanwhile, at Johnson Capital’s Irvine, Calif. headquarters, the firm arranged an $11 million permanent loan through Northwestern Mutual Life Insurance Co., Milwaukee, Wis., for an Orange County-based real estate investment group. The loan is secured by an industrial office complex containing seven buildings with more than 156,700 square feet of space in Santa Fe Springs, Calif.

Johnson Capital’s Irvine office also arranged a $13.2 million permanent loan for an Orange County-based real estate investor through Deutsche Bank Mortgage Capital, New York. The loan, which includes 10 years of interest-only payments, is secured by a two-story office building containing more than 100,000 square feet of office space in Pomona, Calif.

Johnson Capital’s San Francisco office arranged a $14.5 million, 10-year fixed-rate loan to finance the acquisition of a 94,000 square-foot office complex in Walnut Creek, Calif., for a local real estate investment syndicate. The property was 80 percent leased at close of escrow and will be converted to medical office use.

Artesia Mortgage Capital Corp., Issaqua, Wash., provided the financing, which was 94 percent of the purchase price and 80 percent of the stabilized value.
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Attend the conference and hear perspectives from industry leaders on changes and trends affecting the real estate finance industry, and learn how other lenders are strategizing to compete in a complex market.

Keynote speakers include Angelo Mozilo, CMB, CEO of Countrywide Financial Corp., Calabasas, Calif., who highlight’s the conference’s Opening General Session. Also speaking at the Opening General Session is Ace Greenberg, chairman of the executive committee at Bear, Stearns & Co. Inc., New York. MBA Chief Economist Doug Duncan keynotes the Second General Session. Baseball legend and broadcaster Jim Bouton will appear and sign autographs at the Opening Reception: A Taste of New York on May 20.

Join your peers to exchange ideas and strategies on such topics as:

• Mortgage securitization structuring alternatives

• Housing market overview and mortgage performance

• Impact of regulators, such as the SEC and FFIEC, on mortgage products and securitization

• Mortgage pipeline risk management

• Private-label and whole-loan business and legal developments

• New developments in MBS and investor strategies of Fannie Mae and Freddie Mac

• Secondary market servicing

Who Should Attend
This conference is designed for industry leaders and decisionmakers from residential and capital markets, including CEOs and senior level executives, mortgage investors, investment bankers, rating agency professionals, risk managers and mortgage lenders.

To register online, go to http://store.mortgagebankers.org/ProductDetail.aspx?product_code=M2702048/REGIS or call 1-800-793-6222 Monday-Friday, 9:00 a.m.-5:00 p.m. ET. Early registration deadline is April 20. Once you have registered, you may make your hotel reservation using MBA’s Online Housing System, http://events.mortgagebankers.org/secondary2007/travel/housing.aspx?c=housinglogin.

The conference takes place at the New York Marriott Marquis, 1535 Broadway. MBA discount rates start at $239/night for a single room. For more information, visit http://marriott.com/hotels/travel/nycmq-new-york-marriott-marquis-times-square/. MBA has also secured accommodations at the Sheraton New York Hotel and Towers, 811 7th Avenue. MBA discount rates start at $299/night single and double. For more information, visit http://www.starwoodhotels.com/sheraton/property/overview/index.html?propertyID=421. The hotel cut-off date is April 25.

Exhibit and Sponsorship Opportunities
MBA's National Secondary Market Conference & Expo 2007 provides the perfect opportunity to access the real estate finance industry's secondary market decision makers. To sign up for exhibitor space, contact Kim Newell at (202) 557-2791 (knewell@mortgagebankers.org) or Patty Miller at (202) 557-2792 (pmiller@mortgagebankers.org). For sponsorship opportunities, contact Mark Brady at (202) 557-2790 (mbrady@mortgagebankers.org).
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Underwriting University is a hands-on training program designed to provide loan processors, underwriters, originators and quality control professionals with a deeper understanding of mortgage underwriting guidelines and the risk analysis process. The program can also benefit other mortgage professionals who want to gain a deeper understanding of residential underwriting or attend a refresher course.

By registering for Underwriting University, you will learn how to compare underwriting guidelines to increase profitable loan production, better mitigate underwriting risks and gain a better understanding of residential appraisal and property standards. You will also learn more about conventional, Federal Housing Administration and Veterans Affairs underwriting guidelines.

Underwriting University takes place June 5-7 at the Sheraton Indianapolis Hotel & Suites, 8787 Keystone Crossing, Indianapolis, Ind., 46240. A link to the hotel can be found at http://www.starwoodhotels.com/sheraton/property/overview/index.html?propertyID=158.

Registrations received with payment by April 20: MBA Members: $806/Nonmembers: $1,208.
Registration received with payment after April 20: MBA Member: $895/Nonmembers: $1,343.

Contact Info:
For registration information or to purchase this course for someone other than yourself, or to enroll multiple individuals, please call (800) 348-8653 (8:30 a.m.-6:00 p.m. ET) or go to http://www.campusmba.org/products/default.aspx?product_code=E2701722/REGIS.

Contact E-mail:
campusmbaeducation@mortgagebankers.org.
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MBA Chairman John Robbins, CMB, testifying before the subcommittee on Housing and Community Opportunity, said FHA plays a critical role in today’s housing market and should be modernized to make it more competitive in an evolving housing market.

“Most of FHA's business is directed toward low- and moderate-income and minority borrowers—the very strata that are most challenged to be part of the American Dream,” Robbins said. “At the same time, we have watched with growing concern as FHA has steadily lost market share over the past decade, potentially threatening its long-term ability to help underserved borrowers. As the market continues to evolve around FHA, the great fear is that many aspiring homeowners will either be left behind or forced into higher-cost alternatives.”

Robbins said it is “crucial” that FHA keep pace with changes in the U.S. mortgage markets. “While FHA programs can be the best and most cost-effective way of expanding lending to underserved communities, we have yet to unleash the full potential of these programs to help this country achieve important societal goals,” he said. “To be effective in the 21st century, FHA should be empowered to allow it to develop products and programs to meet the needs of today’s homebuyers and anticipate the needs of tomorrow’s mortgage markets, while at the same time being fully accountable for the results it achieves and the impact of its programs.”

Two bills—one introduced by Democrats, the other by Republicans—are under consideration. The Democrats’ bill, H.R. 1852, the Expanding American Homeownership Act of 2007, was introduced by Reps. Maxine Waters, D-Calif., chair of the subcommittee, and Committee Chairman Barney Frank, D-Mass. On the Republican side, Rep. Judy Biggert, R-Ill., the subcommittee’s ranking member, introduced H.R. 1752, the Expanding American Homeownership Act, which is virtually identical to a bill (H.R. 5121) that passed the House last year by a 415-7 vote.

Both bills would increase loan limits in high-cost areas of the country such California, New York and Massachusetts, where FHA has been unable to make loans, forcing many borrowers to use alternative loan products; would authorize zero-down and lower downpayment FHA loans for homebuyers who could not otherwise make the downpayment required under current FHA rules, to make FHA more consistent with other private sector loan products; and direct FHA to underwrite to borrowers with higher credit risk than FHA currently serves that are still creditworthy to take out a mortgage loan, but are otherwise now being driven into the subprime loan market, with much higher mortgage rates.

There are key differences, however. The Waters-Frank bill would eliminate certain fees for borrowers making downpayments, scaling back the maximum upfront fee from 3 percent to 2.25 percent, and the maximum annual fee from 2 percent to .55 percent. Waters said these reductions would reduce FHA closing cost premiums by as much as $2,250. The Waters-Frank bill would also create an affordable housing trust fund from revenue surpluses. Previous surpluses from FHA went into the federal government's General Fund; the Waters-Frank bill would steer those revenues into a specific trust fund.

Biggert expressed concern that the trust fund provision under the Waters-Frank bill result in fewer borrowers to obtain loans. “Using FHA funds to creating a housing trust fund is objectionable and not an appropriate use of FHA money,” she said. “Removing the trust fund provision would enable bipartisan agreement to move forward.”

But Frank replied that Biggert’s objection to the trust fund provision underscored the partisan differences that threaten cooperation. “During the entire period of Republican majority rule, the FHA produced surplus funding that went into the Administration’s general fund,” Frank said. “FHA has been a moneymaker for the federal government. So if the FHA continues to generate surpluses, then it should go not into the general fund, but to target affordable housing.”

FHA Administrator Brian Montgomery straddled the partisan differences, urging the House to reconcile its differences and move forward with a bill. He said he didn’t have enough information on the trust fund provision in the Waters-Frank bill to say whether FHA could support the provision. “I appreciate the concept and am sympathetic to the idea, but would like to know more about it,” he said. “What I’d like to see is a bill pass, and pass quickly.”

Robbins said MBA was concerned that the trust fund provision would slow passage of legislation and questioned its mechanics. "Though the goal —more affordable housing— of this proposed fund is certainly laudable, MBA does not believe the fund provides the most efficient means to achieve more affordable housing and may slow passage of this important legislation,” he said.

Robbins said the Administration’s Fiscal Year 2008 Budget proposal estimates that the FHA mortgage insurance fund would go into the red in fiscal year 2008 unless changes to the existing program are made or budget authority to provide additional credit subsidy is given to FHA. In response to the expected increased costs associated with higher defaults and lower originations, the Administration proposed increases in the up-front MIP from 150 basis points (1.5 percent) to 166 basis points will be needed. In addition, the annual MIP is assumed to increase from 50 basis points to 55 basis points.

“On a $200,000 loan, this is an extra $320 (from $3,000 to $3,321) due at the closing table and an additional $100 (from $1,000 to $1,100) the borrower must pay each year for the same loan,” Robbins said. “This may not seem like a lot of money, but for your typical FHA borrower—who is likely to be trying to purchase their first home and may not have much in the way of a savings—this could be the difference between owning a home or continuing to sit on the sidelines of homeownership.”

“The federal assistance that FHA provides to low- and moderate-income households provides critical support for extending homeownership possibilities that the private market cannot fully address,” Robbins said. “Since no additional budget authority to cover these costs was included in the budget, the FHA would need to either raise premiums, curtail credit to some borrowers who today could get loans or some combination. We note that even with the passage of comprehensive reform legislation envisioned last year, the Administration’s estimates conclude that premium increases may be necessary. In that light, rather than diverting any excess premium revenue resulting from this legislation to a separate fund, MBA believes that the most effective way to lower the cost of homeownership is to return that money to homeowners through lower insurance premiums.”

Robbins also noted that recent unrest in the mortgage industry has led to a number of lenders either significantly tightening underwriting standards or leaving the business altogether. “MBA believes the individuals who will be most directly impacted by these events are the consumers that FHA was created to serve: first-time homebuyers, low-income families, and those with less than perfect credit histories,” he said. “Congress can empower FHA with the authority it needs to provide these consumers with affordable, viable lending options needed to help them achieve and maintain homeownership.”

In fall 2004, MBA formed a FHA Empowerment Task Force composed of MBA member companies experienced in originating single-family and multifamily FHA loans. The Task Force discussed the long-term issues confronting FHA with the goal of developing legislative proposals that would empower it to manage its programs and policies more effectively.

The Task Force identified FHA’s inability to efficiently develop products, higher costs of originations, lessening prominence in the market, out-dated technology and adverse selection as problems for FHA. Per the Task Force’s recommendations, MBA proposed the following steps to unleash FHA from overly burdensome statutory processes and restrictions, and to empower FHA to adopt important private sector efficiencies:

• FHA needs greater autonomy to make changes to its programs and to develop new products that will better serve those who are not being adequately served by others in the mortgage market.

• FHA needs the ability to use a portion of the revenues generated by its operations to invest in the upgrade and maintenance of technology to adequately manage its portfolios and interface with lenders.

• FHA needs greater flexibility to recruit, manage and compensate employees if it is to keep pace with a changing financial landscape and ensure appropriate staffing to the task of managing $450+ billion insurance funds.
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