“It broadens perspectives and [a Master CMB] can transfer applications from one area to another,” Rosser said.

A Master CMB, for example, could have greater insight into the residential subprime mortgage industry’s effect on commercial mortgage-backed securitizations. Rosser’s concern is that “a knowledge gap” exists about the entire mortgage process from point-of-sale to securitization.
 
“That’s what sets CMBs apart from everybody else,” Rosser said. “It is not just originating a mortgage and making a commission. It is the implication [the mortgage] has in the secondary market, in the capital markets, with the ratings agencies, the MI [mortgage insurance] companies, the title companies and the benefit the borrower gets from having the mortgage.” 

At its inception in 1973, the CMB designation was designed for senior managers in all areas of residential, including construction and servicing. Commercial and residential CMBs were combined into one designation.

In 2002, however, Rosser and an MBA task force moved CampusMBA’s CMB designation into the 21st century—reflecting a changing, more specialized industry. Some mortgage bankers, for example, outsourced or sold their servicing rights.

The task force moved to split residential and commercial CMBs into separate designations, and the Master CMB came to represent expertise in both industries.

The task force also formed a CMB Commission, which includes seven members from MBA’s Residential Board of Governors and/or Commercial Board of Governors, and a Society of Certified Mortgage Bankers —colleagues who have expertise in an industry that became more complicated in the last 20 years, according to Rosser. 

Now, after nearly 35 years, 1,000 graduates will have the CMB designation following graduation ceremonies at MBA’s 94th Annual Convention in October.

“If you’re a CMB people pay attention to you,” Rosser said.

History is an important aspect of the mortgage industry for Rosser. His father was a mortgage banker during the 1940s and 1950s. In 1965, as the residential mortgage-backed securities market started moving forward, Rosser started his career mortgage banking. He was in the mortgage insurance industry for 25 years and the remaining time in the mortgage banking industry. Like RMBS, Rosser evolved in providing access to capital and assisting borrowers into new homes.

“History is very important because I think we can avoid current mistakes by just having a greater understanding of history,” Rosser said. “There are tradeoffs—there are government policies—and a lot of these [current events] are consequences that could not have been foreseen.”

Rosser taught underwriting in 1984 and received his CMB—now a Master CMB—in 1986. After teaching for 20 years at the School of Mortgage Banking, Rosser said the CMB is one of his top personal and professional achievements, a designation that reflects “the highest degree of integrity, public service and professional good conduct.”

“The deals I have done, the money and success that I have earned, has been built on the relationship and the trust—not the transaction,” Rosser said. “The loan officer has an obligation to his or her company to make a good loan and an obligation to the investor that the loan is a good long-term asset.”

MBA’s Code of Ethics references an investor obligation, but lender obligations exist for the borrowers and real estate agents as well. Rosser said loan officers can avoid financing pressure from real estate agents by pre-qualifying homebuyers first rather than after they look at a house—a message driven by MBA during the recent housing boom.

“A CMB adds value to someone on the chain,” Rosser said. “It is not only about educating the borrower as much as educating the real estate agent.”

Everyone who received a CMB prior to 2003 is a Master CMB, but Rosser believes the Master CMB designation will become more popular moving forward with a greater need for knowledge of the residential and commercial mortgage industry.

“It was absolutely critical to me and my career,” Rosser said, noting a competitive advantage in earning a CMB and a common experience that could form new business contacts and relationships.

Rosser mentioned one individual who is paying her own way to earn a CMB designation. Meanwhile, some mortgage companies sponsor future leaders—individuals designated by companies for a career path in the mortgage industry—through the CMB program.

“Those are the people you want to get in the CMB,” Rosser said. “It is recognition of professional achievement. It is not handed out easily or lightly, and it is a value to the industry.”

To learn more about the CMB Designation, go to http://www.campusmba.org/cmb.
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Mortgagebot’s Benchmarks 2007 study and analysis of online lending practices and procedures at more than 3,600 mortgage-lending Web sites the company maintains for its clients also found that one-fourth of lenders studied now originate more than half of their loan volume via the online channel and that the number of lenders implementing home-equity functionality in the direct-to-consumer channel has more than quadrupled since 2004, representing 14 percent of online loans.

MortgageBot CEO Scott Happ said online borrowers represent an increasingly sophisticated—and affluent—target base.

“The median household income and credit score of the average online borrower is significantly higher than some reports would have us believe,” Happ said. “Our…data indicates that the median annual income is more than $85,000—and the average credit score is about 709."

The quality of online borrowers is much higher than previously believed, Happ added. “Online loan applications taken by our clients have a more than 70 percent approval rate. And the median loan amount was $145,000 against a median purchase price of $210,000—which equates to a loan-to-value ratio of 69 percent.”

Rates continued to drive online consumer activity, consisting of 48 percent of inquiries. “This supports our premise that consumers research rate information frequently when looking for loans,” Happ said. “Posting such information to a lender’s home page ensures accurate rates are visible at the first point of contact. Of course, competitive rates may also increase the likelihood of converting site visitors into applicants.”

A good first impression drove applications, the study found. In 2006, 50 percent of loan applications were submitted within a single application session, but for returning users, it took an average of five days for the user to complete the application, if they chose to do so. Seventy-eight percent of online loans were submitted within one week of the initial site visit, and 91 percent were submitted within two weeks.

The study also found that loan officer Web sites have grown in popularity since they were first introduced in 2002. Used by just 5 percent of officers in 2003, it grew to 23 percent in 2006. “These personalized web sites make loan officers available 24 hours a day and enable consumers to research products and pricing, apply for a loan, receive an approval and obtain disclosures at their convenience,” the study said.

Other results from the study:

· Web-savvy borrowers apply for mortgages during peak business hours. Most borrowers visit a mortgage-lending Web site between the hours of 10:00 a.m. and 3:00 p.m., which indicates that they are more likely to apply for a loan while on a break or during a lunch hour than while at home in the evening.

· Electronic disclosures are widespread. The number of lenders implementing online, RESPA-related disclosure functionality has nearly tripled since 2004.

· Loan officers are trading paper forms for online tools. Online lending solutions are moving strongly into the hands of loan officers—the implementation of loan-officer-specific Web sites has more than doubled since 2004.

The 2007 study is divided into several sections, which present detailed data analysis on loan product and decisioning statistics; online borrower behavior and Web-site usage; lender Web-site configuration and marketing; and lending channels and loan volume.
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Core and shell construction covers base building elements—including structure and building-level systems, such as central HVAC, according to the USGBC.

The council granted LEED for Core and Shell Precertification to MBA’s office building after it reviewed the building's early design stage documentation and formed an “anticipated” LEED for Core and Shell Certification level. The Precertification is formal recognition that an owner establishes the goal to develop a LEED for the core and shell of the building.

"We are very proud that we are on course to have our new headquarters achieve a high level LEED Precertification, which will put us in the vanguard of environmentally sensitive construction in the Nation's Capital," said MBA President and CEO Jonathan Kempner . "We also are pursuing an advanced level LEED certification for our interior space as it will be built out in the winter and spring. Representing the real estate finance industry, we feel a special responsibility to set an example for sustainable building, not to mention the healthier work environment that we will be able to afford our staff."

The documentation provided to USGBC on 1331 L Street, however, covered a LEED Silver level, and it is possible that documentation at completion could bring the property to a LEED Gold Certification value.

MBA said it expects to move into 1331 L Street after the building’s completion next summer.
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The apartment sector received the best outlook for future returns followed by the suburban office sector. The CBD office and industrial warehouse sectors had relatively high ratings, but they declined overall from last quarter, the report said. Meanwhile, commercial real estate continued its higher ranking compared with stocks, bonds, or cash.
 
 “This relative strong sentiment for commercial real estate owes a lot of its current success to the unease and volatility exhibited throughout the entire investment environment and especially in the world’s credit markets,” said Kenneth Riggs, president and CEO of RERC. “Returns on commercial real estate are relatively strong, and in the first half of 2007, we are still seeing some of the highest prices ever paid for high-quality properties. However, we are also seeing reduced pricing power and credit for average and lower-tier properties, resulting in downward pricing pressure on lower quality assets in more marginal locations.”

Second quarter required capitalization rate expectations declined an average of 20-40 basis points from the first quarter, according to the report. The greatest reduction was in the hotel sector, with a 60 basis point decline. The required going-in capitalization rate average fell to 7.4 percent and the required terminal capitalization rate average dropped to 8.2 percent from the previous quarter’s rates.

The second largest reduction occurred in the CBD office sector, which declined 50 basis points for both the required going-in and terminal capitalization rates, falling to 6.0 and 6.8 percent, respectively.

The second quarter also marked the fourth consecutive quarter that RERC’s required pre-tax yield rate expectations declined. The required pre-tax yield rate for the hotel sector dropped 60 basis points to 9.4 percent, the first time this rate fell below double-digits since RERC started tracking hotels in 1991. The required pre-tax yield rate for the other property types declined 20 basis points each.

“All of this apparent strength is coming at an inflection point in the market for commercial real estate and the global investment environment. We have had it too good for too long,” Riggs said. “Commercial real estate will begin to see a flight to quality with an increased level of demand for properties that possess stable investment characteristics, and there will be an increased level of discrimination for properties that are built on weak space fundamentals. There is a clear shift on investment pinned to strong market fundamentals versus building all of one’s investment hopes on the capital markets and low interest rates.

“Investors are lowering their expectations for commercial real estate. However, the economy and employment remain strong, fundamentals are strong, and for the near term, new construction remains in check. Although performance is down, commercial real estate continues to offer reasonable returns, and compared to the volatility we have seen in the stock market recently, real estate is looking better and better as an investment alternative,” Riggs said.

RERC said it added coverage of the Milwaukee, New Orleans/Baton Rouge, Norfolk, Oklahoma City, Raleigh, Sacramento, Toledo, and Tucson markets to its list of metros in the report.
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Cohen Financial secured the $5.4 million non-recourse loan with 80 percent loan-to-value and 10 years interest-only loan with LaSalle Bank, Chicago, priced at 104 basis points over the 10-year treasury.

Wedgebrook Heathrock is on a major East-to-West thoroughfare between Orlando and Tampa. Deane Western, director in Cohen Financial’s Tampa office, originated the loan. The borrowers are two local commercial real estate developers.

“We structured the refinancing from the existing construction loan,” Western said.  “This allowed our clients to maintain the original loan parameters even through the recent upheaval in the capital markets. Although one of the property’s tenants did not take occupancy shortly before closing, Cohen Financial was able to secure a minimal hold back so this did not jeopardize the closing of the loan.”
 
Western also originated an $11 million non-recourse loan for an industrial property in Orlando. The loan has a 75 percent LTV, priced at the five-year treasury. The lender is a life insurance company, and the borrower is a Midwestern industrial property investor, focusing on Midwest and Southeast commercial real estate markets.

 The 216,000 square-foot, multi-tenant property is in an industrial warehouse submarket of Orlando.  The property is 90 percent leased and was 80 percent occupied at close.   

“Because one tenant was still in the process of a build-out when we went to close, we had to structure some last minute provisions to ensure that the deal would close on time,” Western said. “When we took this financing request to market, we offered it to both the securitized and life insurance lenders.  During this process, the underwriting standards changed. We chose to work with a life insurance company as we were able to secure more proceeds for our client than if we had elected to secure financing from the CMBS market.”
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To play the Trivia Game, go to http://events.mortgagebankers.org/qa2007/contest/.

Learn how current concerns about the subprime market impact your daily activities and discover the latest and most efficient ways to develop and implement quality control procedures While at the conference, be sure to attend these events for the latest information on quality assurance issues:

• Opening General Session featuring Ronald Paul Hill on Monday, October 1, 8:00-9:30 a.m.

• Special Luncheon featuring Don Blohowiak on Monday, October 1, noon-1:00 p.m.

• Special Luncheon featuring Patti Wood on Tuesday, October 2, 12:30-2:00 p.m.

For the most up-to-date program information, go to http://events.mortgagebankers.org/qa2007/default.html.

Register early for the conference and save: Early registration date: September 17; Hotel cutoff date: September 10.

This year’s conference is at the entertaining Omni Shoreham Hotel; for information, visit http://www.omnihotels.com/FindAHotel/WashingtonDCShoreham.aspx.

Senior and mid-level QA managers and analysts; wholesale and retail originators; auditors; regulatory compliance professionals; and anyone interested in improving quality assurance should plan to attend this meeting. To register, go to http://store.mortgagebankers.org/ProductDetail.aspx?product_code=M2802070/REGIS.

Exhibit Space Nearly Sold Out
Conference sponsorship is the ideal vehicle to grab the attention of this important audience and position your company as a leader in the industry. All levels of conference sponsorship include the use of a tabletop exhibit, but space is nearly sold out. For more information on sponsorship opportunities, please contact Philip Giorgianni at phil@mortgagebankers.org or (202) 557-2733.
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Session highlights include:

Agency Showdown (General Workshop)
Sunday, September 9, 12:30-2:00 p.m.
Lasso your favorite agency in a round table discussion. Meet with Ginnie Mae, Freddie Mac and Fannie Mae to discuss the hot topics and get answers to your most common questions. Wear your boots and jeans and join us for some good old Texas fun.

Moderator:
Angee Nolan, assistant vice president, JPMorgan Chase

Panelists:
Carol Andrade, operations and servicing manager, Freddie Mac

Jennifer Burke, MBS specialist, Ginnie Mae

Sharon Novak, operations manager, Freddie Mac

Debra Thompson, director of custodian oversight & monitoring, Fannie Mae

MBA Luncheon/Economic Update
Monday, September 10, 11:45 a.m.-1:30 p.m.
Featured Speaker: Douglas Duncan, MBA senior vice president and chief economist.

As leader of MBA's Research and Business Development Group, Duncan is responsible for providing economic and policy analysis services in the areas of real estate finance, legislative and regulatory proposals and industry trends for MBA and its members. He also oversees the education products and services of the association as well as its industry technology committees and standards efforts. He has oversight responsibility for the Research Institute for Housing America, MISMO, the Secure Identity Services Accreditation Corp. and Lender Technologies Corp.

This year's conference is in San Antonio, at the enjoyable Hyatt Regency San Antonio on the Riverwalk (http://sanantonioregency.hyatt.com/hyatt/hotels/index.jsp). This conference offers a unique opportunity to network with business-to-business partners and industry peers. A variety of programming covers current topics affecting your business such as:

--Impact of ARM loans on the marketplace
--Private securitization
--Audit management
--MERS eRegistry and MISMO® updates
--Information security

New and experienced document custodians, quality assurance professionals or anyone else with a business that touches on any aspect of the post-closing process, loan delivery, document control or servicing issues, such as time management and customer service should plan to attend this conference.

To register, visit http://store.mortgagebankers.org/ProductDetail.aspx?product_code=M2702038/REGIS.
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“With many consumers having a harder time getting mortgages or coping with higher payments from their adjustable rate mortgages, there will be a considerable impact on light vehicle sales," said Charles Chesbrough, chief economist at CSM. "Weak sales of existing homes and declining home values also are dampening consumer spending, leaving less money available for vehicle purchases. We looked at data going back to 1970, and it’s remarkable how closely light vehicle sales mirror housing sales, particularly new housing starts.”

In the past five years, consumer debt is up 13 percent and mortgage debt has reached 23 percent during the same period. Overall consumer confidence remains far below its peak prior to 9/11—consumer confidence is a strong indicator of major purchases such as homes or automobiles.

“The housing downturn drags on consumer confidence, posing downside risk to spending as consumers feel less wealthy and are more likely to save than ever before. During the earlier housing boom—when interest rates were low and home price appreciation was unusually strong, the auto industry also experienced a boom as many homeowners used some of the proceeds from their cash-out refi or home equity loans to support their spending, including buying cars. The current slowdown in the housing market has contributed to the slowdown in auto sales,” said Orawin Velz, director of economic forecasting at the Mortgage Bankers Association. “Rising interest rates and decelerating home price appreciations in some areas—and downright declines in others—have reduced the value of home equity, making it less likely for homeowners to tap equity in their homes. Making the matter worse since early this year are tighter lending standards, which have made it more difficult for many homeowners to refinance, especially for subprime borrowers. Recent turmoil in the financial markets, including the problem in non-agency mortgage-backed securities, has made it considerably more costly to get a loan even if a homeowner has equity and a good credit score.”

Though the current outlook for automotive sales shows signs of struggle which are expected to continue in the near term, industry experts expect the overall U.S. economy to rebound in 2008, recovering from the gradual slowdown of this year. The automotive industry’s economic conditions, however, remain uncertain due to inflation and rising gasoline prices—which are also impacting the rest of the economy. The target inflation rate is currently three percent.

“Inflation could cause the Federal Reserve to increase interest rates which is bearish for stocks, housing and autos,” the CSM report said. “The overall economy may not be incorporating the full impact of energy prices.”

Gasoline prices are also affecting consumer demand for automobiles—prices for gasoline have increased 109 percent since 2002. While the price of oil and consumption was inversely related in the 1990s, since 2000, price and consumption has been positively correlated. Today, however, though the price of oil is up, the demand is unchanged and expected to surpass the supply. Some analysts forecast significant supply shortages starting in 2010.

But rising gasoline prices are not deterring drivers. Though transportation options are limited in the U.S., 78 percent of Americans are driving alone while only five percent are utilizing public transportation, according to the report. Also, average number of miles traveled annually per passenger vehicle has steadily increased from close to 9,000 in 1980 to nearly 14,000 this year.

Volatility in gasoline prices, when calculated week-over-week, is also up 137 percent from the 1990s, when changes averaged 0.8 percent. Since 2000, change in the prices of gasoline is 1.9 percent and prices are increasing demand for smaller vehicles. The year-to-date vehicle market is down two percent, but some segments are experiencing growth as consumers shift toward smaller vehicles at the expense of mid-size automobiles.

Increasing energy prices are draining consumers’ disposable income, but the luxury and specialty market remains unchanged.

Vehicle sales also correspond significantly with the U.S. Gross Domestic Product growth. The U.S. GDP has been experiencing a downward trend since 2004, this year reflecting a two percent year-over-year change compared to 3.5 percent last year.

According to Joe Barker, CSM’s senior manager of North American Vehicle Sales Forecasting, demand for automobiles will recover in the fourth quarter of 2008. Deteriorating market fundamentals would need at least one year to rebuild, he said.

The emerging cross-over vehicle segment —SUVs with car-like engineering—experienced a sales surge of 82 percent during the past five years with expectations for another 78 percent growth by 2013, mainly at the expense of traditional body-on-frame SUVs.

“The crossover market already is as large as the traditional SUV market during the truck boom of the late-1990s, and we only have seen the tip of the iceberg,” Barker said. “Favorable demographic trends and another wave of new products will life crossover sales from 2.8 million to five million units in the foreseeable future. Sales of small cars and luxury vehicles will also grow at a healthy clip.”
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