“Public/private sector partnership is essential to promote affordable rental housing,” said Erika Poethig, associate director for housing at the John D. and Catherine T. MacAruther Foundation , speaking in a webcast sponsored by the National Housing Council . “A comprehensive approach is critical to help us reach our goal.”

In Cook County, Ill., for example, affordable rental housing supply has been depleting steadily as demand increases. For every two units built, one may be lost by the year 2020—a potential shortfall of 78,000 units. Causes impacting supply including condo conversions, demolition, expiring subsidies, gaps in funding, increase in energy costs and increase in property taxes.

The MacArthur Foundation drafted The Preservation Compact—a rental housing strategy for Cook County—with the goal to preserve 75,000 affordable rental housing units by 2020 and to accelerate overall housing preservation activity. Additionally, the Foundation launched the Window of Opportunity in 2003, a national initiative totaling $150 million to support affordable housing in both Cook County and New York City.

“Half of the $150 million will go to a mix of regional and housing developers, financing initiatives, research projects and in depth initiatives in affordable housing," Pethig said. "Additionally, $35 million will go towards state and local preservation awards. It’s a national cross-cutting effort to improve information about housing stock, policies in advanced preservation, technical assistance, evaluation and research,”

The Foundation has a goal of preserving 300,000 rental homes nationwide—about one-third of the homes that might be lost over the next decade.

In Cook County, preservation keystones include an interagency council consisting of a partnership between the Chicago Department of Housing, Illinois Housing Development Authority, HUD and the county government. The council meets monthly to coordinate activities such as identifying properties requiring preservation and developing systems to match sellers with developers who have an interest in affordable preservation.

The Foundation also developed a data clearinghouse to provide data on the supply of affordable housing. The Energy Savers Program promotes energy savings in affordable housing. Outreach efforts, both training and education, include offerings for tenants and communities with at-risk communities. The Rental Housing Alliance was established to offer legal and technical assistance to tenants in ongoing preservation transactions and to coordinate with other public agencies.

A preservation fund of up to $100 million will provide short to mid-term loans for new preservation buyers to quickly purchase and improve at-risk buildings. Additionally, the fund would provide smaller, low-cost loans and grants for long-term owners to maintain existing rental properties.

Lowered property taxes are also part of the compact, also endorsed in the webcast by the Massachusetts Housing Partnership. Tax reductions for owners who substantially improve or preserve housing is one way to promote growth in affordable housing supply. But so is taking advantage of the federal 4 percent tax credit.

Part of the federal Low-Income Housing Tax Credit program, four percent tax credits are available for qualified affordable housing projects with an allocation of private activity tax-exempt bondsy. In 2008, each state will get the greater of $262 million or $85 multiplied by the state's population in private activity tax-exempt bond cap to allocate.

“Four percent tax credits are often easier to get than nine percent credits,” Mark Curtiss, managing director of the Massachusetts Housing Partnership. “Having the added benefit of tax-exempt bond financing, meaning lower interest rates and the ability to support more debt, can work especially well for existing affordable properties that need some capital improvements.”

Affordable housing, however, isn’t the only option in private activity tax-exempt bonds—it competes with education, economic development, single-family homeownership and other programs for "volume cap" dollars. Additionally, allocations vary from state to state for multifamily housing.

“The challenge is how to demonstrate the importance of rental housing compared to all other noble uses of tax-exempt bonds,” Curtiss said. “You have to show how much more leverage you can get using tax-exempt bonds for multifamily housing.”

Curtiss called for increasing the volume cap for affordable housing by $100 million, which would raise an additional federal tax credit subsidy in Massachusetts by an additional $45  to $50 million. “Our goal is to advocate further increases up to 50 percent of the state’s volume cap over the next several years. This could allow us to build or renovate an additional 1,500 units per year,” he said. “However, four percent credits don’t work everywhere—you want to be sure you can use the entire volume cap your state allocates for multifamily bonds.”

In Vermont, the Champlain Housing Trust promotes affordable homeownership opportunities. Through its shared equity program, the Trust provides a downpayment grant which acts a silent second mortgage.

“As homes become more affordable over time in an appreciating market, the appreciation goes back into the homes,” said Emily Higgins, director of homeownership at Champlain Housing Trust. “Grants are in the 20 percent range and provide a substantial incentive for borrowers. The grants come from the Vermont Housing and Conservation Board, which receives profits from a program which channels 50 percent of the state’s property transfer tax into affordable housing and preservation work. If sales increase, affordable housing and more land becomes available.”

The Trust acquires new homes through new developments and also provides a buyer-driven option where homeowners could bring a home to the program and earn a grant—to later share appreciation with the Trust when the house is sold again. Additionally, the Trust works with conversions—creating homeowners out of tenatns in some cases.

“Our challenges are in defining a stewardship role and overseeing maintenance and how to negotiate repairs,” Higgins said. “Additionally keeping homeowners involved in education and events is also a challenge. Of course, delinquency, foreclosures and taxes pose big challenges as well.”
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“The reality is that all companies should adhere to strategic choices they make and should keep drawing to create values for their stakeholders," said Chet Wood, chairman and CEO of New York-based Deloitte Tax LLP and managing partner of its merger and acquisition services. "One of the great engines has been M&A. Notwithstanding the current times, they should stay the course with respect to their strategy and that means to go through mergers and acquisitions—they should be disciplined about it but move forward."

Investors expect to see results of growth and profitability irrespective of economic conditions. Sometimes changes in customer preferences and technologies companies utilize, and even the viability of business models affect a company’s performance. M&A represents one of these changes, Wood said.

Deloitte conducted a study last March of M&A activity and categorized two types of companies that go through process—high achievers and low achievers. The study found that high achievers, as they are in the current period, continued to go through with M&A plans regardless of conditions, but were more cautionary in their approach when compared to low achievers.

“The relevance of the study today is that at the time of the study, decisions were being made though some companies had problems in areas that will be particularly relevant now as they go forward in this unsettled and uncertain environment,” said Dwight Allen, director of merger and acquisition studies at Deloitte Research.

Capital availability and shortage in credit will affect M&A activity but is only temporary , Wood said. In such instances, the future is certainly uncertain but having a narrow and limited outlook could prove disastrous to M&A.

“Credit markets have certainly tightened up, there is no question about that. But banks are still in business and lenders will continue to lend, but their pace may have slowed down,” Wood said. “But it’s only a temporal situation.”

“There is a possibility that the business environment will become much more challenging," Allen said. "Although the market will be back by 2009, when foreign-direct investment and cross-border merges will come roaring back. Companies need to be careful assuming a single future and making that foundation their strategy in approach M&A. The preferable approach is broader—taking a panoramic view of the possibility of what lies ahead is the proper way to proceed."

The Deloitte study found that a majority of companies did achieve success in their deals.

“Even when times are good or stable, doing a successful merge or making a successful acquisition is difficult. It’s not easier when times are good and worse when times are worse—it’s difficult whenever. Discipline needs to be taken into account to ensure success, irrespective of time,” Wood said.

Discipline is found more among high achievers rather than low achievers, who often think shorter-term and act fast. They are more driven by a "mood of the moment," the Deloitte study found. At the time of the study, they were optimistic about economic conditions and financial conditions—forecasting a favorable situation for the next 18 months. However, high achievers had more likely anticipated problems or even uncertainty over the future.

“High achievers were more realistic and accurate in their appraisal of what lay ahead,” Allen said. “Low achievers tend to make their decisions based on emotions.”

The deal strategy, while being well thought out and disciplined, should also align with the overall institutional strategy for longer-term success. Consistency with corporate structure and alignment is critical—where it is for reasons of growth, people or new products.

“You have to have more than one scenario,” Wood said. “Execute on strategy and vision and be flexible.”

Communication is also central to a successful M&A. “It’s the age of transparency and you can expect a continued push for scrutiny and accountability,” Wood said.

“You can’t over-communicate—it’s all about who you communicate to and who you communicate with,” Allen said. “Also, speed is crucial but the faster deals result in higher costs sometimes; there are greater chances of the deal being structured and designed around the politics of the organization."
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In today's business climate, information is the key to ensuring you and your business navigate the challenges the industry is facing. The conference—designed for lawyers and compliance officers at all levels of experience—industry experts and conference participants explore the hottest legal topics in the mortgage industry, including:

• Federal Anti-Predatory Lending Legislation and Regulations
• Servicing and Loss Mitigation
• State Law Developments
• RESPA and TILA Reform
• Regulatory Guidance, Including Nontraditional and Subprime
• Secondary Market: GSE and Agency Issues
• Protecting Against Mortgage Fraud Against Lenders
• HMDA and Fair Lending Developments
• Data Security, ID Theft and Privacy Issues
• FCRA and FACTA Developments
• Litigation Developments and Class Action
• FLSA/Employment Law
• Legal Ethics
• Dealing with Reputation Risk
• Other Compliance Considerations

CLE credits available for attendees of this event.

Make your hotel reservations at La Costa Resort and Spa before April 4 by calling 800-854-5000. Room rates are $220/night, single/double, including the daily resort fee.

Register today: Call (800) 793-6222 or visit www.mortgagebankers.org/conferences.
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The new courses are part of CampusMBA's New FHA Central (web site: http://www.campusmba.org/AllLearningProducts/FHACentral.htm), the industry's unique one-stop shop that helps professionals increase their single-family FHA and VA business.

FHA Fundamentals targets those who are new to FHA lending or who need to refresh their knowledge of FHA guidelines. FHA lending processes have improved over the past two years and this workshop covers these updates in procedures and regulations. This informative course has several offerings:

• February in Irving, Texas (http://www.campusmba.org/products/default.aspx?product_code=E2801618A/REGIS);

• March in Phoenix (http://www.campusmba.org/products/default.aspx?product_code=E2801618B/REGIS); and

• April in Chicago (http://www.campusmba.org/products/default.aspx?product_code=E2801618C/REGIS).

FHA Fundamentals & Operations is specifically designed for processors, underwriters and quality control staff responsible for FHA loan process details. This course takes an extensive look into the processing and underwriting requirements of FHA guidelines and compliance. Learn about developments related to the back end of the process, including closing and quality control.

This course is offered in the following locations:

• February in Irving, Texas; (http://www.campusmba.org/products/default.aspx?product_code=E2801620A/REGIS);

• March in Phoenix (http://www.campusmba.org/products/default.aspx?product_code=E2801620B/REGIS); and

• April in Chicago (http://www.campusmba.org/products/default.aspx?product_code=E2801620C/REGIS).

Register for both upcoming FHA courses and receive special pricing. The special registration price deadline is Tuesday, Feb. 19.

DE (Direct Endorsement): FHA Fundamentals Workshop, FHA Underwriting & Operations Workshop and FHA Fundamentals Guided Web-based Courses provide complete information on all origination, processing and underwriting requirements unique to FHA loans. Lenders across the country use these courses as part of a certification program for their processors and underwriters who are looking to become DE (Direct Endorsement) Underwriters.
 
In addition to these dates and locations, CampusMBA can deliver standard or customized instructor-led training on site at your location or online at your convenience. This allows you to save on travel expenses and time away from the office and still leverage CampusMBA's industry leading courses to support your business initiatives. It also allows you to potentially train people in a more budget-friendly capacity.

Learn more about CampusMBA's Corporate Training today at http://www.campusmba.org/CorporateTraining.
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Attend this conference to learn from these innovative and informative sessions. Follow one track or mix and match sessions from different tracks depending on your goals and needs.

Business Solutions
Learn how leveraging today’s technology solutions can help service providers, lenders and investors meet their business goals and initiatives. The Business Solutions track will allow you to discover how you can save money while achieving shorter cycle times and reduced risk. Gain insight into appraisal quality and security, regulatory compliance, the latest MISMO® initiatives and find out how costs of production, operations and secondary marketing can be dramatically cut to keep you ahead of tough investor demands. This track also offers you an exclusive opportunity to hear the latest updates from the industry’s investor community on technology implementation, eMortgages and planning.

- MISMO Standards Adoption by Industry Partners
- Leveraging Today's Technologies to Accommodate Reverse Mortgages
- Industry Hangover: The Future of Automated Underwriting
- Closing the Gap: Appraiser-to-Loan Decision with Secure, MISMO Compliant Methods
- Life on the Leading Edge: The CEO's Perspective
- Reducing Costs and Staying Ahead of Market Shifts with Change Management and BPO Strategies
- Investor Technology Update

Risk Management
How can your company benefit from the latest developments in loss mitigation, compliance and information security? The Risk Management track shows how technology-enabled solutions can help simplify the default management process. Now is the time to find stronger yet cost-effective ways to mitigate risk and build profitable loan portfolios. Explore the necessary ingredients that go into a robust and comprehensive automated risk management system and learn about automated solutions that cost-effectively comply with federal standards to help reduce fraud and improve overall loan quality and performance.

- Strategies for Mitigating Third-Party Origination Risk
- Automated Risk Management Tools
- Information Security: Strengthening Your Systems
- Information Security Offshore: What to Expect and How to Cope
- Leveraging Technology for Essentials of Risk Management
- Advances in Default Management Strategies and Technology
- Today's Outsourcing Reality: How Changes in Market Conditions Have Created New Incentives and Opportunities

Technology Implementation
Technology continues to streamline the origination and servicing of mortgages. Discover how paperless processing can bring greater efficiencies to all aspects of your business. In the Technology Implementation track you will learn how to use key technologies such as MISMO®, eMortgages and information security to succeed in these challenging times. Learn more about how eClosing solutions are reducing loan cycle time, enhancing borrower experience and improving lender margins. Hear about MBA ResTech Committee’s eMortgage Adoption Task Force and how it’s supporting the industry’s movement into eMortgage adoption.

- Taking Web Services to the Next Level in Mortgage Origination and Servicing
- eMortgage Technology Update
- Saving Time and Money with Paperless Lending Initiatives
- How to Implement eMortgages
- eRecording and eNotorization, Key Pieces of the eMortgage Process
- Spanning the Gaps in a Paperless Environment: Advanced Electronic Vaulting
- Exploring Today's Most Electronic eClosing Solutions

For more information on these tracks visit the Schedule of Events section of the conference Web site at http://events.mortgagebankers.org/tech2008/sessions/default.aspx.

Register Early and Save
Early registration received with payment by February 15: MBA Member: $1,145; Nonmember: $1,645. Regular registration received with payment after February 15 and before March 11: MBA Member: $1,295; Nonmember: $1,845. March 12-19: Onsite conference registration fees apply: MBA Member: $1,395; Nonmember: $1,945. Guest registration fee: $295.

Exhibitors
More than 30 vendors have already signed up to exhibit. For more information, visit http://events.mortgagebankers.org/tech2008/exhibitors/default.aspx.

Hotel
The Gaylord Texan Resort & Convention Center (http://www.gaylordhotels.com/gaylordtexan/) is just 20 minutes from downtown Dallas or Fort Worth, and only six minutes from the Dallas-Fort Worth International Airport. Surrounded by rolling pastureland and overlooking Lake Grapevine, the Gaylord Texan pays tribute to everything Texas as only Texas can, on a grand scale.

The resort offers a wide variety of dining options to suit every taste. For rest and relaxation, enjoy the luxurious 25,000-square-foot world-class spa and fitness center with indoor pool, 18-hole championship golf at the adjacent Cowboys Golf Club, grotto-style outdoor pool and nightly live music.

MBA discount rate: Rooms: $220/night, single/double occupancy. Guests are charged a resort fee of $10 per day per room. The $10 daily resort fee includes:

- In-Room High-Speed Internet Access
- Fitness Center Access
- 2 bottles of water per day in guestroom
- Local telephone calls (1st 20 minutes per call)
- 800 Access and Toll Free Calls (1st 20 minutes per call)
- Complimentary shuttle service to Grapevine Mills, Bass Pro Outdoor World and Downtown Grapevine on a pre-set schedule
- Daily newspaper

Cutoff Date: February 18. For more information, visit http://events.mortgagebankers.org/tech2008/travel/.

Web Site
For more information, visit http://events.mortgagebankers.org/tech2008/default.html.
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“Congress should make clear what the rules of the game are, so the current market upheaval is not exacerbated by a rapid change in regulation,” said MBA Chief Economist Doug Duncan. “These include passage of a uniform national mortgage lending standard; government-sponsored enterprise reform and FHA modernization. In order for the market to change course, certainty must be realized by consumers, lenders and investors. With the possibility of major investor liability still on the horizon, secondary market participants and mortgage lenders will remain apprehensive of lending to all but borrowers with perfect credit. The longer these fears remain, the longer our housing market will take to rebound.”

The hearing, Strengthening our Economy: Foreclosure Prevention and Neighborhood Preservation, included on-site testimony from federal banking officials; trade groups such as MBA were invited to submit written testimony.

Duncan noted that markets have changed significantly over the past year. “We have gone from a market of relatively loose credit, to one where credit is severely constrained,” he said. “We have, in effect, a mortgage market that is going through a once-in-a-generation transformation. The mortgage market already looks very different from one year ago and it will look different one year from now.”

Duncan also criticized distorted economic data that inflate the number of borrowers at risk of foreclosure and blanket-criticize the mortgage industry for seemingly not doing enough to help borrowers. He emphasized that mortgage bankers’ commitment to provide adequate credit opportunities to increase home ownership and quality rental housing has not wavered, citing statistics from MBA and the HOPE NOW Alliance, of which MBA is a member, that detail efforts to assist borrowers facing delinquency and/or foreclosure.

“When people find themselves in difficulty, lenders and servicers continue to work with them to find a successful outcome, whether through re-payment plans, forbearance, debt forgiveness, loan modifications or other loss mitigation options,” Duncan said. “There are some people we are not able to help, but it is important to understand that foreclosure is always a last option for our members. It is extremely expensive and represents, ultimately, a failure of our industry to help a homeowner achieve the American Dream.”

Duncan said lenders and servicers clearly understand the economic sense to help borrowers who are in trouble. “Borrowers who are not able to stay current on their loans are very costly to the servicer, who must forward principal and interest payments to investors as well as remit taxes and insurance payments, even if borrowers are not paying them,” he said. “In addition, significant staff resources must be employed to contact the borrower, assess the situation, work on repayment plans, and if these efforts do not resolve the situation, initiate and manage the foreclosure process.”

The flip side, however, is that servicers can only help borrowers who want to be helped. “Borrowers must respond to servicers’ notices and phone calls,” Duncan said. “At some point, the servicer has to assume the property is abandoned or the homeowner has no intention of paying off the obligation. This is why the most important thing lawmakers can do is to use the ability to influence the media to get the word out that if borrowers are in trouble they should reach out to their servicer.”

Duncan reiterated MBA’s support for continued improved transparency in the mortgage process and for a uniform national mortgage consumer protection standard for all homebuyers that will “simplify the process for borrowers and protect them, facilitate better enforcement against predatory practices and assist the smooth flow of global capital into the mortgage market.”

Duncan said the single-most important step Congress could take to support the housing market is to encourage long-term economic growth through sound fiscal and tax policy. “Members of Congress should also recognize that housing and mortgage delinquencies react to economic conditions and are not a key driver of those conditions,” he said. “States such as Ohio and Michigan have seen an exodus of jobs and population, stranding a significant amount of housing stock and lowering home prices in the region. States such as California, Florida, Arizona and Nevada saw speculative home construction that far outpaced the rate of household growth, causing home prices to retreat to levels of about two years ago. As long as economic growth continues, these Sunbelt states should be able to grow out of their problems. Other sections of the country face more long-term and intractable problems."

“Were there loans made that probably should not have been made? Yes, there is no question bad loans were made and there were bad actors taking advantage of a robust housing market," Duncan said. "Several key points should be highlighted as we all look to turn this current situation around. In the short term, the most important thing Congress, industry and consumer groups can do is to help those borrowers who are currently in trouble and occupying the home for which they have a loan. The industry has greatly increased its capacity and we are starting to see those results.

Duncan added that not all of those loans facing rate resets deserve a workout. "We saw a lot of investor and speculator activity and most of those loans should not be used to minimize the good work we are doing to help deserving borrowers," he said. "As an economist, all policy decisions lawmakers might consider over the course of this year and beyond, must take into account what the essential factors are for a healthy and vibrant market.”
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