Half of the 10 components of the leading economic indicators increased during the month. The largest positive contribution was money supply, while the largest negative contribution came from average weekly initial claims for unemployment insurance. Over the six months ending in March, the leading indicator index fell 1.6 percent. According to The Conference Board, the economy will face a tough environment of weak or no growth in the near term. 

In yesterday’s report of the weekly initial unemployment claims, claims increased by 17,000 to 372,000 for the week ending April 12. The four-week moving average declined slightly to 376,000, still lower than the 400,000 initial claims seen during the 2001 recession. Initial claims data over the past four weeks, which coincide with the survey period in the Establishment Survey from the Bureau of the Labor Statistics, showed a much smaller increase than that for the prior month. This suggests a more moderate decline in payroll in April than the decline of 80,000 jobs in March.

Continuing claims, which measure the total number of workers drawing unemployment benefits and gauge the pace of hiring rather than layoffs, increased by 29,750 to 2.98 million for the week ending April 5. This is the highest level since mid-June 2004. Recent trends in continuing claims suggest that businesses have been reluctant to hire, consistent with widespread weakness in the labor market.

A separate report from the Philadelphia Federal Reserve showed that the area’s manufacturing sector continued to struggle, as activity declined again in April. The general business index fell to negative 24.9 from negative 17.4 in March. (Readings below zero indicate contraction in the Fed district’s manufacturing activity.) Manufacturing in the Philadelphia region has now contracted for the fifth consecutive month, with the index reaching the lowest reading since February 2001. 

The Philly Fed survey is the second regional Fed manufacturing survey for March. The results from the two regional Fed surveys are conflicting. On Wednesday, the New York Fed released the Empire State Manufacturing Survey, showing the jump in the index to 0.6 in April from negative 22.2 in March. The index had been negative in February and March. 

According to the Beige Book—a collection of anecdotal information about business conditions in a variety of sectors from 12 Federal Reserve districts—released on Wednesday, manufacturing conditions across the country were mixed. Four bank districts, including New York and Philadelphia, reported weakening activity during March and early April.

(Orawin Velz is senior director of economic forecasting with the Mortgage Bankers Association. She can be reached at ovelz@mortgagebankers.org.)
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Credit Source One works with borrowers to reach target FICO scores and passes the prospect back to the loan officer to complete the loan application. MortgageDashboard is a web-based loan origination system that allows brokers to track and manage leads and upload paper documents for processing. The LOS can also gather leads from the web and enables brokers to provide short applications for use by realtors on their web sites, sending leads into the broker’s LOS.

Calyx Software to Provide Marketing Tools
Calyx Software, San Jose, Calif., a provider of loan origination and processing software, will integrate marketing templates into its Point loan origination software. The nine templates were created by Greg Frost, a loan originator who teaches and mentors loan professionals.

They contain customized ARM conversion letters, birthday cards, referral letters, tax preparation and after-closing notices available for borrowers, real estate agents, reverse mortgage borrowers, listing and selling agents. Each template corresponds to a report to ensure accuracy of names drawn from a user’s customer database.

MBS ProClose Launches ProClose Platinum Web Services
MBS ProClose, McLean, Va., a mortgage technology company providing closing document packages, launched its MISMO XML-native ProClose Platinum web service. Governed by rules-based automation, ProClose Platinum delivers a set of closing docs in PDF format that are ready to print and e-deliver after the loan file is completed.

MBS ProClose and Calyx Software, San Jose, Calif., a provider of loan marketing, originating and processing software, co-developed the network interface that allows users of Point to connect directly with ProClose Platinum web service in real time.

Built with MISMO at its core, ProClose Platinum accommodates any MISMO XML transfer without a data integration procedure, eliminating mapping exercises, discrepancies between program selections and incomplete pass-through of data from LOS to doc prep. Platinum partners with the end-user LOS to enhance loan file data yielding final XML data that will populate a set of compliant closing documents. From there, the XML is transferred into post closing and servicing applications.

Primary Residential Mortgage Adopts Optimal Blue Technology
Primary Residential Mortgage Inc., Salt Lake City, Utah, implemented a product eligibility and pricing engine technology from Optimal Blue, Plano, Texas, developer of a web-based platform that couples decisioning technology with content management for the mortgage industry.

Using the program through PRMI’s interface, the Platinum Banking Engine, originators can compare loan products. The system shows pricing, guidelines and investors, and allows loan officers to use an open book, hybrid or closed book model.

Whitebirch Planning 7.0 Debuts
Whitebirch Software Inc., Salem, Mass., a provider of business planning, forecasting and budgeting software, launched Whitebirch Planning 7.0, offering tools to customize planning models to meet financial and operational requirements of businesses.

Enhancements include the ability to extend Whitebirch Planning’s library of standard financial objects, called Business Building Blocks, with business-specific logic. New Line Item Sets have also been added. They automatically reference multiple line items for use in formulas and reports, regardless of when or where those lines are added to the model.

Mortgage Builder LOS Integrates with First American Flood Data
Mortgage Builder Software Inc., Southfield, Mich., a provider of end-to-end mortgage banking software, announced that First American Flood Data Services, Austin, has integrated its flood certification process into Mortgage Builder’s loan origination system, providing an instant response for a flood determination request.

Users of Mortgage Builder software can order a flood determination from within the system. The flood certificate is returned automatically with fields populated into the loan application. When requesting a flood certification in Mortgage Builder, a MISMO-compliant data file is transmitted to First American via web services. The data returned includes the census tract identifier, MSA identifier, county code and additional flood mapping fields indicating to the user if there is a flood insurance requirement. The automatic importation of flood data saves time and reduces errors as well as secondary market risks.

PowerDOX Provides Spanish Language Option
PowerDOX, a program from SourcingPoint Solutions, Garden Grove, Calif., that combines document imaging with web and multimedia technology to stimulate referrals and repeat business, is now available in Spanish.

The PowerDOX Media Branding and Marketing Program makes it possible for professionals in mortgage, real estate and finance to give their clients a disc containing digital copies of their transaction documents. The documents are accessible through a customized interface bearing the professional’s company name, logo, and contact information, so each PowerDOX CD or DVD also serves as a permanent marketing messenger for the professional, increasing the likelihood for future business with every viewing.
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“The impact of the U.S. subprime market has created a ripple affect across the globe,” said Patricia Hines, senior analyst of whole banking at TowerGroup. “However, U.S. commercial banks are making good effort to keep themselves covered.”

Hines reported only a 3 percent change between 1986 and 2007 in the ratio of net loan and leases to total deposits at commercial banks. J.P. Morgan Chase, New York, stood out prominently with deposits significantly exceeding lending. Though net income and net charge-offs among commercial banks dramatically changed between 2006 and 2007, they were reported to be at historic levels—levels reached in 2002 when the internet bubble burst.

Commercial banks continued to lend between 2006 and 2007 despite a 13 percent increase in the number of loans outstanding. The last five years have seen a 37 percent increase in the number of loans outstanding. However, Hines reported record lows in terms of past due and nonaccruing commercial loans when gauged as a percentage of total loans between 2001 and 2007.

“The average across the six year period indicates an increase in past due and non accruing loan, but it’s only 1.8 percent of total outstanding,” Hines said. “In the current environment, banks will worry about that increase. However, outside of construction and land development sectors, the past dues aren’t as significant as they are on the consumer lending side.”

Despite the positive news, U.S. banks’ net interest margins are steadily declining. With increasing charge-offs, banks aren’t experiencing high rates of returns. U.S. banks overall experienced a decline from 4.3 percent in 2006 to 3.4 percent in 2007. Banks with assets exceeding $15 billion experienced a similar decline, falling to 3.2 percent in 2007 from 3.8 percent in 2006.

“The U.S. outlook sees a weakening of the U.S. dollar that has made U.S. products and services a good value for foreign firms,” Hines said. “U.S. exports were up 12.2 percent for the first 10 months of 2007. Businesses will face a tougher time refinancing existing short-term debt because of uncertainty over cash flows in a weakened economy. Additionally, financial institutions will experience increased usage of preexisting commercial lines of credit.”

Businesses using adjustable-rate credit products will benefit from continued reductions in the U.S. federal funds rate, Hines said. Also, middle market customers may not be affected by the credit crunch. She also forecasted that community banks and credit unions may not feel the credit crunch as they tend to rely more on relationship lending. “Banks will return to traditional underwriting, practicing the three Cs of credit: character, capacity and collateral,” she said.

Syndicated loans are disappearing, large loans made by the biggest lenders, Hines said. Last year was reported to be a good year for syndicated loans, but they are expected drop 26.8 percent in 2008. The U.S. fall will be the most significant, dropping from $2,282 billion in 2007 to an expected $1.372 billion in 2008.

“The largest deals are declining because there are no mergers or acquisitions,” Hines said. “We see a meltdown, but a lot the growth in this area is in Japan and Asia Pacific, both of which are expected to be up more than 50 percent. Today, banks are more focused on completing syndication of existing deals—credit overhang—rather than making new deals.”

In terms of commercial real estate, the Moody’s REAL Commercial Property Index cited in the webinar revealed industrial and office space sectors beating the national average. Though experiencing price declines, they are the best performing sector, Hines said.

Small business lending increased between 2006 and 2007—growing from $633.9 billion in 2006 to an estimated $687.5 billion in 2007. “It has been slow and steady but we see a decline because so many small businesses go out of business each year,” Hines said. "Entrepreneurs may find it most difficult with many using personal credit lines and home equity loans to back their business. Credit scores are important and there is no question credit now costs more for this segment."

Despite availability of credit, Hines also reported that business owners are holding back on spending because of recession and inflation fears. “Continued tightening and certainly more banks will look at consumer credit scores for small business owners,” she said, “Startups will have a harder time without collateral of real estate or equipment. Small business real estate lending is a bright spot with the emergence of work and live places. It’s a hard asset and there is collateral. Overall, however, small business owners are being hit with higher fuel prices and slowdown in the housing market.”

Hines predicts market instability will continue but suggests wholesale banking business leaders improve their ability to react to market fluctuation, and quickly. Market conditions have also pushed banks to think more about technology, implementing enterprise data management, portfolio management and risk management practices.

“It is especially important to gather information up front to understand the loan,” Hines said. “Increased use of business intelligence, data mining and predictive analytics will provide early warning of deterioration in loan and deposit balances or transaction volumes.”
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"Marie's advocacy and service on behalf of MBA has been exemplary and we are thrilled to present her with this year's award," said MBA President and CEO Jonathan Kempner. "Marie's lobbying efforts have helped MBA gain a number of significant successes on Capitol Hill and have played a key role in advancing our legislative agenda, particularly with affordable rental housing issues."

A former employee of HUD, Head’s lobbying efforts helped MBA prevent the Administration's proposed increases to the FHA Multifamily Mortgage Insurance Premium in both 2006 and 2007. She has also successfully advocated for higher FHA loan limits and a myriad of other industry-related issues. She has been involved with a number of MBA committees and workgroups over the past four years, including the Multifamily Steering Committee and the FHA Insurance Subcommittee.

“Marie has been a tremendous asset to MBA,” said MBA Chairman Kieran Quinn, CMB. “Her activity has been exemplary. She’s been to every policy conference and put in numerous hours in defeating the MIP and advocating for other programs.”

The award is named after MBA Legislative Counsel Burton Wood, who has devoted 30 years of service to MBA's advocacy efforts. The award is given annually to an MBA member employee in recognition of his or her sustained, superior service to the association and the real estate finance industry as a whole.
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Did you now that 97 percent of borrowers use a competitor to finance their next home? Learn how you can successfully work with realtors and other referral sources to change this number to your advantage. Learn effective strategies to reach and keep borrowers in today's challenging market at this 90-minute LIVE Online Workshop from CampusMBA.

This interactive online program will help you acquire and keep borrowers, develop strategies to refill borrower pipelines and build and nurture borrower relationships in this new lending environment.

Key concepts covered at this workshop:

• How to reach borrowers first, before realtors;
• How to incubate buyers through an often-lengthy buy cycle; and 
• How to prevent realtors from referring pre-quals to other mortgage originators/brokers.

For more information about this program, visit http://www.campusmba.org/products/default.aspx?product_code=E2801716W/REGIS&wt.mc_id=LOWMethodsE1.

The workshop is led Steve Kropper, president of Bank on Real Estate (BoRE) Inc., which develops advanced technology to retain and acquire customers for residential lenders and real estate brokers. He is also director of New Homes Realty, an advisor to CircleLending and a consultant to TotalMove. He is a member of the MBA's Loan Production Committee. A regular speaker, instructor and writer, Kropper consistently appears at real estate and residential finance events throughout the U.S., is a contributor to the MBA's Mortgage Banking magazine and teaches in CampusMBA's School of Mortgage Banking.

Program Cost: MBA Member: $79.99 per person; Nonmember: $99.99 per person. To register online, visit http://www.campusmba.org/products/default.aspx?product_code=E2801716W/REGIS&wt.mc_id=LOWMethodsE1) or call (800) 348-8653.

CampusMBA's LIVE Online Workshops allow participants to attend a one-time, interactive, instructor-led course from anywhere in the world. All that is needed is a computer with an Internet connection, Web browser and telephone. All workshops are interactive and include open discussion and question/answer sessions with industry leaders. To learn more about LIVE Online Workshops, visit http://www.campusmba.org/Tools/ProductLists.aspx.

Designation Credit:
Participants in CampusMBA LIVE Online Workshops earn ½ point toward the Certified Mortgage Bankers (CMB) designation per workshop.
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MBA's 95th Annual Convention & Expo 2008 offers strategic options to business challenges and provides a venue where you can obtain usable solutions in an evolving industry. Nowhere else will you find the exceptional range of original content and fresh information for residential mortgage bankers just when it is needed most.

The in-depth program tracks offer insight on leadership, growth strategies and trends to better position your business. In addition, take advantage of an influential mix of contemporary speakers and educational sessions that delve beyond the basics to help position your company for new opportunities in a dynamic environment.

The coming years will bring vast changes to the real estate finance industry. Make MBA's 95th Annual Convention & Expo 2008 the start of future growth. Be sure that your company is prepared with Winning Strategies for the New Age.

Who Should Attend
Because this conference is the largest annual gathering of residential real estate finance professionals and is the centerpiece event for networking and professional development, more than 60 percent of the attendees are from upper management of the industry's leading corporations.

Senior-level attendees include:

• Presidents and CEOs
• Chief Financial Officers and Chief Operating Officers
• Vice Presidents
• Managers and Directors

Attendees also include:

• National and regional lenders
• Full-service mortgage companies
• Mortgage brokers
• Mortgage conduits
• Service providers
• Affordable housing groups
• State and local association executives

Expand Your Reach
To apply for sponsorship of MBA's 95th Annual Convention & Expo 2008, download the sponsorship brochure at http://www.mortgagebankers.org/files/conferences/pdf/M2901402_sponsorbrochure.pdf or contact Phillip Giorgianni at pgiorgianni@mortgagebankers.org or (202) 557-2733 to request details on customized Sponsorship packages, production deadlines or logo/signage specifications.

Explore MBA's exhibitor opportunities by contacting Kim Newell at knewell@mortgagebankers.org or (202) 557-2791 or Patty Miller at pmiller@mortgagebankers.org or (202) 557-2792.

For more information, visit the Conference Web site at http://events.mortgagebankers.org/95th_annual/default.html.
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Reps. Jeb Hensarling, R-Texas, and Brad Miller, D-N.C., spoke this week to participants at the Mortgage Bankers Association’s annual National Policy Conference. While Hensarling said he preferred free market solutions to solving the current situation, Miller said legislative remedies were necessary to correct a situation he said the free market helped to create.

“Some people accuse conservatives of wanting to do nothing—that couldn’t be further from the truth,” Hensarling said. “We believe that the market needs liquidity. Our plan unleashes the greatest enterprise system out there—the free market. We believe that there is more than $1 trillion in liquidity out there just waiting to be tapped. That liquidity can stabilize markets, create jobs and promote homeownership.”

Miller countered that “We’re now dealing with mortgages that never should have been made and now have financial consequences on borrowers and the economy. There is no doubt now that we are in a recession and the foreclosure problem is making it worse.”

Both Hensarling and Miller took different tacks on the recently passed economic stimulus bill, which in the end both supported. Miller said the bill will help “tens of thousands of homeowners;” Hensarling said while he supported the language of the stimulus bill, he added that he is “not under the illusion that it was going to solve our problems.”

They also disagreed sharply on legislation that would permit bankruptcy judges to modify the terms of primary mortgage loans(known as a "cram down"), which MBA vigorously opposes. “You can’t change the terms of a contract after the fact,” Hensarling said.

Miller said he supports such language, but noted that such a provision faces fierce opposition, not the least from MBA. “[Fed Chairman] Ben Bernanke did not support that legislation—I didn’t expect him to—but he did say the situation requires a vigorous response. We need to do a lot more. There is a consensus that we need to do something—the bankruptcy legislation would do something—but there is no agreement on how we should approach it.”

Miller noted that bankruptcy is a last resort and an intrusive, but defended the legislation, saying that it was not a “bailout” of borrowers. “It will not cost taxpayers a dime,” he insisted. “I really hoped the industry will come forward in the same way that they did with predatory lending legislation—instead I have gotten nothing but adamant opposition.”

Hensarling, who like Miller sits on the House Financial Services Committee, said the economic downturn has created “tough and challenging times” for the economy and for his constituents. But he said that the votes he cast are guided on long-term outlook.

“There is a role for government to play; the housing market needs more liquidity,” Hensarling said. “I come to the debate with an open mind, but not an empty mind. I am a conservative and I am suspect in what the government can do in intervening in the market that is beneficial. I think it’s important that we have the facts in front of us. So when we speak of the housing crisis, it’s important to note that already we have more than half of America who rent or own their mortgage. Of those who do have a mortgage, 96 percent pay their mortgage on time.”

Hensarling said solutions offered by Democrats go too far. “Hardworking Americans should not have to subsidize the costs of people who made mistakes,” he said. “If we come in now and bail out these people who made bad loan decisions, aren’t we kicking the housing market down below? Aren’t we risking greater injury? I’m very leery of a bailout of any kind.”

Miller co-authored H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007, with Reps. Barney Frank, D-Mass., and Mel Watt, D-N.C. That bill passed the House in December by a 291-127 vote. He insisted that Congress acted because the mortgage markets reacted too slowly to changing conditions.

“I went back to read testimony from hearings over the past five years as a means of understanding how we got into this mess,” Miller said. “Innovations in the mortgage finance industry extended credit to more families that did not otherwise have access to credit. Witness after witness said that subprime mortgages were helping people achieve the American Dream of Homeownership, despite the dire warnings of some people who said this was a crisis in the making.”

Miller said he is aware of his philosophical disagreements with MBA, but said he values MBA’s views. “You shouldn’t have been surprised by H.R. 3915, because you were part of the discussions,” he said. “I try to find common ground. I need people to be candid about how they think legislation will work.”

Although H.R. 3915 passed the House, Miller wryly noted that the bill “is now the Senate, the place where good bills go to die.” He remained optimistic that the bill would become law this year.

Miller also said he is not fundamentally opposed to subprime lending, although he believed that such lending was made disproportionately to minorities and to people who should have qualified for prime loans.

“I do not begrudge you that it’s possible to make subprime lending available and to do it at reasonable terms.” Miller said. “But there is no question of the economic consequences that have occurred since then.”

MBA Vice President of Government Affairs Francis Creighton said the philosophical differences outlined by Hensarling and Miller underscore the purpose of MBA’s National Policy Conference.

“This is why it is so important for our members to speak with members of Congress,” Creighton said. “We need to be part of the debate and we must be able to help shape the debate.”
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