On an unadjusted basis, sales fell between June and July as they normally do, but since the decline was smaller than those in recent years, the seasonally adjusted numbers showed an increase. Since November 2007, total existing home sales have been in a narrow range of 4.8 million units to 5.1 million units.

Sales continued to decline significantly from the same period last year, however. Sales of single-family homes during the first seven months of this year were down 16.6 percent from those during the same period last year. The year-to-date decline has been worse for condo sales, with sales 23.6 percent lower than those last year. 

Existing home sales increased in three regions, led by a 9.7 percent jump in the West, the fifth consecutive monthly increase. Sales also rose in the Northeast and the Midwest by 5.9 percent and 0.9 percent, respectively. The South posted a slight decline of 0.5 percent. 

Foreclosure or distressed sales, which accounted for as much as a third to 40 percent of the national market last month, according to the National Association of Realtors, helped support sales in the West over the past several months. The West has experienced the highest foreclosure rate and suffered the largest price decline in the nation, as foreclosed homes are usually sold at a deep discount. While the median price for total existing homes for the nation fell 7.1 percent in July from a year ago, the decline in the West was 22.2 percent—the largest on the record. Since February, the region has posted double-digit year-over-year home price declines. 

Bargain prices have helped lure buyers back into the market, however. While the year-over-year price drop has accelerated since February, the year-over-year drop in sales has moderated. July marked the first month since October 2005 that the West has posted a year-over-year increase in sales. All other regions continued to show double-digit declines in home sales from a year ago.

Other data corroborated the strong activities induced by rising distressed sales in the West. For example, according to a report by DataQuick released on August 18, home sales in Southern California increased 16.7 percent in July from June and 13.8 percent from last July. July’s sales were up from a year ago level for the first since September 2005. Foreclosure sales accounted for 43.6 percent of Southern California existing home sales in July, helping to push down the median home price 31.1 percent lower than a year ago level.

For the nation, the number of total homes available for sale was up 3.9 percent in July from June, solely a result of a 29.2 percent surge in the number of condos for sale. (The data are not seasonally-adjusted.) A stronger sales pace and a flat inventory pushed down the months’ supply of existing single-family homes to 10.6 months in July from 11.1 months in June. The huge jump in the number of condos for sale pushed up the months’ supply to 15.1 months, despite the increase in sales pace.

(Orawin Velz is associate vice president of economic forecasting with the Mortgage Bankers Association. She can be reached at ovelz@mortgagebankers.org.)
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The Panda Security report defined “zombie” computers as systems affected by bots, controlled remotely by cyber criminals. It revealed that 74 percent of all email received between April and June was spam.

“This is not just annoying for users who have to delete all of this mail, but in corporate environments, it has important repercussions on productivity and resource consumption,” said Luis Corrons, technical director at PandaLabs.

Last year, Nucleus Research Inc., Wellesley, Mass., said the spam epidemic costs U.S. businesses $712 per employee in lost worker productivity.

The report said Turkey had the most zombie computers, comprising 11 percent of the global total. Brazil ranked second at 8.4 percent, followed by Russia at 7.4 percent. The United States accounted for 4.3 percent, ranking ninth, dropping from 5 percent during the first quarter.

“The percentage of IT employees dedicated to security in any given IT organization is relatively small—only 1.5 percent of the typical IT staff, and has been declining,” said John Longwell, director of research at Computer Economics.

Security as a percentage of IT staff was 2 percent in 2006. The report added that the decline was not a result of staff growth in other areas.

Jay Meadows, CEO of Rapid Reporting, Fort Worth, Texas, said IT security needs in the mortgage banking industry have evolved over the past 10 years. “Many companies are deploying systems that already have a lot of security measures built into them,” he said. “But technology is created in an environment for possible intrusion. There has been a tremendous reduction in mortgage staff nationwide, and while the reduction in security has been significantly smaller, security measures can ultimately be the demise of a company and should not be taken lightly.

“Security begins at the top,” Longwell said. “A commitment from executive management is required to create a culture of security that ensures procedures are enforced, audits are taken seriously and investments are made in personnel, training, services and technology. That commitment undoubtedly has more bearing on security than staffing levels.”

Meadows urged lenders to be vigilant not only about their own security measures, but also of their  vendors. “If a lender is doing business with a vendor that is not as secure as it is, then by association the lender is increasing its fraud risk," he said. "Ultimately the highest burden of risk falls on the lender and not the vendor that may cause damage. As cost-cutting measures prevail, lenders should keep in mind that if a vendor’s price seems low, they may secretly be skimping on security, which is expensive to uphold.”
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Rick Williamson, principal of WLJ Partners, Coral Gables, Fla., said “technicals” in the commercial mortgage-backed securities market—spreads and pricing driven wider by CMBX synthetic derivatives that caused a disconnect—are beginning to catch up to property fundamentals.

Williamson, a former commercial real estate bank lender, said banks will need to “shrink” and not lend anymore on commercial real estate because of prior lax underwriting.

“A year and a half ago, it was just crazy,” Williamson said. “Money was free, and the deals that were getting done were just insane. At the bank, for the last two years, we were just sitting around twiddling our thumbs saying, 'this is crazy. We can't participate in these deals.' It was extremely hard but, I'll tell you, the folks that are still at the banks are sure glad they didn’t."

Michael Grupe, executive vice president of research and investor outreach at the National Association of Real Estate Investment Trusts, said economic events, including consumer spending and corporate investment, are true unknowns that can affect commercial real estate property fundamentals.

“There are clearly some structural problems in the economy,” Grupe said. “It is reasonable to expect that some of those problems—perhaps excessive levels for debt in the household sector that could constrain spending on the retail side going forward—those are challenges going forward. They are real. They cannot be ignored.”

"Retail is definitely hurting,” Williamson said. “They are already talking about a bust to the 'back to school' season, saying it will carry over to the bust in the Christmas season. I don't see how they avoid it. I think you are going to see alot more bankruptcies, a lot more store closings from January to February. They will be out there for one last gasp—the 'Hail Mary'—hoping that Christmas saves them. I don't think it is going to happen. Come January and February, it is going to be a real thud."

Some industry analysts view commercial real estate as a lagging indicator of the residential real estate market. Reports have Lehman Brothers, New York, trying to rid itself of $40 billion in commercial real estate assets.

The New York Times reported last week that Wall Street banks were trying to unload bridge equity and floating-rate loans made to hotels, office developers and retail strips. It said holders of nearly $100 billion of CMBS feared problems in the commercial property market could lead to more write-downs.

Commercial Real Estate Direct.com reported the previous week that CBRE Realty Finance wrote off $40 million in mezzanine debt used by Macklowe Properties to finance their acquisition of four office properties from the Blackstone purchase of Equity Office. Macklowe and their senior lenders had been trying to sell the buildings but “indicative bids came in at below expectations.”

Williamson said office properties in Orange County, Calif., are closing down as a result of the residential subprime crisis.

Matthew Mowell, analyst at Property & Portfolio Research, Boston, compared the economy in the Inland Empire—the Riverside and San Bernardino counties in Southern California—to Cleveland or Detroit. 

“Most of the economic indicators—job growth and unemployment—paint quite a dire picture,” Mowell said. “A recovery here will require the housing market to stabilize, net migration to pick up to steadier levels and restored consumer confidence.”
 
Mowell forecasts “severe occupancy losses” for the next four quarters in office properties—not much change from the past year.

“The metro is seeing the weakest demand in over a decade, and although construction is slowing, it is still a force to be reckoned with," Mowell said. "The Inland Empire will rank fifth for occupancy losses over the next year—down by 330 basis points."

Grupe, however, said commercial real estate property fundamentals remain at a “decent balance” compared to prior cycles.

“It’s not like we started off with significant excess supply of space,” Grupe said. “I think we were pretty well balanced and, in that respect, should be able to handle any weakness in far better shape than we might have otherwise.”

"Multifamily seems to be holding up better, but that's also going to follow because, as we get further and deeper into a recession, household formation is going to fall and reverse itself—entry level workers moving back home with their parents or combining into one apartment,” Williamson said. “There is a huge shadow market of condos and empty houses out there competing for established multifamily properties. The multifamily market is going to be hurt as well."
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Preceding MBA’s 95th Annual Convention & Expo, the Workshop offers valuable interaction with peers and industry leaders from around the country, in addition to a timely and relevant agenda.

The October 17 session focuses on current legislative developments and their impact, positive and negative, that might result for associations. In addition, a session dedicated to community outreach related to rescue efforts and struggling local economies gives state and local associations critical insight on how to enhance their standing as industry leaders, add value for members and positively influence their markets.

With an "open" agenda and topics to be determined by participants, a roundtable session is scheduled for that afternoon, offering the opportunity for substantial peer discussion among association management and volunteer leadership.

October 18 kicks off with a breakout session for executives and managers, as well as one for volunteers focusing on the role of leadership in enhancing association visibility and influence. The morning continues with the introduction of a redesigned CampusMBA partnership initiative and concludes with a comprehensive overview of industry data and trends, a general economic forecast and specific focus on data from MBA's National Delinquency Survey, including its utilization.

A highlight of the annual Workshop will be the Leadership Luncheon on October 17. Newly appointed MBA COO John Courson will provide keynote remarks. Courson, who takes over as president of MBA on Jan. 1, will discuss his vision for MBA's future. The luncheon is sponsored by Wells Fargo Home Mortgage.

That evening, renew acquaintances and make contacts at the Welcoming Reception sponsored by MERS and attended by MBA leadership and staff.

Who Should Attend
This workshop continues to attract both state and local association representation from around the country. Attendance is recommended for state and local association managers, officers, board members, legislative counsel, lobbyists and committee members. MBA Associate Members interested in supporting state and local association activities find this a valuable networking opportunity.

For more information and to register, visit the conference web site at http://www.mortgagebankers.org/stateandlocal2008.htm.
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This timely course focuses on a multi-dimensional approach including operations, analytics, technology, loan product and other current strategies. Participants engage in case studies and group activities based on new ideas and strategies being implemented by their peers within the industry.

Upcoming offering of Executive Education: Loss Mitigation Business Strategies
October 18 in San Francisco, at MBA’s 95th Annual Convention & Expo (Register now at http://www.campusmba.org/products/default.aspx?product_code=E2901764/REGIS).

Loss Mitigation Workshop
This popular new interactive workshop is designed to provide participants with insight on common reasons for default, investor and insurer loss mitigation requirements and loss mitigation options. Throughout the day, students engage in five hands-on exercises, including the design of a loss mitigation workout plan.

Upcoming offerings of Loss Mitigation Workshop include:

December 10 in Dallas, Texas
(Register now at  http://www.campusmba.org/products/default.aspx?product_code=E2901763/REGIS)

February 16, 2009 in Tampa, Fla., at MBA's National Mortgage Servicing Conference & Expo
(Registration to open soon).

May 14, 2009 in Chicago (Register now at http://www.campusmba.org/products/default.aspx?product_code=E2901763B/REGIS)

August 10, 2009 in Washington, D.C. (Register now at http://www.campusmba.org/products/default.aspx?product_code=E2901763C/REGIS)

To register by phone for any of the above listings, call (800) 348-8653.

School of Mortgage Servicing
The School of Mortgage Servicing reviews mortgage servicing functions and the potential risks of not applying appropriate processes. The themes covered range from loan administration and default administration to financial controls and investor administration. The school walks through considerations for establishing strategy and managing risk.

This course fulfills a requirement for the popular Residential Certified Mortgage Servicer designation.

Upcoming offerings of School of Mortgage Servicing include:

March 24-26, 2009 in Westlake, Texas (Register now at http://www.campusmba.org/products/default.aspx?product_code=E2901895/REGIS).

August 18-20, 2009 in Jacksonville, Fla. (Register now at http://www.campusmba.org/products/default.aspx?product_code=E2901895A/REGIS)

To register by phone for any of the above listings, call (800) 348-8653.
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Special focus is given to the responsible selling of reverse mortgages, including understanding borrower needs, qualification requirements, dealing with borrower heirs and trusted advisors and common myths that surround this type of loan.

Finally, students review key guidelines that cause origination and processing issues and discuss the purchase of reverse mortgages.

To lean more or register, visit http://www.campusmba.org/products/default.aspx?product_code=E2901624/REGIS or call (800) 348-8653. Early registration savings end Nov. 12. 

MBA’s Reverse Mortgage Lending Fall Conference
October 1-2, Miami.

To register, click  http://events.mortgagebankers.org/rmlf2008/default.html?wt.mc_id=FallRevMortfromNLFHACentral
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The MBA/MISMO letters to ASF, which in July proposed Project RESTART, agree that such an effort would enhance transparency in the RMBS market. But MBA and MISMO expressed concern that the “informational utility of certain elements of the Draft Plan may be overshadowed by the varied challenges of implementation.”

“In some instances, MBA suggests ASF reassess whether a modified approach would provide a comparable level of investor confidence but in a manner that is less costly/burdensome,” the MBA/MISMO letters said.

ASF officials unveiled Project RESTART as a collaborative effort of a cross-section of ASF member market participants, including investors, issuers, originators, credit rating agencies and servicers to restore confidence and liquidity to the securitization markets by implementing steps to improve the securitization process and reshape critical information and data flows with consensus, market-based solutions.

ASF said its initial effort would focus on RMBS, and expects to pursue similar efforts in other major asset classes such as student loan, credit card and automobile securitizations. Treasury Secretary Henry Paulson Jr., offered support for the program, noting that the President’s Working Group earlier this year determined that there was no single, simple solution to the problems that have emerged from the mortgage securitization process.

The MISMO submittal letter answers specific questions posed in ASF's request for comment. It cross references MISMO's Logical Data Dictionary to the data set that comprises ASF's RMBS Data Disclosure Package. It also assesses the areas where the data is aligned while outlining specific gaps that may require additional attention. 

In the MBA submittal letter, MBA COO John Courson voiced MBA's support for incorporation of a unique loan identifier within the ASF framework, suggesting that the MERS® MIN is an ideal solution.

“The inclusion of the MERS unique loan identifier in the RMBS Data Disclosure Package, as well as other residentially oriented data standard efforts, is consistent with MBA's view of the benefits derived from standards,” Courson said. “MBA believes that such an identifier could play a significant role in helping to re-invigorate the RMBS market. While MBA supports certain aspects of ASF's Data Disclosure Package, MBA has requested ASF reevaluate instances where data ambiguity, logistical difficulties and costs might overshadow the utility of the draft plan's new data elements.”
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The MARI Quarterly Fraud Report said Florida continued to lead all states in reported incidents, representing 24 percent of all properties with material misrepresentation. California ranked second in mortgage fraud incidents, followed by Illinois, Maryland and Michigan. In Florida, the Miami Metropolitan Statistical Area represented 49 percent of all reported incidents; in California, 52 percent of all properties with misrepresentations occurred in the Los Angeles MSA.

In Illinois, 94 percent of fraud investigations came from the Chicago MSA. In Maryland, 25 percent of incidents came from the Baltimore MSA. In Michigan, Detroit represented 56 percent of fraud cases.

"The mortgage industry is currently in a volatile state, as many constituents try to protect themselves from criminals who continue to use these turbulent times as an opportunity to commit new fraud and inflict additional damage to our nation's lenders," the report said.

For all states, "general application misrepresentation" represented the most common type of fraud, followed by misrepresentations related to income. Misrepresentation on mortgage applications trended higher in all states. Florida and Maryland reported higher incidents of income misrepresentation; Michigan showed a high percentage of asset and debt misrepresentation, as well as the highest level of appraisal misrepresentation; and Maryland showed an "abnormally high" percentage of tax return and financial statement misrepresentation.

The data support assertions by the Mortgage Bankers Association that the overwhelming majority of fraud incidents involve fraud committed against lenders, and not by lenders. MBA has called for passage of legislation in Congress that would strengthen the FBI's ability to identify and prosecute cases of fraud against lenders; the FBI's 2007 Mortgage Fraud Report noted that the "downward trend in the housing market provides an ideal market for mortgage fraud perpetrators to employ a myriad of schemes suitable to a down market." The FBI report showed that mortgage fraud cases have tripled over the past year.

"To save itself from schemes both commonplace and new, the mortgage industry must continue to strengthen its attention to and practice of due diligence to ensure that transactions are in good order at the point of origination," MARI said. "This includes an analysis of the borrower's identity, as well as the players involved in each of the real estate roles, whether they are outsourced or work directly for the lender."

MARI, a division of ChoicePoint, Reston, Va., drives data from its Mortgage Industry Data Exchange database, which contains an aggregation of reported incidents of fraud and verified misrepresentations by mortgage industry participants.

The report can be found at http://www.marisolutions.com/resources-news.asp.
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