Multifamily starts had surged by 230 percent in June in the Northeast, reflecting a rush to start building activity before local building code changes took effect at the beginning of July. A huge decline in multifamily starts in the Northeast in July partially reversed that surge. In August, every region but the West showed sizable drops in multifamily starts.

Through the first eight months of this year, single-family starts were 39.7 percent lower than those in the first eight months of 2007. By contrast, year-to-date multifamily starts with five units and over were 11.2 percent higher than those last year. Year-to-date construction of structures with 2-4 units declined 45.6 percent. 

Total permits fell 8.9 percent in August. Single-family permits—a leading indicator for single-family housing starts—dropped 5.1 percent following a similar drop in July. This marked the 16th decline over the past 17 months. The large back-to-back drops in single-family permits in July and August suggested that single-family housing starts should continue to trend down in the coming months. This is necessary to reduce excess supply in the housing market given the huge overhang of unsold inventory in many parts of the country and soft housing demand. 

The report also showed that the share of single-family starts intended for sale was about one third in the second quarter of 2008. (The rest were owner- or contractor-built units). This suggested that single-family starts intended for sale in August were around 420,000 units, seasonally adjusted, well below sales pace in recent months. Unless new home sales slip considerably going forward, the months’ supply (inventory-sales ratio) should decline slowly from the current level of about 10 months.    

While continued decreases in home sales are likely, near-term leading indicators of sales activity showed that the declines should be moderate in the coming months. Home builders reported that current market conditions and outlook for new home sales modestly improved in September, according to the National Association of Home Builders/Wells Fargo Housing Market Index, which was up slightly from a record low, the first increase in seven months. 

Rising consumer confidence, declining mortgage rates and the first-time homebuyer tax credit helped lift builders’ confidence. The Mortgage Bankers Association Weekly Application Survey also showed that the purchase application index has steadily increased since mid-August as mortgage rates have trended down.

(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 purpose of the electronic payments industry is to facilitate conduct of commerce and improve efficiency of day-to-day transactions among consumers and businesses,” Chenault said, speaking at The Brookings Institution on Tuesday.

Gagan Sharma, president and CEO of BSI Financial Services, Irving, Texas, said that in servicing mortgage loans, his company has seen an increase in the use of Automatic Bank Draft, commonly known by the acronym ACH.

“We have seen an increase in the number of borrowers looking to set up ACH withdrawals and that is something we encourage,” Sharma said. “It’s easier for everyone—for borrowers it minimizes forgetting while minimizing errors on our end.”

However, borrowers who are current with their payments—most often prime borrowers—differ in how they pay when compared to distressed or non-performing—most often subprime borrowers, Sharma said. “For most prime borrowers, money is automatically deducted," he said. "They also tend to be more tech savvy. For other borrowers, however, we get a lot of checks and even see the use of Western Union. Some of these borrowers may not even have bank accounts or regular source of income. They just pay when they can.”

"In hard times people move away from ACH to checks,” said Fred Melgaard, executive vice president of DRI Management Systems, Newport Beach, Calif. “And from checks they move to 'speedpay' or 'payment thru' web sites. Under duress borrowers want to manage their cash flow closely."

“We write 31 billion checks each year, though that number has been declining at a 5 percent yearly rate,” said Vijay D’Silva, director at McKinsey & Co., New York. “It’s remarkable, however, how slowly consumer behavior changes. Balancing checkbooks and controlling financial lives are embedded behaviors that are hard to change.”

“Change is the buzzword and has been used to describe what’s happening in the electronic payment industry,” said David Evans, founder of Market Platform Dynamics, Cambridge, Mass. “Though cash accounts for a vast amount of transactions, there has been a 7 percent yearly decline in the use of checks since 2003."

Evans said consumers currently are not yearning for change and most believe credit cards work well. “They think it is safe, convenient and best,” he said. “Merchants are also happy because they care about making their customers happy and earning hefty margins despite associated fees.”

Evans said change, however, may come about as a result of three technological revolutions—what he referred to as "data, cloud and hands.” He said data will drive more opportunities in advertising and cross-selling; the cloud will change processing methods in electronic payment technology; and mobile phones—hands—have the potential to revolutionize how people conduct business.

Richard Schmalensee, professor at Massachusetts Institute of Technology, Cambridge, Mass., said policymakers should proceed with care and concern when creating new laws surrounding electronic payment technology. “The Fed must deal with excesses and concerns need to be weighed against value for consumers,” he said. “Privacy advocates tend to overstate the use of consumer data but there are also legitimate concerns which warrant regulation.”

In forecasting electronic payment technologies, D’Silva said risks include barriers, critical mass of customer acceptance, trust and authentication, investment process and appetite, organizational silos and entrenched business models.

“Taking a measured view is important,” D’Silva said. "Consumers have plenty opportunity in how they conduct business. Try to get the user perspective. New entrants sometimes make the mistake of assuming all of their constituents will adopt and adapt, but consumers actually adapt slowly. Trust and established behaviors take longer than people expect. If you are sitting on a large customer base, there has to be a critical mass in the system.”

“Moving to other forms of payments is an educational process for people—to understand productivity and efficiency,” Chenault said. “There are categories in the payment hierarchy which are driven by impulse. People use each form differently from a cash management standpoint. We want to give customers choice and part of what we are selling is financial discipline."

“What is a common theme, however, is educating consumers about economic advantages, convenience and services,” Chenault said. “But you have to emphasize trust. Choice in payments is critical. We trade information and data, and at the end of the day, customers and businesses trust us with their vital data. It is important that we have strong internal standards. That has to be carefully thought out. Privacy is critical.”
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Notice IR-2008-106, issued Sept. 16, describes criteria of the program, which received support from the Mortgage Bankers Association. The program provides for a $15,000 tax credit—which essentially functions as an interest-free loan—for first-time home buyers who purchase homes after April 8, 2008 and before July 1, 2009.

The credit reduces a taxpayer’s tax bill or increases his/her refund, dollar for dollar and is fully refundable, even if they owe no tax or the credit is more than the tax they owe. The loan must be repaid over a 15-year period.

“The notice is important information for loan production and secondary marketing people,” said James Gross, associate vice president of accounting, tax and bank regulation at MBA.

Additional information can be found at http://www.irs.gov/newsroom/article/0,,id=186831,00.html.
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For Merrill Lynch, 76 properties secure loans totaling $2.8 billion in combined unpaid balances within 68 deals.

Merrill Lynch holds $1.2 billion from 23 loans with debt service coverage ratios at less than 1.25 and $135 million secured by six collateral properties less than 80-percent occupied. Seven loans at $225 million have DSCRs less than 1.00. The firm's largest CMBS exposure—a $405 million loan—is for Two World Financial Center, a 100-percent leased, 2.6 million square-foot office property. The debt service coverage ratio was not reported, Realpoint said.

AIG has a combined unpaid balance of nearly $506 million in 12 CMBS deals with 13 properties securing the loans.

Three collateral properties secure $67 million in CMBS and are less than 80-percent occupied, and six loans at $251 million have DSCRs less than 1.25. Three loans total $74 million with DSCRs less than 1.00.

AIG's largest loan exposure, however, is a $106 million loan secured by a San Francisco office property that was 92-percent occupied as of June. The loan had a 1.19 DSCR for the six months ending June. AIG occupies 25 percent of the 129,195-square-foot office building, Realpoint said.

The third largest British-bank, Barclays purchased Lehman's North American investment banking and trading operations. Lehman's holds a total unpaid balance of $614 million secured by four properties in four CMBS deals. No loans have a DSCR less than 1.25 or collateral occupancy less than 80 percent, Realpoint reported.

Lehman's largest CMBS exposure—a $421 million loan secured by the nearly 335,480 square-foot 1301 Avenue of the Americas—was 100 percent occupied in December 2007 and the DSCR was 3.24 for 2007. Lehman has made a combined 400,000 square feet available for sublease at 1301 Avenue of the Americas as well as 1271 Avenue of the Americas, which is not in CMBS, according to Commercial Real Estate Direct and Reuters.

Realpoint's reasearch and surveillance group said the degree to which Merrill Lynch, AIG and Lehman will scale back operations is still unknown.
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The conference takes place today, Thursday, September 18 from noon-1:30 p.m. ET.

President George W. Bush signed this major legislation into law on July 30. Significant developments within FHA reform include a primary focus within our industry and our economy. Learn how FHA's ongoing changes affect the mortgage industry moving forward.

Join MBA and senior staff from HUD for this LIVE Online Conference to explore the recent changes to FHA lending in general, focusing on newly issued guidance in particular. This conference gives members and other industry professionals the opportunity to hear from and interact with these experts, including:

• Meg Burns, director of the Office of Single Family Program Development with HUD
• Ken Markison, associate vice president and regulatory counsel with the Government Affairs department at MBA

These experts will cover the following relating to FHA and HERA:

• Review recent mortgagee letters, including letters on risk-based pricing and down payments
• Hope for Homeowners
• New insurance requirements
• New HECM restrictions 
• FHASecure

This LIVE Online Conference is an excellent opportunity to ask questions of experts on how this new legislation will impact FHA lending.

Cost: Because space is limited, you must register. The fee is $95 per person for MBA members and $195 per person for nonmembers.

To register, call (800) 348-8653 or click http://www.campusmba.org/products/default.aspx?product_code=E2801716AE/REGIS.
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Join members of the lending industry for candid discussions of the interplay of lending, diversity and the bottom line. Conference topics include sales tools; Home Mortgage Disclosure Act data mining; the impact of housing legislation on minority homeownership opportunities; perception of the industry by the media; a Town Hall meeting on consumer protection; and many other issues.

Who should attend:

• Loan origination professionals
• Retail/wholesale lenders
• Emerging market professionals
• Fair lending and CRA officers
• Housing finance agencies
• State and local housing professionals
• Wall Street and secondary market investors
• Housing policy makers
• Minority mortgage bankers and real estate professionals
• Community-based organizations
• GSE and federal agency staff
• Diversity officers

Attend the Best in Industry Minority Lending Awards, recognizing outstanding minority leaders and industry professionals who have helped increase minority mortgage industry participation.

For more information, the conference web site is www.MortgageIndustryDiversity.com or call 202/552-7408 Monday-Friday between 9:00 a.m.-5:00 p.m. ET.
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Jay Leno follows in the footsteps of legendary NBC late-night hosts Steve Allen, Jack Paar and Johnny Carson and is the host of the Emmy Award-winning and top-rated “The Tonight Show with Jay Leno.” As one of the country’s premier comedians, Leno’s personable style and reputation for being one of the hardest working people in show business have earned him millions of fans worldwide.

With uncanny, note-for-note live renditions of Beatles’ songs, the Fab Four will make you think you’re watching the real thing. This loving tribute and incredible stage show will bring you classic hits such as “Can’t Buy Me Love,” "Yesterday” and “A Day in the Life,” and is sure to take you down memory lane.

MBA’s Annual Convention & Expo, which takes place Oct. 19-22 at the Moscone West Convention Center in San Francisco also features these events:

• The Chairman’s Luncheon, featuring Chris Gardner (The Pursuit of Happyness) as he tells his extraordinary tale from a homeless single father to founder and president of multi-million dollar brokerage Gardner, Rich & Co.;

• The Sports Luncheon, featuring NFL Hall of Famer Steve Young, co-founder and manager of Sorenson Capital.

Register today and purchase individual tickets or reserve an entire table at these events for preferred seating.

For more information visit the Ticketed Events section of the Annual Convention web site, http://events.mortgagebankers.org/95th_annual/ticketed_events/.

For more information, visit the Annual Convention web site, http://events.mortgagebankers.org/95th_annual/default.html.
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HFH was created this past summer by the Homeownership and Economic Recovery Act of 2008 and is scheduled for implementation Oct. 1. HFH was designed as a “rescue plan” to help distressed mortgage borrowers for whom the value of their property has declined below the outstanding amount of their mortgage loan. FHA received an additional $300 billion in FHA mortgage insurance authority to refinance eligible borrowers into new, affordable FHA-insured loans with lower fixed rates based on the current property values. Such loans would also be made available for securitization through Ginnie Mae. 

Courson noted that while MBA members and servicers support HFH, uncertainties remain, such as a lack of firm guidelines established under HERA for mortgages eligible for refinancing through HFH.

“Until these parameters have been established, the industry cannot accurately identify which borrowers may qualify for the program and, therefore, which borrowers should be considered for pre-implementation forbearance,” Courson said. “That said, our members believe that their ongoing forbearance activities likely will capture potential candidates for HFH refinance transactions, although it is likely that many borrowers who are granted forbearance by our members may not ultimately qualify for the HFH program.” 

Courson also noted that the HOPE NOW Alliance’s Project Lifeline has shown that servicers commonly grant forbearance while evaluating a borrower’s request for loan modification or other accommodations.

“Servicers are now performing record volumes of loan modifications and other accommodations to the benefit of millions of borrowers,” Courson said. “HOPE NOW data indicate that servicers prevented over 2 million foreclosures through modifications and repayment plans from July 2007 to July 2008. Other modification options are also offered that are not captured in these numbers, including forbearances, advance claims and delinquent refinances.”

Ultimately, the goal is to help more distressed borrowers stay in their own homes, Courson said. “Accordingly, while we work to make HFH the best program it can be, MBA and its members continue to focus on enhancing additional tools, particularly FHASecure, to ensure that borrowers and lenders have a full palette of options available to reach the best possible outcomes.”
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The letter comes on the heels of a House Financial Services subcommittee hearing Tuesday in which the Mortgage Bankers Association and other industry trade groups testified that the proposed rule, in its current form, would not provide consumers with clarity about the mortgage process or with more effective protections.

The Hinojosa-Biggert letter recommends that HUD withdraw the pending rule, work with the Federal Reserve and other relevant government agencies on a combined rule and publish a new rule for comment. MBA has also called on HUD to work with the Fed and other agencies in a collaborative effort, rather than make singular agency changes to RESPA.

“To our knowledge, HUD did not coordinate its efforts with the [Fed], which under the Truth in Lending Act also has the authority to revise mortgage disclosures,” the Hinojosa-Biggert letter said. “Therefore it is likely that HUD’s RESPA rule sent to you will conflict with other federal and statutory and regulatory requirements under the Equal Credit Opportunity Act and TILA and could, if promulgated, confuse consumers who might receive multiple and conflicting disclosures.”

HUD’s proposed rule would establish a four-page standard Good Faith Estimate form; impose tolerances to limit increases in GFE estimates at closing; revise requirements for disclosure of mortgage broker fees as the charge or credit for the interest rate chosen; make changes to the HUD-1 to facilitate comparison between GFE and HUD-1 charges; establish a new script to be read to borrowers at settlement concerning final loan terms and settlement costs; revise regulations to permit certain average-cost pricing and volume discounts; clarify required use requirements to restrict disincentives to use of non-affiliates; and make technical amendments to the RESPA rules.

More than 240 members of Congress in August sent a “Dear Colleague” letter to HUD urging the department to withdrawal the proposed rule and to work with the Federal Reserve in creating a more comprehensive approach. The comment period for the HUD proposed rule drew more than 12,000 comment letters, most in opposition to the rule.

MBA Chairman-Elect David Kittle, CMB, testifying at Tuesday’s House subcommittee hearing, noted that the proposed changes to RESPA “take what should be a one-page form and make it four pages; require a 45 minute script be read to the consumer, stretching an already long closing process, with no benefit to the borrower; [and] continue to have a series of forms where the lines don’t match up and consumers can’t figure out what happens from one part of the process to the next.”

Hinojosa and Biggert urged OMB Director Jim Nussle to send the proposed rule back to HUD and instruct the agency to coordinate with the Fed and resubmit the proposal.

“As it stands, the rule has the potential to negatively impact home buyers, the housing market and our economy,” the Hinojosa-Biggert letter said. “This is a setback that none can afford—especially during this time of market turmoil and uncertainty. Until there are assurances that HUD’s revised RESPA rule will result in benefits that far outweigh any potentially negative consequences, a final RESPA rule should not be promulgated. Too much is at stake to rush quickly to judgment on an issue of such magnitude.”
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In addition, the FOMC authorized new swap facilities with the Bank of Japan, the Bank of England and the Bank of Canada, supporting provision of U.S. dollar liquidity of up to $60 billion by the Bank of Japan, $40 billion by the Bank of England, and $10 billion by the Bank of Canada. 

The Fed said these currency arrangements are authorized through January 30, 2009. 

"These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets," the Fed statemen said. "The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures."
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