If the trade group’s assessment proves correct, it would be the lowest level of loan production since 1997. This, despite the lowest mortgage rates in half a century.

Of course, the mortgage market could improve if the moribund economy shows some signs of life. Or, to hear participants tell it at the MBA’s annual convention in Chicago earlier this month, if lawmakers and regulators in Washington would just get out of the way.

Brian Chappelle of Potomac Partners, a Washington-based mortgage industry consulting firm, told the gathering of about 3,300 mortgage professionals that the most important thing government can do is strike a better balance, a suggestion that won approving applause from the audience.

As it stands now, Chappelle said, Congress and regulators are “going after” the entire housing finance system “for problems that no longer exist.” And the result, he added, is “suffocating the whole market.”

SichelmanMBA_3_200“Every lender I talk to is scared to death someone will come in with a fine-tooth comb and find technical problems [with their loans] that have nothing to do with underwriting,” the consultant said. “There has to be balance on both sides, or the only thing lenders can do is tighten up on the front end.”

David Stevens, the former Federal Housing Administration (FHA) commissioner who took over day-to-day operations of the MBA in June, went even further. Against a backdrop of protestors marching and chanting outside the Hyatt Regency, Stevens said it’s time for Uncle Sam to jump out of the mortgage sandbox and let the professionals take over.

“We are the grownups in the room,” the MBA president said. “We can’t wait for policymakers to tell us how to act.”

The ex-FHA commissioner said the lenders who have managed to remain standing despite housing’s nosedive “didn’t participate” in the debacle. Rather, they are the ones who have “spent their lifetimes doing the right thing.”

There’s a “strong desire” among the MBA’s 2,200 member-companies to be “recognized for what we do” and stop being blamed for the catastrophe, he proclaimed.

Mortgage bankers are the first to admit they made mistakes that helped cause the housing market implosion, according to Stevens. But they also “know better than anyone else” about how to police the bad guys.

Housing finance is “way more complicated” than lawmakers and regulators believe, and that it is not as simple as outlawing certain products or micro-managing underwriting guidelines, he said.

In reference to a provision in the Dodd-Frank Financial Reform Act that requires originators to retain a 5 percent share in the mortgages they sell on the secondary market, Stevens also said it is wrong to think lenders don’t already retain some risk. “Tell that to the hundreds of mortgage bankers spending millions to buy back defective loans or defend buyback demands on legitimate loans sold years ago,” he said.

Stevens also said that all markets go through cycles, and after each one there is a correction. “You can’t just outlaw that one bad product or that one market structure and expect there will never be another serious market crisis, because markets always find a way to correct,” he said.

While most in housing finance might concur with the MBA president’s “it’s time to ‘take a stance”’ message,” agreement was not universal. One who dissented was Michael Heid, president of Wells Fargo Home Mortgage, Charlotte, North Carolina, who said it is still too early in the cycle to take the offensive.

Rather, Heid told the conference, the business should continue working on a positive image, develop an even thicker skin and “live with it.”

SichelmanMBA_2_351
Picketers marched outside
During the question-and-answer sessions following his remarks, the Wells Fargo executive was the target of two protestors who managed to infiltrate the meeting and make it to a microphone. As picketers marched outside, the ones inside asked Heid what he is doing “to fix the colossal damage done to Chicago families” and “How do you sleep at night?”

“I wish I had an answer to all of the market’s woes,” Heid responded. “All we can do is keep trying.”

Conventioneers applauded the response, but one of his antagonists, who said he paid to get into the meeting “just like everyone else,” was “not at all satisfied.”

The two protestors were said to be a part of a team of five planted inside the conference. The scene was reminiscent of two years ago at the MBA convention in San Francisco, when protestors managed to take the stage and interrupt the proceedings.

This time, against a backdrop of heightened security, there was no disruption. But outside, a crowd—unofficially estimated at 300 by the police—carried signs that said, among other things, “They get rich. We get foreclosed.”

Organized by National People’s Action and several local organizations in an effort “to take back the jobs, homes, and schools stolen from us by the greed of big banks and big business,” the protest fell far short of the 1,500 marchers that were expected. Nonetheless, the group made plenty of noise and drew coverage from all the local media.

Inside the convention hotel, though, it was business as usual. Below is a recap of what some of the other major speakers had to say:

• Housing Secretary Shaun Donovan said both he and the President understand the frustrations of not just homeowners but also financiers during what he called “a tremendous time of uncertainty.”
• “I get that, but what I also get is how essential your industry is to the strength of our economy, and the future of this country,” the HUD Secretary said. “And President Obama gets it, too.”
• White House economic adviser James Parrott also said housing is “extremely important” to the President.
• “Housing is one of the core causes that got us into this mess, and it is key to getting us out,” said Parrott, a senior adviser to the National Economic Council, the principal forum used by the President to consider economic policy. “It may not lead us out of the recession, but if we don’t get housing going, the recovery will be much slower and more painful.”
• In the spirit of what he called “participatory regulation,” the de facto head of the fledgling Consumer Finance Protection Bureau (CFPB) invited the MBA to suggest which areas of housing finance need its immediate attention.
• But Raj Date, the special adviser to the Treasury Secretary at the three-month-old bureau, also challenged audience members to leave their wish lists in their pockets. Instead, he urged them to come forward with a cost-and-benefits analysis on which key areas of regulation should proceed. “If we let the facts speak for themselves,” he told the convention, “we can help ensure that consumer financial markets actually work.”
• For the CFPB’s part, Date promised “smart regulation” that would be evidence-based, participatory, and precise. The CFPB “doesn’t plan to hide behind closed doors,” he said. “We aim to be an open book.”
• Rep. Spencer Bachus (R-AL), chairman of the House Financial Services Committee, indicated that the industry can expect less interference from Congress going forward.
• Bachus, who brought chuckles from the audience when he lifted file after file out of a box marked “Dodd-Frank Regulations” and dropped them to the floor, promised to “stay out of the way and let the private market take over with as little regulation as possible.” Dodd-Frank alone includes 3,700 regulations, he said. And there’s more coming, he added—4,257 regulations in the pipeline, including 219 that will have a net impact of $100 million or more on the particular industry covered. The Republican lawmaker also vowed “not to allow ideology” to block any attempt to get the housing market back on its feet, and said he would work with mortgage bankers to “come up with something that works for you.”

by Lew Sichelman
October 17, 2011
Original Article

Because of the possibility of a double-dip recession, some investors may consider it a bad time to invest in an asset class that is tied to the economy, given that the retail and leisure sectors, for example, are linked to how consumers feel, how much they are willing to spend, and how well the economy is doing.

Confidence in the real estate investment market has wavered over the last few weeks. At the start of the year, strong growth was expected in European investment on the back of secondary property coming to the market, with prime stock now being fully priced. However, that hasn’t happened; European growth has, in fact, petered out in the investment market.

Research conducted by multinational property services firm Knight Frank shows continuing polarization in performance of European property. Strong investor demand is evident in core western Europe, along with the Nordic countries and central Europe, yet interest in more peripheral markets remains down on last year.

In the opinion of Joe Montgomery, chief executive of ULI Europe, “there exist safe-haven places regarded as core, such as central business districts in London and Paris, as well as other relatively stable markets that have a history of consistent return, but people are getting progressively more cautious about second cities, and even some places in emerging parts of eastern Europe have shown oversupply. In Prague, for example, there are supermarket and mall developments that have underperformed due to oversupply.”

Against a backdrop of uncertainty, deals are taking longer to close because investors are being more selective and are looking more closely into the details of deals. As a result, a further slowdown is anticipated during the remainder of this year.

Nonetheless, there has not yet been a significant outflow of capital. Broadly speaking, there remains a stable balance between buyers and sellers of open-ended products.

Core properties will continue to attract investors, but secondary property may struggle to generate interest because it is difficult for investors to take the risk at this stage. Montgomery sees “a migration to the core—everyone’s chasing that and prices are escalating. Anything that’s carrying even a moderate amount of risk is being left behind. There is very much a flight-to-quality mentality.”

Knight Frank agrees that investors remain focused on income-producing prime properties and are generally reluctant to consider buying an asset unless it “ticks all the boxes.” It adds that banks are largely unwilling to finance secondary property deals.

The economic turmoil means investors in all asset classes are taking a more risk-averse approach. Within real estate there is a leaning toward stable assets in safe-haven locations, which tend to hold liquidity, and a move away from poorer-quality real estate.

Investor confidence may have been shaken, but Joe Montgomery insists that “well-selected real estate still holds it own against other asset classes.”

by Lauren Parr
October 19, 2011
Original Article

The explosion of political party primaries during the 1970s in the wake of the Vietnam War and Watergate, with their single-issue litmus tests for candidates of the two parties, coupled with ever-increasing numbers of gerrymandered legislative districts concocted by the two parties to insulate their incumbents, has brought us to this pivotal point in our national life, when it is extremely hard for a moderate voice to be heard, much less survive. Even a candidate for dog catcher better have a position these days on his religious beliefs. It is no wonder President Obama is turning prematurely gray after only two years in office. Increasingly, he is the only adult in the room in Washington.

Now, of all the powers wielded at the local level of government, it is the use of land, of private property, that stands out as distinct from the powers exercised by the federal and state governments. States certainly possess the sovereign authority to “guide” their localities when it comes to land use (and a few dare try), and the feds get their nose under the tent through environmental regulation, but land use remains jealously guarded by local officials and those who voted them in. Indeed, no level of government likes the next level of government telling it what to do.

When it comes to land development proposals, the not-in-my-backyard (NIMBY) syndrome is a well-honed performance art in U.S. municipalities and counties. NIMBYism has been deeply ingrained in the local culture since the 1960s, when all forms of authority began to be questioned. We know it when we see it; we have learned how to deal with it. After all, people fear change. They are comfortable with what is already down the street. And can you really trust the government to do what is right?

When one surveys this broad landscape, then, not only locally but also nationally, an unsettling thought steals in. At what point might the local NIMBY pattern of navigating the land use world merge with the more recent rigid harshness of our national—and, increasingly, state—political worlds? Can such a merger be avoided in the land use game? Will it?

Back in the early 1990s, when I was chairman of a sizable, regional planning and regulatory agency in Maryland, I met one hot evening with a citizens advisory committee (CAC). The CAC had been assembled to advise the planning staff on the drafting of a new area master plan for heavily populated Montgomery County. A small rebellion had been brewing within the CAC; a rump faction—a kind of Tea Party, if you will—felt empowered to use its advisory role to instruct the staff to delete all references in the plan to a highly controversial but long-planned regional highway that would traverse this particular area of the county. Staff members felt things beginning to spiral out of control. Members of the press were attending the CAC meetings and writing stories. Sometimes an elected legislator would attend and observe and, of course, be observed observing.

So I went that night to hear people out and then explain the facts about the process. The room was crowded: the media had gotten wind of what was up; legislators, pro and con on the highway issue, were there to watch, but not to speak; and other citizens showed up to listen. I spent the better part of two hours fielding questions and comments from the CAC, especially its rump faction, not all of it pretty, and then closed with a simple message: they could meet as often as they wished, but the master plan schedule would not be delayed, and the long-planned Intercounty Connector highway would remain in the new master plan. As I was leaving, a state legislator—a highway opponent—sidled up to me and very quietly said, “When are you going to get that highway built so I don’t have to keep voting against it?”

I miss the days of that kind of ironic wit tinged with a dash of self-knowing cynicism in our politicians, especially at the federal level. We have gone in a single generation from Senator Daniel Patrick Moynihan to Representative Anthony Weiner. From a demigod to a demagogue, both of them, as it happens, products of the same state political party. The nation’s bipartisan model of governance has been replaced by an ideological model. The goal is no longer to make a deal but to destroy the other side. The right is especially effective at using invective, but the left is trying to catch up. Their handicap is that the nation is, for the most part, center-right in its political orientation. Moderation has always been America’s bedrock strength.

Indeed, have you ever noticed that, when they speak, in small settings or large, liberals love “humanity,” conservatives love “individuals,” and moderates love “people?” And then reflect upon the fact that the Constitution carefully opens with the enlarged words, “We the People.” The Framers naturally grasped a wisdom both timeless and true, a wisdom lost on too many leaders today.

Of course, the use of land—and by that I mean, for our purposes, the regulation of private property by local government—is not a left/right proposition, at least not in the eyes of the general public. There is nothing liberal or conservative, Democratic or Republican, about where to put a new office complex. But land use is certainly political in a small-bore sense. To be sure, the left may trust regulation more than the right, but when it comes to the use of land, regulation is an equal opportunity power wielded by populists and elitists alike. As with all things governmental, it comes down to whose ox is being gored and whose pot is being filled.

For close to a century, ever since New York City adopted the nation’s first zoning ordinance in 1916, land use regulation has meant—in its most fundamental guise—the separation of uses through zoning. Very often, the separation of uses has really meant the separation of classes or races of people when it comes to where they live and where their children go to school. After all, it was a conservative U.S. Supreme Court in 1926 that ruled zoning constitutional despite the pressing issue of property rights precisely because the justices intuited that zoning effectively separated classes of people in terms of their housing—into apartment districts, small-lot districts, and large-lot districts. Longstanding private covenants supplemented the new zoning tool by ensuring that races, nationalities, and religions could be excluded by residential neighborhood, including within apartment co-ops, regardless of a household’s income or class. Despite a 1948 Supreme Court decision that such covenants would not be enforceable in court, they remained very much alive until the civil rights legislation of the 1960s.

So land use regulation, or zoning, has been political since its inception, and there is nothing inherently wrong with that in a democracy as long as individual rights are protected and due process is accorded when the majority acts. Life is political. As practitioners, we understand that behind every land use fight lie private property values. We are frequently told that “development” is bad and “community” is good. Do you know what the difference is between a development and a community? Twenty years—the time it takes for trees to grow and memories to fade. And some 50 years after that, a push will quite often be made to get that once-objectionable development or building designated as historic. (It takes about 50 years because no one seems to like the architecture of his or her parents’ generation.)

I learned this after witnessing or mediating many conflicts over proposed projects and requested historic designations. One struggle in particular sums up the local land use dynamic. An inner suburban downtown was dying—it was the 1970s and 1980s, a rancid period for the American city (captured perfectly in The French Connection)—and at that downtown’s core, its heart, lay an abandoned art deco movie theater and a rapidly emptying, adjacent shopping center. Revitalization proposals began emerging during the 1980s and 1990s: either tear down those old, decaying, single-story structures and begin anew with gleaming towers, or preserve and restore the historic center and build great things upon that foundation. It is the classic four-query land use dilemma: What does the property owner want? What does the community desire? What will the market say? What role should government play?

Presenting itself front and center, then, was the iron triangle of land use: the applicant proposes, the neighbor opposes, the government disposes. Thus, through struggle and compromise over several years, a viable, acceptable agreement emerged that involved a shared vision of saving some downtown buildings in Silver Spring, Maryland, and sacrificing others for new development and uses, with both private and public investments in the bargain as well as in the shared outcomes.

We presently find ourselves in the fourth year of the Great Recession, which—despite official announcements to the contrary—is still very much affecting the lives of most Americans. And its stranglehold shows no sign of relaxing. This structural economic dislocation is something we have not endured for some 70-plus years. Except for health care (thank you, baby boomers), every sector of the economy—private and public—is retrenching.

Sour times such as these serve to reinforce and magnify political fringes as they take advantage of a fearful situation and assault both reason and civility. The Great Depression had radio’s Father Charles Coughlin—conspiratorial, anti-Semitic, far right—and the Great Recession has radio’s Glenn Beck, which even the “fair and balanced” television network of “truthiness” could no longer tolerate. Take his latest outrageous pronouncement about the recent slaughter of scores of Norwegian youths by a far-right gunman at a summer camp sponsored by Norway’s Labor Party, in which Beck somehow managed to equate the campers to the Hitler Youth. Beck is obviously beyond the pale, but he is by no means an isolated phenomenon. He is the proverbial canary in society’s coal mine. He is the id to the egomania that is corroding our national politics by elevating discord and belittling compromise.

So will this long-running, acrid political farce seep down from the national capital, as well as from some of our statehouses, reaching into our localities and infecting them as well? Will the familiar NIMBY syndrome morph into something much more sinister, as happened in the disturbingly metaphorical Invasion of the Body Snatchers?

It is incumbent upon us to make sure that does not happen. It is our mutual responsibility as citizens of a republic and a community to prevent that infection. We should vow, at least to ourselves, “Not on my watch.” Land use regulation in our multifaceted communities faces enough challenges already. Take just three common dynamics:

People say they dislike sprawl, but they hate density. (We can work on that sentiment.)

Folks everywhere are for transit so long as the next guy uses it. (We can talk about that.)

Everyone supports “smart growth,” as long as it is restricted to the city. (We need some more time with that one.)

At the end of the day, all the nuttiness we sometimes experience in the land use game does not come close, by and large, to the relentless, irresponsible extremism we see on television and hear on the radio emanating from our various capitals.

The politicization of land use in America is still a relatively manageable affair. Let us strive to keep it that way. Or do something even more daring: Let us embark upon an effort to undo the 30 years of ideological warfare in America before it also overwhelms our local governments, not to mention our shared sense of community.

Now that would be a truly radical notion. If nothing else, such an effort would at least instill hope, badly needed, of returning us to the path toward a more perfect union.

by Gus Bauman
December 27, 2011
Original Article

Join ULI Baltimore for our next Third Thursday “Content before Cocktails”.

Join ULI Baltimore and ULI Bay for a tour of The Hotel at Arundel Preserve and networking at Grillfire.

Developed by Southern Management, The Town Center at Arundel is a multi- faceted mixed-use community featuring 242 ultra-luxury apartment homes, a 150-room full-service hotel and more than 18,000 square feet of complementary retail space designed to service both Town Center residents and the surrounding residential and business communities. The 150-room Hotel at Arundel Preserve, also constructed utilizing LEED-Silver standards, is a full-service hotel that includes over 10,000 square feet of indoor/outdoor meeting space, including a 5,000 square foot grand ballroom to accommodate up to 500 guests. Contained within The Hotel at Arundel Preserve is Grillfire, a new restaurant by The George Martin Group.

Date: Thursday, January 19, 2012

Location: The Hotel at Arundel Preserve / Grillfire Restaurant 7793-A Arundel Mills Blvd. Hanover, Md 21076

Speakers: David Hillman, CEO – Southern Management, Neil Greenberg, COO – Somerset Construction Company

Registration: 5:00pm in Lobby The Hotel at Arundel Preserve 2nd. Floor Washington Room

Content/Presentation/Tours: 5:30pm – 6:30pm

Cocktails / Networking: 6:30pm- 7:00pm

Cost:

Private: Member: $FREE Non-Member: $20
Public Sector/Nonprofit: Member: $FREE Non-Member: $20
Young Leader (under 35): Member: $FREE Non-Member: $20
Student (full-time): Member: $FREE Non-Member: $20

NOTE: Registration is limited – so book today!

Event Code: __8103-1214
Registration: Call 1-800-321-5011 to register.
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ULI, the Urban Land Institute, is a 501(c) (3) nonprofit research and education organization supported by its members. Founded in 1936, the Institute now has members in 95 countries worldwide, representing the entire spectrum of land use and real estate development disciplines working in private enterprise and public service.
As the preeminent, multidisciplinary real estate forum, ULI facilitates an open exchange of ideas, information, and experience among local, national, and international industry leaders and policy makers dedicated to creating better places.
Members say ULI provides information they can trust and is a place where leaders come to grow professionally and personally through sharing, mentoring, and problem solving. With pride, ULI members commit to the best in land use policy and practice.