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Keeping Financially Fit California Mortgage Bankers Association

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					CHAIRMAN'S CORNER

                                                                                             in this issue...
Keeping Financially Fit                                                                      CHAIRMAN'S CORNER                  page 1

                                                                                             LEGISLATIVE UPDATE                 page 2
BY MATTHEW M. SOTO, SR., CMBA CHAIRMAN
                                                                                             EXECUTIVE DIRECTOR'S
                            It’s a fact     Unified School District to help keep             LETTER                             page 4

                       that kids to-        teens financially fit.                           LEGAL UPDATE                       page 5
                       day are simply           The program proved to be a real
                                                                                             OPINION                            page 6
                       unarmed and just     success. CMBA and partners held a
                                                                                             WELCOME NEW MEMBERS page 6
                       not getting the      press conference that attracted all major
                       tools they need      media from the Capital Region, as well           RESIDENTIAL UPDATE                 page 7

                       when it comes to     as representatives from the California           CALENDAR                           page 12
                       the money and        Legislator and other community leaders
debt game. Bad credit can make it next      who were enthusiastic about welcom-
                                                                                             Contact: California Mortgage
to impossible or expensive for people       ing this national program for the first                   Bankers Association
to buy a home. With that in mind,           time to a California school district.                     (916) 446-7100 Phone
                                                                                                      (916) 446-7105 Fax
financial education is a wonderful tool         Not only did teens learn a good les-
                                                                                                      info@cmba.com Email
to start planting the seed to achieve the   son about credit card debt and its poten-                 980 Ninth Street
American Dream of homeownership.            tial to hobble their futures, but parents                 Suite 2120
                                                                                                      Sacramento, CA 95814
    America’s 31.3 million teenag-          of the school district had a chance to
                                                                                             California Mortgage Finance News is pub-
ers spend an average of $103 a week.        learn about what it takes to buy a home.
                                                                                             lished four times per year: Spring, Summer,
In 2003, that equated to $173 bil-              A first time home buyer education            Fall and Winter. Deadlines for submission of
lion. They spend far more than they         presentation was available to Hmong-             articles for 2004 are:

save, and more and more of them are         speaking parents to help them un-                  SUMMER 2004           MAY 12, 2004
                                                                                               FALL 2004             AUGUST 10, 2004
acquiring ATM and credit cards before       derstand the basic financial concepts              FALL / WINTER 2004 OCTOBER 15, 2004
they’re old enough to vote.                 of handling money. By summer’s                     WINTER 2005           JANUARY 15, 2005

    That said, the California Mort-         end, some 14,000 refugees who have               California Mortgage Finance News is pub-
                                                                                             lished by the California Mortgage Bankers
gage Bankers Association, Sacramento        been stuck in Thai refugee camps for
                                                                                             Association.
Neighborhood Housing Services and           decades finally will get the green light
                                                                                             EDITOR:   Marcella Rojas
Consumer Credit Counseling Service          to come to America, and as many as               PUBLISHER/LAYOUT:  Wolfe Design Marketing
of the Sacramento Valley and As-            4,000 will come to Sacramento. They
semblyman Darrell Steinberg (D-Sac-         will face tremendous adjustment prob-
ramento) kicked off Financial Fitness       lems, and trying to buy a home will be
Week in February at Sacramento City         one of the problems.
                                                       FINANCIALLY FIT CONTINUED ON PAGE 9

CALIFORNIA MORTGAGE FINANCE NEWS                                                                                                            1
LEGISLATIVE UPDATE



Primary Election Brings
Mixed Results for California
BY JON ROSS, CMBA LEGISLATIVE COUNSEL


                            The March        and a renewed commitment in Sacra-        by a nearly two-to-one margin.
                       primary election      mento to solving problems.                Sponsored by public employee labor
                       brought mixed             He was not talking to the media       unions, who dressed up the mea-
                       results for the       so much as through them. And the          sure with legislative “reforms” and
                       California busi-      audience he wanted to reach was not       outspent opponents by a two-to-one
                       ness community.       just the general public. Rather the       margin, the initiative never resonated
                       On statewide          governor was specifically targeting       with a skeptical public.
                       issues, business      the financial analysts, investors, and        Passage of Proposition 57.
did well; in the legislative primaries,      business leaders whose decisions will     Voters approved the issuance of up
however, the best that can be said is        decide how much business California       to $15 billion in “Economic Recov-
that things did not get worse.               can actually do in 2004.                  ery Bonds,” a key component of the
                                                 The Governor’s election night         Governor’s plan for resolving the
Stakes Were High for Governor                victory was a necessary step in con-      State’s ongoing budget crisis. The
    The election was above all a test        solidating his policy agenda, certainly   sale of the bonds will allow the State
of Governor Schwarzenegger’s ability         with regard to gaining legislative        to “smooth” the pay off of accumu-
to sell his economic recovery plan.          cooperation on his next set of top        lated deficits and buys a little time to
The new governor had a “fantastic”           drawer issues: workers compensa-          get future budgets back into balance.
night. He demonstrated the ability           tion reform and passing a fiscally        Most important for the business
to translate his personal election vic-      responsible budget.                       community, approval of this debt
tory into public support for his policy          But while this new Governor           refinance should reduce the pressure
agenda as Propositions 57 and 58             was elected as a moderate and has         for tax increases on business and in-
passed by large majorities.                  gained overwhelming popular sup-          dustry, and will help restore Califor-
    Most elected officials treat a vic-      port for a moderate policy agenda,        nia’s tarnished fiscal reputation.
tory at the polls as an end in itself, the   his personal successes have not               Passage of Proposition 58.
closing of a chapter in which they star.     translated into the election of more      While voters approved the bonds,
As a skilled communicator, however,          moderate legislative candidates.          they made it clear they didn’t want
this governor, like many well-run                                                      this to happen again. Proposition 58
companies, treats success as an oppor-       Results of Statewide Ballot               declares the use of “deficit bonds”
tunity to project a larger message.          Measures Favor Business Climate           to be a one-time event, and changes
    On election night, Schwarzeneg-              Defeat of Proposition 56. On          the State Constitution to require the
ger’s message could not have been            the bright side, the biggest threat to    Legislature and the Governor to enact
more explicit. Standing before a             the state’s business climate was de-      a balanced budget. (Until now, the
huge sign reading “California is Back        feated. Proposition 56, which would       Governor was only required to propose
on Track,” the governor delivered a          have reduced the legislative vote         a balanced budget.) Other parts of
speech that was all about self-confi-        requirement for new taxes from two-       the ballot issue aimed at providing
dence, cooperation, bipartisanship,          thirds to 55 percent, was trounced        more certainty and stability to the
                                                                                              PRIMARY ELECTION CONTINUED ON PAGE 10


2                                                                                                                       SPRING 2004
Statewide Primary Election Results (Winning Propositions or Candidates are in bold face.)
 Ballot Measure                                                                    Yes                            No
 Prop. 55 Education Bond (Passes)                                         2,810,724 (50.6%)                2,753,870 (49.4%)
 Prop. 56 Budget Accountability (Fails)                                     1,904,212 (34%)                3,667,254 (66%)
 Prop. 57 Economic Recovery Bond (Passes)                                  3,546,705 (63%)                 2,059,412 (37%)
 Prop. 58 Balanced Budget (Passes)                                         3,961,724 (71%)                 1,620,349 (29%)


Contested State Senate District Elections
SD 11 (Byron Sher’s seat) DEM                SD 13 (John Vasconcellos’ seat) DEM         SD 35 (Ross Johnson’s seat) REP
Ted Lempert               40,578 (42.7%)     Elaine Alquist        28,660 (50.0%)        John Campbell           59,299 (60.5%)
Joe Simitian              54,443 (57.3%)     Manny Diaz              26,316 (45.8%)      Ken Maddox                 29,447 (30.1%)
                                             Jose Medeiros              2,443 (4.2%)     Joe Snyder                    9,272 (9.4%)

Contested Assembly District Elections
AD 7 (Patricia Wiggins’ seat) DEM     AD 29 (Steve Samuelian’s seat) REP                 AD 60 (Robert Pacheco’s seat) REP
Noreen Evans            28,639 (54.8%)       Mike Briggs             13,116 (27.0%)      Robert Huff             16,158 (41.3%)
Jim Leddy                 23,648 (45.2%)     Chris Mathys            14,691 (30.3%)      Bill MacAloney             10,998 (28.0%)
                                             Mike Villines         20,675 (42.7%)        Gayle Pacheco              12,023 (30.7%)
AD 9 (Darrell Steinberg’s seat) DEM
Donna Begay                   838 (2.2%)     AD 33 (Abel Maldonado’s seat) REP           AD 62 (John Longville’s seat) DEM
Leslie Cochren                888 (2.3%)     Sam Blakeslee         19,198 (39.2%)        Joe Baca, Jr.           11,451 (59.1%)
Roger Dickinson            9,621 (25.6%)     Matt Kokkonen           15,293 (31.2%)      David Roa Pruitt            5,328 (27.5%)
Lauren Hammond             6,738 (17.9%)     Mike Zimmerman          14,528 (29.6%)
Manny Hernandez             3,433 (9.1%)                                                 AD 63 (Robert Dutton’s seat) REP
Dave Jones              16,143 (42.9%)       AD 37 (Tony Strickland’s seat) REP          Bill Emmerson             9,483 (29.4%)
                                             Jeff Gorrell            14,104 (31.8%)      Mike Morrell                8,151 (25.2%)
AD 20 (John Dutra’s seat) DEM                Eric McClendon               948 (2.1%)     Elia Pirozzi                9,278 (28.8%)
Ash Bhatt                   1,172 (3.3%)     Mike Robinson           13,422 (30.3%)
Dennis Hayashi             7,960 (22.8%)     Audra Strickland      15,817 (35.8%)        AD 68 (Ken Maddox’ seat) REP
Henry Manayan              4,930 (14.0%)                                                 Mark Leyes                 14,781 (43.7%)
Tom Pico9,794                      (28.0%)   AD 47 (Herb Wesson’s seat) DEM              Van Tran                19,020 (56.3%)
Alberto Torrico         11,148 (31.9%)       Karen Bass            23,561 (48.1%)
                                             David Cooper               1,177 (2.4%)     AD 69 (Lou Correa’s seat) DEM
AD 21 (Joe Simitian’s seat) DEM              Richard Groper           4,912 (10.0%)      Claudia Alvarez             7,057 (48.8%)
John Barton                6,755 (14.4%)     Nate Holden             10,194 (20.8%)      Tom Umberg                7,384 (51.2%)
John Carcione             17,075 (36.6%)     Rickey Ivie              9,174 (18.7%)
Barbara Nesbet             5,419 (11.6%)                                                 AD 70 (John Campbell’s seat) REP
Ira Ruskin              17,417 (37.4%)       AD 50 (Marco Firebaugh’s seat) DEM          Cristi Cristich            12,684 (26.6%)
                                             Hector Chacon              4,089 (3.9%)     Chuck DeVore            22,122 (46.3%)
AD 23 (Manny Diaz’ seat) DEM                 Xavier Reyes               1,738 (0.1%)
Joe Coto                 9,806 (43.5%)       Hector de la Torre 11,294 (66.0%)
Kathy C-Napoli             6,971 (30.9%)
Patricia M-Roach           3,095 (13.7%)
                                                                                                 ELECTION RESULTS CONTINUED ON PAGE 11
Khanh D. Tran              2,693 (11.9%)
CALIFORNIA MORTGAGE FINANCE NEWS                                                                                                    3
EXECUTIVE DIRECTOR'S LETTER



A Trade Group at its Best
BY SUSAN DEMARS, CMBA EXECUTIVE DIRECTOR


                              CMBA          Mortgage Originators Conference                On a housekeeping note, we
                       greeted the New      (May 7–9), we are pleased to host          want our membership to know that
                       Year with excit-     our Western States Secondary Market        recently, CMBA changed its fiscal year
                       ing programs for     Conference at the historical Westin        to November 1 through October 31.
                       our members          St. Francis Hotel in San Francisco         This change will allow for increased
                       and as always        (July 7–9), our Western States Loan        efficiencies in our leadership for future
                       an ongoing           Servicing Conference (August 8–10)         planning. Along with this change,
                       commitment to        and the Western States Commer-             CMBA will also change the member-
serve the real estate finance industry      cial Real Estate Finance Conference        ship dues cycle. In the past, dues
in California.                              (September 26–28) both at the Bel-         have run from June 1 through May 31.
    Representation before the Cali-         lagio Hotel in Las Vegas, and finally      This means that all current mem-
fornia State Legislature and regulatory     our Western States Legislative and         bers are paid through May 31, 2004.
agencies is one of our top priorities,      Regulatory Compliance Conference           Please note that when you receive
and as we enter the second year of the      (November 8) at the Sutton Place           your next membership dues statement
two-year legislative session we will be     Hotel in Newport Beach.                    you will be paying for the short cycle
focusing on issues of critical importance       We have two one-day seminars,          (through October 31, 2004), as well
to mortgage banking in California.          one in Northern California and one         as your next full year membership
    CMBA participated in a hearing          in Southern California, for our com-       which would bring your dues current
in the Assembly Banking Committee           mercial members that are aptly named       through October 31, 2005.
earlier this year to discuss the cir-       the “Deal Makers Forum”—watch for              To show our appreciation for
cumstances surrounding the licensing        the September dates and locations for      your continued support through these
and regulatory oversight of mortgage        these informational events on cutting      changes, CMBA will provide each
banking companies in our state. This        edge commercial issues.                    member company with a $200 gift
informational hearing stemmed from              While we strive to always have         certificate to be used towards registra-
the 2003 failure of two companies in        great speakers at our conferences, we      tion at CMBA conferences. With the
California. The goal of the Legislature     have a special guest speaker joining       help of membership dues, CMBA is
is to determine if proper mechanisms        us at our Western States Commercial        able to provide leadership on legisla-
are in place to protect consumers from      Real Estate Finance Conference in          tive and regulatory issues facing the
this happening in the future.               Las Vegas. Larry Sabato, Election          real estate finance industry, public
    In addition to monitoring our           Analyst and the Robert Kent Gooch          relations efforts, as well as educational
Legislative agenda, we are preparing        Professor of Government and Foreign        and networking opportunities at our
for a hot conference schedule this          Affairs at the University of Virginia      annual conferences.
year. We are quickly approaching our        will be our luncheon keynote speak-            We value your membership and
popular and well-attended conference        er. He will give a detailed overview       sincerely appreciate your continued
season offering the best overview of        of current political races in all states   support of CMBA, the only statewide
the mortgage industry in the Western        and at the national level. In a big        organization representing the resi-
states. In addition to our Legislative      election year, this is a speaker you       dential and commercial real estate
Day (March 16) and Western States           don’t want to miss!                        finance industry.                        •

4                                                                                                                     SPRING 2004
LEGAL UPDATE



Does a Complaint for
Fraudulent Transfer Support
a lis pendens on Real Property?
BY FRED TIMOTHY WINTERS, MANAGING PARTNER, MILES, BAUER, BERGSTROM & WINTERS, LLP,
IN-HOUSE COUNSEL FOR PROFESSIONAL LENDERS ALLIANCE, LLC,CMBA MEMBER


    Debtors trying to remain one step      “actual intent to hinder, delay, or            record a lis pendens are rather strict,
ahead of their creditors are often un-     defraud any creditor of the debtor,”           because of the potential for abuse of
able to resist the temptation to “gift”    whether the transfer leaves the debt-          the procedure. The California Court
away their real property to a close        or insolvent, and whether the transfer         of Appeal recently summarized the
family member in order to prevent the      was made without the debtor receiv-            problem as follows:
creditors from reaching the property.      ing “a reasonably equivalent value in          A notice of lis pendens is easily recorded,
Anyone connected with real property        exchange for the transfer” [as in the          immediately clouding the title to the
title or financing work in California      “gift” situation].                             property and preventing its transfer...As
has encountered such deeds, which              The remedies of a creditor under           a result of the historic growth in secured
recite that they are a “bonafide gift”     the UFTA are many, including in ap-            real property financing and the now nearly
and that no consideration was given        propriate circumstances the ability to         universal use of title insurance to insure
for the transfer.                          reach the transferred asset by prejudg-        title, the recordation of a lis pendens gives
    In fact, these are often sham trans-   ment attachment or by post-judgment            a claimant a de facto, if not a de jure,
actions in which the debtor-transferor     levy of execution, and by obtaining a          provisional remedy. The cloud created
retains actual control, use and enjoy-     money judgment against a transferee            on title generally precludes either sale or
ment of the real property while shield-    who cooperated with the debtor-                encumbrance of the affected property for
ing the property from the legitimate       transferor in the fraudulent scheme.           the duration of the action. The lis pendens
claims of the creditor.                        Fraudulent transfers may involve           procedure has been criticized because of its
    Creditors have a variety of tools      personal property or real estate, but          obvious potential for abuse. The financial
to combat this practice and to reach       where they involve the latter, the credi-      pressure created by an improperly recorded
the equity in the real property, to ap-    tor naturally wishes to warn “the world”       lis pendens can force settlement of ground-
ply that equity toward the debt. The       of the creditor’s claim to the property,       less suits without subjecting the recording
most common such tool is a lawsuit         and to prevent further alienation of the       party to the requirement for posting attach-
against both the debtor and the trans-     property, and the easiest way to do this       ment bonds. Kirkeby v. Superior Court
feree, under the Uniform Fraudulent        is to record in the chain of title a “Notice   (2003) 135 Cal.Rptr.2d 861. [Internal
Transfer Act (“UFTA”), which in Cali-      of Pendency of Action,” more com-              citations and quotations omitted].
fornia is codified at California Civil     monly known as a lis pendens.                       Let us for the sake of argument
Code Section 3439 et seq.                      A lis pendens warns anyone                 concede that the court has a legitimate
    The UFTA provides various tests        searching the title that the creditor          interest in curbing “groundless suits.”
for determining whether a particular       has a claim, and it prevents a new             Bogus lawsuits are a concern to ev-
transfer is “fraudulent” as to credi-      buyer or lender from claiming igno-            eryone, as any institutional lender or
tors, which include such factors as        rance of the creditor’s claims. But            creditor can attest, given the plethora
whether the transfer was made with         the rules surrounding when one may
                                                                                                      A LIS PENDENS CONTINUED ON PAGE 11


CALIFORNIA MORTGAGE FINANCE NEWS                                                                                                          5
OPINION



Complex Solutions in
Mortgage Banking
BY BOB FICKAS, PRESIDENT OF LOAN DNA FINANCIAL NETWORK, INC, CMBA MEMBER


    I finally made the commitment to          increased productivity and presented
buy a digital camera. I could no longer       significant new opportunities for those
resist the temptation. My patience for        who utilize these technologies. Credit
better technology or lower prices was         scoring, automated underwriting, and
gone. The basic premise is so compel-         risk based pricing are all evolutionary
ling: instant pictures, keep only the         steps in mortgage industry technology.
ones you like, print them on your own             It is crystal clear that technol-
printer and e-mail as many as you             ogy has and will continue to change              CMBA would like
want. The concept is fine, so which           the way we do business. What is
                                                                                               to thank the 2003
camera should I buy?                          not so clear is how to make prudent
    It was not long before I realized         decisions that actually improve our
                                                                                              President’s Council
that selecting a digital camera was           operation and avoid “technology for              for their support:
similar to the process of keeping up          technology’s sake” solutions that are
with technology in the mortgage busi-         more trouble than they are worth.                  Fannie Mae
ness. Good concepts—lots of choices.              New technology is no guarantee of                   Executive Member
    The old adage “I want to take a           an improved process. Sometimes it is
picture, not build a camera” seems            quite the opposite. In the mortgage in-           Countywide
particularly appropriate. Just like the       dustry we have been told for years how               Credit
advances in digital photography, the          the “latest and greatest”, “must have”             Industries
technology/information evolution of           technologies are going to revolutionize
the last few years has had a dramatic         our business. Throw in slick advertis-             Bankers
effect on the way we originate mort-          ing campaigns and smooth marketers,
                                                                                                Insurance
gage loans. Advances in automated             who talk technology, not mortgages
processing, on-line communications            and the task becomes a huge challenge.
                                                                                               Service Corp.
and database management have                       COMPLEX SOLUTIONS CONTINUED ON PAGE 12




    NEW MEMBERS



    Welcome New Members to the CMBA Family
          Dan Cook, Realtor                        Sea Financial Group, Inc.                Home Savings Mortgage
          Forlini Capital Group                    SMA                                      MERS
          Gerson Law Firm APC                      Smart Rate Direct. Com, Inc.             White House Properties
          McDonough Holland & Allen P.C.           Realty Trac, Inc.                        Vital Signing, Inc.
          Rich Barron Financial Group, Inc.        Fullerton Community Bank




6                                                                                                                        SPRING 2004
RESIDENTIAL UPDATE



Mortgage Bankers can Expect
Moderation of Rates in 2004 for
Professional Insurance Coverage’s
BY LEE BRODSKY, MANAGING DIRECTOR, BANKERS INSURANCE SERVICE, CMBA MEMBER


    Insurance rates for many industry        tions and servicing portfolio are about    creases. If your staff, branches, origina-
segments have begun to moderate, in          the same size, the bond increase will      tions or servicing portfolio have grown,
that increases are lower than the past       track market rates, depending on           which may cause you to raise your
several years. Since mortgage bank-          individual financial performance as        limits, consider raising the deductible
ers are a part of the larger insurance       well as claims activity. However, if       at the same time. This may help offset
universe, they may benefit from the          these factors increased, as was quite      part of the premium increase.
affects of the rest of the market. Over      likely in 2003, this will further im-          You might be tempted to consider
the past couple of years we have been        pact the ultimate premium charged.         lowering your limit (making sure it
experiencing a “hard” insurance mar-         For example, if a mortgage banker’s        remains above the minimum E&O and
ket, which means prices are high and         originations increased 50 percent over     fidelity limits required by the second-
capacity is limited. However, in 2004        the prior year coupled with an average     ary market or warehouse lenders).
mortgage bankers will start to see some      rate increase in the 15 percent range,     But this could be especially risky right
moderation in their insurance rates.         this might result in a 25 percent to 30    now and not suggested as claims tend
    Mortgage bankers in the MBA-             percent increase in ultimate premium.      to increase following a bull mortgage
endorsed Mortgage Bankers Bond                   Claims activity has been increas-      banking market. Losses in excess of
program are faring better than other         ing over the last few years with the       your limit could also seriously affect
businesses and even other financial          growth in originations. This greatly       the health of your company or put
institutions as a group. On average,         impacts the premium paid by mort-          your firm out of business.
Mortgage Bankers Bond rates have             gage bankers due to definition of              In either soft or hard markets, it’s
only increased in the 15 percent range.      insurance: the small certain premiums      a good idea to seek insurance expertise
    In addition to the current insur-        of the many pay for the large uncer-       from those with experience in mort-
ance market conditions, growth in a          tain financial losses of the few.          gage banking insurance. Find someone
mortgage banker’s origination vol-               The good news for current fore-        who understands mortgage banking
ume will also factor into the ultimate       casts is that hard insurance may be        and who can offer your firm appropri-
premium that is charged. In 2003 we          coming to an end. New capital has          ate risk management choices.              •
saw a record mortgage banking year:          been moving into the insurance market          Lee Brodsky is Managing Director
$3.8 trillion in residential originations.   and as more capital enters the insurance   of national accounts & associations at
That’s nearly a 50 percent increase          market, the rate increases will slow       Bankers Insurance Service, a division
from the 2002 volume of $2.6 trillion.       down and eventually start to reverse.      of Financial & Professional Risk Solu-
An increase in a mortgage banker’s           It’s a matter of supply and demand.        tions, Inc. He has been working with
business, in addition to the insur-              In the meantime, although rates        mortgage bankers on their insurance
ance market changes, will also impact        are starting to see some moderation,       programs for over 25 years. Bankers In-

insurance premiums.                          there are some measures you can take       surance Service specializes in insurance
                                                                                        for mortgage lending operations.
    If a firm’s staff, branches, origina-    now to balance out any premium in-


CALIFORNIA MORTGAGE FINANCE NEWS                                                                                                   7
RESIDENTIAL UPDATE



Fannie Mae and Local Mortgage
Lenders Will Create 6 Million New
Homeowners Throughout America
BY MICHAEL CARROLL, DIRECTOR, CENTRAL VALLEY PARTNERSHIP OFFICE, FANNIE MAE, CMBA MEMBER


    Mortgage lenders now have great-      force housing in high cost markets,      alizes what is fast becoming accepted
er support to help meet the needs of      among other things.                      across the housing industry (and by
more customers through an ambitious           Robert M. Couch, Chairman of         mortgage lenders), that serving emerg-
new national effort by Fannie Mae. To     the Mortgage Bankers Association,        ing markets is key to success in the
better impact underserved populations,    helped announce the new plan, stat-      industry’s future. Fannie Mae’s mis-
we recently unveiled a new business       ing, “Our members are proud to be        sion to tear down barriers and increase
plan, Expanding the American Dream        mortgage bankers. We take tremen-        affordable homeownership opportuni-
Commitment, and will pursue a range       dous pride in having helped millions     ties is one shared with lenders. Our
of creative initiatives to increase the   of American families and individuals     Expanding the American Dream Com-
minority homeownership rate to 55%,       become homeowners or lower their         mitment plan will undertake a number
helping six million families—including    mortgage costs by directly providing     of steps to help mortgage lenders
1.8 million minority families—become      the financing that enables them to       reach out and serve more first-time
first time homeowners over the next       achieve the American Dream.”             home buyers. These steps include:
ten years, and address issues of work-        Our new business plan institution-   •   Making three to five percent down
                                                                                       payment mortgages more available


      www.cmba.com
                                                                                       nationwide, and continue making
                                                                                       down payments even lower;
                                                                                   •   Increasing the minority hom-
                                                                                       eownership rate to 55 percent;
                                                                                   •   Creating six million new first-
                                                                                       time homebuyers;
                                                                                   •   Cutting $500 from the cost of
                                                                                       processing a mortgage application,
                                                                                       while driving toward a totally
                                                                                       paperless mortgage process.
                                                                                   •   Making affordable mortgage
         THE INFORMATION YOU NEED IS                                                   financing available to teachers,
              FINALLY ON THE WEB                                                       police, firefighters and other public
                                                                                       servants so they can afford to own
                                                                                       a home in communities they serve.
    We look forward to your visit at www.cmba.com and hope
                                                                                       Everyone benefits from expanding
     you’ll use it in the future as your number one resource for                   homeownership. Numerous studies
                                                                                   all reach the same conclusion: hom-
                legislative, regulatory and industry news.
                                                                                            NEW COMPANY CONTINUED ON PAGE 12


8                                                                                                                 SPRING 2004
FINANCIALLY FIT CONTINUED FROM PAGE 1

     Hopefully, Financial Fitness will      State Capitol for this unique, hands-on      will host a CAMPAC (California As-
serve as a model for a handful of           opportunity. You can register online         sociation Mortgage Political Action
other school districts throughout the       by visiting the Conference page of our       Committee) Golf Tournament at the
state. CMBA gives special thanks to         Web site at www.cmba.com.                    Talega Golf Club in San Clemente.
our members Fannie Mae and Central              CMBA would like to thank Green-          Proceeds from this tournament will
Pacific Mortgage for their generous         Point Mortgage, MortgageTree Lend-           benefit our political action committee.
financial support to make this event        ing, and Central Pacific Mortgage for        Come out for a great day of golf on a
a success. This is a prime example of       serving as our sponsors for this event.      beautiful course and support our po-
CMBA member organizations show-                                                          litical efforts in California. For more
ing dedication to their communities.        Don’t Miss the Opportunity                   information on these and other CMBA
     Speaking of Central Pacific Mort-          It’s that time of year again. After      events, please visit our Web site.
gage, President/CEO John Courson            a Legislative Day, CMBA’s six month
and past CMBA President was ap-             conference season begins again start-        A New Day
pointed by Gov. Schwarzenegger as           ing with our Western States Mortgage             On another note, I think most of you
Chairman of the California Housing          Originators Conference & Expo in May         would agree that 2004 is looking brighter.
Finance Agency. CMBA wishes to              5–7. It will be held at the Laguna Cliff’s       The economy has been showing
congratulate John on his new appoint-       Marriott Resort & Spa in sunny Dana          “impressive gains,” Federal Chairman
ment. We look forward to continue           Point along Southern California’s coast.     Alan Greenspan reported last month
working with John and the agency to             We are honored to have the               (February). The economic picture has
represent our industry and make a dif-      participation of some of our industry’s      brightened since summer with the econ-
ference in its ability to thrive.           key leaders. Angelo Mozilo of Coun-          omy growing at an average rate of 6.1
                                            trywide Home Loans, John Courson of          percent in the second half of 2003, the
A Legislative Day                           Central Pacific Mortgage and former          fastest back-to-back quarterly increases
     Time is running out. If you            MBA Chairman, and Mike Perry of              since the first two quarters of 1984.
haven’t registered yet for CMBA’s Leg-      IndyMac Bank will start us off with              So far, the commercial and mul-
islative Day happening in Sacramento        their insight on the future of the indus-    tifamily mortgage markets have been
Tuesday, March 16, we encourage             try. Barry Habib of Mortgage Market          helped considerably by an improving
our members to hurry and sign up. A         Guide will also share his experience on      economy. Apartment markets in the
Legislative Day helps California Legis-     how to be successful in the mortgage         high-priced housing markets of South-
lators learn more about our profession      banking industry. Our program is             ern California are thriving—actually,
and to discuss upcoming real estate fi-     geared towards mortgage originators.         they are sizzling. While rents have
nance issues with them. The purpose             Among our topics, we will be cov-        increased in all West Coast markets
of our Legislative Day is to increase       ering hot new industry products, con-        in recent years, rental units are in
policymaker’s awareness of our indus-       struction loans, creating efficiencies as    more demand in Southern California,
try and the valuable contributions we       you grow your business and working           including San Diego.
make to the state’s economy.                efficiently with underwriters to get             But even with these signs of a
     This year’s Legislative Day is         those loans through. Don’t miss this         strengthening economy, there is a bit
particularly important, since we have       opportunity to learn from the pros!          of uncertainty about what 2004 will
several legislation issues that arose in        It’s a big election year, and CMBA       bring for the mortgage industry. Gen-
2003, and are still pending such as elec-   needs to position itself in 2004 as          eral consensus is that the rebound in
tronic recording, predatory lending,        taking an active stance on important         the U.S. economy will create higher
privacy and unfair business practices—      legislative races throughout the state.      interest rates. What do you think?
Business and Professions Code Section       Immediately following the Originators        Mortgage Bankers will just have to
17200. We hope you’ll join us at the        conference on Friday, May 9, CMBA            wait and see what happens.                •
CALIFORNIA MORTGAGE FINANCE NEWS                                                                                                    9
PRIMARY ELECTION CONTINUED FROM PAGE 2

budget process by requiring the state     achieved at the last election. On the    and smooth out the recovery of the
to maintain a budget reserve and by       other hand, three moderate Assem-        State’s financial condition.
establishing a mechanism to allow the     bly Democrats left office because of         Although investors traditionally
Legislature and the Governor to fix       term limits and three new moderates      have supported California bond secu-
out-of-balance budgets in mid-year.       were elected. When the dust settled,     rities, there are some risks:
                                          the biggest overall winner in legisla-   •   A legal challenge to the election
Legislative Candidates                    tive races was organized labor.              or the proposition itself, would
     Since the last redistricting,            In the State Senate, the two             delay the bond sale. This would
California’s primary elections have       contested races did not change the           necessitate the extension of some
been far more competitive than the        make-up of this already liberal body.        of the $14 billion in short-term
general elections. The highly parti-      The big question facing the Demo-            notes that come due in June 2004.
san design of the current legislative     cratic majority will be what direction   •   Others may challenge the redi-
districts means that only a small         they go in choosing new leader-              rection of the quarter-cent sales
handful of Assembly districts will be     ship—replacing termed-out leader             tax from local government to the
competitive in November—and no            John Burton with another liberal such        payment of the bonds. This chal-
Senate districts will be up for grabs.    as Sheila Kuehl or Martha Escutia, or        lenge alone wouldn’t shut down
     Independent action committees,       turning to a more moderate Demo-             the sale of the bonds, but it could
not formally allied with any named        crat such as Don Perata?                     reduce their marketability and
candidates, played a large part in            On the Republican side, the              make them more expensive.
these elections and are likely to play    conservative wing of the party sup-      •   At $15 billion, some believe the
an even larger role in the years to       ported candidates against the more           sheer size of the sale—the largest
come. Moreover, the poisonous mix         moderate wing of the party. In the           sale of state bonds in history—
of gerrymandered legislative districts,   race for the nomination to challenge         will at best make the bonds more
low voter turnout, closed primaries       incumbent Barbara Boxer for her U.S.         expensive or even exceed the
and enormous spending and get-            Senate seat, former California Sec-          market’s demand. To increase
out-the-vote efforts by liberal and       retary of State Bill Jones, supported        demand the State may have to
conservative constituencies resulted      by Republican moderates, defeated            offer higher interest rates making
in Democratic nominees of an even         Rosario Marin and conservative               the bonds more expensive to pay
more liberal cast and more conserva-      Howard Kaloogian. In the Assembly,           off. The Treasurer is reviewing
tive Republican nominees as well.         meanwhile, conservative Republicans          techniques to break the sale into
As a result, even though the state-       won the vast majority of contested           a series of bonds that offer dif-
wide electorate clearly votes “moder-     primary elections.                           ferent features that may increase
ate,” the primaries have been increas-                                                 demand. Another alternative is
ingly dominated by the left and right     What’s Next for State Finance?               to extend some of the short term
extremes of both parties.                     Currently, the State Treasurer           borrowing into July and break up
     On the Democratic side, for ex-      plans to sell the Proposition 57             the sale of the new bonds into
ample, the contested districts pitted     bonds in a single transaction at the         several pieces to be sold over
the trial lawyers supporting the liber-   beginning of June to finance ap-             June and July.
al wing of the party against the more     proximately $11 billion in deficits          Obviously, with the State’s ongo-
business-oriented “moderate” caucus.      generated over the last three fiscal     ing financial crisis, the market may
This year, the liberal faction held off   years. The remainder of the bonds        have a concern about the credit qual-
numerous challenges from moder-           will be used to help balance the
ates, and maintained the gains they       budget for the 2004–2005 fiscal year
                                                                                   ity of the bonds.                       •

10                                                                                                                 SPRING 2004
ELECTION RESULTS CONTINUED FROM PAGE 3

AD 73 (Patricia Bates’ seat) REP             AD 76 (Christine Kehoe’s seat) DEM            AD 78          (Shirley Horton’s seat) REP
Jim Gibson                  13,099 (29.0%)   Vince Hall                11,646 (31.1%)      Patty Davis            12,533 (41.7%)
Mimi Walters             18,839 (41.8%)      Lori Saldana            15,331 (40.9%)        Arlie Ricasa                8,916 (29.6%)
Tom Wilson                  13,228 (29.2%)   Heidi von Szeliski        10,524 (28.0%)      Maxine Sherard              8,666 (28.7%)



A LIS PENDENS CONTINUED FROM PAGE 5

of baseless “wrongful foreclosure” ac-       real property to avoid creditors would        that safeguards already exist, in that
tions by borrowers who have default-         fall squarely within this definition.         the party recording the lis pendens
ed but want to blame someone else                Yet some California courts are            must, if challenged, show the “prob-
for their shortcomings, or the many          uncomfortable with that idea. There           able validity” of his underlying claim.
nuisance “Fair Debt Collection Practic-      is a line of cases which holds that               The signal the Kirkeby Court was
es Act” suits brought by hack lawyers        where the gist of the claim is simply         giving is that if you sue to enforce an
out for quick buck, or by what passes        for money damages, then requests              ownership right in property, you may
for the “class action bar,” a coterie of     in the pleading for the court to rule         record a lis pendens, but if you sue
jaded and cynical sociopaths out for a       that the debtor’s transferee holds the        to enforce a lien right (such as judg-
quick million bucks.                         property in a “constructive” or implied       ment lien), watch out. All is not lost,
    But what about the honest credi-         trust for the creditor do not support         however. Fortunately, the California
tor who has not a “groundless suit”          the lis pendens.                              Supreme Court has stepped in and
but a meritorious claim, confronted by           The rule is the same with claims          agreed to review the Kirkeby decision,
the debtor who conveniently transfers        that the creditor has an “equitable           so for now, creditors asserting legiti-
away the title to his real property just     lien” on the property. Examples of            mate fraudulent conveyance claims
days before suit is filed or days before     these cases are Urez Corp. v. Superior        in the Fourth Appellate District of
the creditor’s abstract of judgment is       Court (1987) 190 Cal.App.3d 1141 and          California may arguably continue to
recorded? Creditors in these situa-          La Paglia v. Superior Court (1989) 215        employ the lis pendens in appropriate
tions have every reason to want to tie       Cal.App.3d 1322, where lis pendens            circumstances, as they seek to cloud
up the property until a court can order      were expunged because the creditor            title to fraudulently transferred proper-
it sold to pay the debt. These credi-        himself did not claim an ownership            ty. One may hope that the California
tors have a legitimate need for a quick      interest in the property. Against this        Supreme Court will look with favor
and easy way to prevent the transferee       line of cases, the plaintiff in Kirkeby ar-   upon the legitimate needs of creditors,
from transferring the property a sec-        gued that her allegations of fraudulent       and not deprive them of the use of this
ond or third time.                           conveyance of the real property by defi-      most potent tool in fraudulent transfer
    The courts and legislature in Cali-      nition “affect title to the real property”    actions, the lis pendens.                 •
fornia have struggled with these com-        and support the lis pendens, relying              Fred Timothy Winters is a principal
peting interests over the years. The         on Hunting World, Inc. v. Superior Court      with Miles, Bauer, Bergstrom & Winters,
current version of the Code states that      (1994) 22 Cal.App.4th 67.                     LLP, a law firm with offices in Costa
a lis pendens is allowed if the Plaintiff        Surprisingly, the Fourth Appel-           Mesa, California and Las Vegas, Ne-
asserts “a real property claim,” which       late District of the California Court of      vada. He is a 1979 graduate of Loyola
is defined in relevant part as “the cause    Appeal disagreed with Ms. Kirkeby,            Law School of Los Angeles, and admit-
or causes of action in a pleading which      choosing to view the notion of what           ted to practice in California before the

would, if meritorious, affect...title to,    constitutes a “real property claim”           state and federal courts. His practice
                                                                                           focuses on representation of residential
or the right to possession of, specific      very narrowly. The Court emphasized
                                                                                           lenders and other creditors, secured
real property...” One would think that a     the dangers of abuse in the lis pendens
                                                                                           and unsecured, in litigation.
claim that the debtor transferred title to   process, while minimizing the fact

CALIFORNIA MORTGAGE FINANCE NEWS                                                                                                     11
COMPLEX SOLUTIONS CONTINUED FROM PAGE 6

     We all want interactive web sites,          process and your business goals,           And above all: if you can’t identify
instant underwriting and pricing and al-         not the technology. Stick to the      the specific benefit of a new technol-
most anything that reduces the crush of          original premise: What am I trying    ogy, stay with what you are doing
paperwork. What we don’t want is to              to achieve? Does this technology      until you can.                            •
become computer engineers, expand IT             do it for me?                              Bob Fickas is President of LoanDNA
staffs and disrupt our business merely       •   Start the process with the original   Financial Network, Inc., a Los Angeles
to understand and evaluate the options.          premise and work “backwards” to       based lender. Bob has twenty plus
     Buying the wrong technology for             the appropriate decision.             years experience as a senior manager in
your business can be catastrophic. To        •   Don’t fall in love with the “gee      the mortgage and capital markets. He
avoid the technology “bloat” of need-            whiz” features.                       has been an early adapter in integrat-
lessly complex solutions you need to         •   Be skeptical of vendors and com-      ing technologies with mortgage analyt-

prepare for the marketing avalanche.             petitors who say “you can’t live      ics and the origination process.

•    Focus on the decision-making                without it”.

NEW COMPANY CONTINUED FROM PAGE 8

eownership benefits not just the home        ing a home is the single most power-      the American Dream, and we believe
owning families, but also their commu-       ful way most families in America can      all Americans deserve a chance to see
nities, the economy and the nation as        build equity wealth for the future.       it come true.                             •
a whole. Neighborhoods of predomi-               America has the best housing               Michael Carroll is the director of
nantly homeowners tend to thrive and         finance system in the world. Fannie       Fannie Mae Central Valley Partnership
be safer and healthier for families and      Mae is going to make it even better       Office, based in Sacramento and serving
children. The expansion of homeown-          by helping our partners create more       a 32-country geographic area. He and
ership fuels the economy, not just by        first-time homeowners, particularly       his team are responsible for implement-
creating jobs and commerce in the            among families who have never had         ing a five-year, $20 billion affordable
housing sector, but also because own-        the chance. Owning a home is called       housing plan for the Central Valley.




     2004 Calendar                                                                 SAVE THE DATE!
     CALENDAR




     March 16, 2004                                                August 8–10, 2004
     CMBA Legislative Day                                          9th Annual Western States
     Hyatt Regency Sacramento & California State Captiol,          Loan Servicing Conference
     Sacramento, CA                                                Bellagio Hotel, Las Vegas, NV

     May 5–7, 2004                                                 September 26–28, 2004
     Western States Mortgage Originators                           7th Annual Western States
     Conference & Expo                                             Commercial Real Estate Finance Conference
     Laguna Cliffs Marriott Resort & Spa, Dana Point, CA           Bellagio Hotel, Las Vegas, NV

     May 7, 2004                                                   November 8, 2004
     CMBA CAMPAC Golf Tournament                                   Western States Legislative Regulatory &
     Talega Golf Club, San Clemente, CA                            Compliance Conference
                                                                   Sutton Place Hotel, Newport Beach, CA
     July 7–9, 2004
     32nd Annual Western
     Secondary Market Conference
     Westin St. Francis, San Francisco, CA




12                                                                                                                     SPRING 2004

				
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