Mortgage Market Meltdown

What it Means to You

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Mortgage Market Meltdown

Perfect Storm

Mortgage Market Meltdown

Key Determining Factors

Subprime and Alt-A Lending

Alt-A consists of reduced and No-Doc

Accounted for 40%-70% of loans in 2005-06

Investor appetite brings loose underwriting Everybody gets a loan

Liquidity crisis hits subprime December ’06 Maybe everybody can’t pay it back…

Mortgage Market Meltdown

The Role of Mortgage-Backed Securities

Most loans are sold as securities

Investors accept risk with reward

Delinquencies mount; risk outweighs reward Keep your loans – we don’t want them! If I take them – I’ll pay you less! American Home & others can’t cover losses

Mortgage Market Meltdown

Results

Underwriting guidelines based on historical data, including rising prices

Consumer maxed-out and unable to repay

No more equity to support spending habits

“Officer and a Gentleman” loans

Mortgage Market Meltdown

What’s Next For Real Estate

Fewer potential buyers

Increasing inventory

Increasing foreclosures

Increased pricing pressure

Mortgage Market Meltdown

Borrowers Who Are Impacted

Caught in contagion: Non-Conforming Stated income/asset borrowers Alt-A No-doc Loans

Still free to roam: Conforming and Gov’t Vanilla Fannie Mae: Full-doc type Some stated deals still exist FHA & VA Don’t get too comfortable

Mortgage Market Meltdown

Critical QuestionWhat would your life be like if

you didn’t sell your home in the next 12 months?

Mortgage Market Meltdown

It Doesn’t Have to Be This Way

There are opportunities

Sellers

Buyers & Investors

Mortgage Market Meltdown

Action Steps for Sellers

Get real about price

Consider seller-held seconds

Beware of the non pre-approved buyer

Get your financial house in order

Mortgage Market Meltdown

Action Steps for Buyers

100% financing programs have seen severe cutbacks

PMI: not so bad & possibly deductible

Get your credit in order

Get your docs in order Tax returns, bank statements, pay stubs

Mortgage Market Meltdown

Not a Buyer or Seller Just Yet?

Still critical to make sure credit is in order now

Allows time to fix anything before you do become a buyer

Make sure you know what kind of loan you have now – grab your closing docs and review with trusted mortgage professional

Mortgage Market Meltdown

FICO Scores Rule the Land

720, 680, and 620 scores.That means exceptions (and Elvis)have left the building

Credit repair is paramount

Routine credit monitoring – annual review Start credit review process 3-6 months in

advance

Mortgage Market Meltdown

Full Doc is Back With a Vengeance

Many lenders have killed Stated/No Doc

Where available, it’s more expensive

Provable income, assets, and good credit

Mortgage Market Meltdown

Partnerships Are Critical

Not the time to shop lenders!

You need one “go-to” lender Wide array of available product Expert in underwriting “Credit analysis and repair” partnerships Local and accountable

Mortgage Market Meltdown

Future Possibilities

Subprime was 12.75% of all 2006 loans

There is still massive opportunity here!

Keep your head up

Mortgage Market Meltdown

Get Prepared

Sellers Choose the right Realtor! Educated sellers set realistic prices Get your house in order – Best Shape/Right Price Work only with Pre-Approved Buyers

Buyers Due diligence Don’t be a cab driver Real Estate investors: Cultivate relationships

Mortgage Market Meltdown

Next Steps

Seller Action Meetings Expect Realtor to provide realistic information –

you may not like what you’ll hear Risk analysis meeting involving lender How willing are you to navigate troubled waters? Demand Realtor to promote your home to

aggressive Buyers Agents

Buyer Action Meetings Pick the right lender Get pre-approved not pre-qualified Be realistic with sellers Have your Realtor aggressively promote you to

other selling agents