mortgage market meltdown v2

Mortgage Market Meltdown

What it Means to You

[Your Full Name][Your Company Name]


Perfect Storm


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…


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


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


What’s Next For Real Estate

Fewer potential buyers

Increasing inventory

Increasing foreclosures

Increased pricing pressure


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


Critical QuestionWhat would your life be like if you closed 50% fewer deals in

the next twelve months?


It Doesn’t Have to Be This Way

There are opportunities

Sellers

Buyers & Investors


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


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


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


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


Partnerships Are Critical

Not the time to refer three lenders!

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


Future Possibilities

Subprime was 12.75% of all 2006 loans

There is still massive opportunity here!

Keep your head up


Profit Looms for the Prepared

Sellers Educate sellers for realistic prices Due diligence for buyers Decrease marketing times Prepare sellers to be buyers: Pre-approve them

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


Next Steps

Seller Action Meetings Inform Risk analysis meeting involving lender Assess willingness to navigate waters Promote aggressively to buyers agents

Buyer Action Meetings Inform Pre-approve with mortgage lender Direct towards realistic sellers Continually communicate with other listing agents

mortgage market meltdown v2

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