mortgage market meltdown v2

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  • 1. Mortgage Market Meltdown What it Means to You [Your Full Name] [Your Company Name]

2. Perfect Storm Mortgage Market Meltdown 3. 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 cant pay it back

Mortgage Market Meltdown 4. 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 dont want them!
    • If I take them Ill pay you less!
    • American Home & others cant cover losses

Mortgage Market Meltdown 5. 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 6. Whats Next For Real Estate

  • Fewer potential buyers
  • Increasing inventory
  • Increasing foreclosures
  • Increased pricing pressure

Mortgage Market Meltdown 7. Borrowers Who Are Impacted

  • Caught in contagion: Non-Conforming
    • Stated income/asset borrowers Alt-A
    • No-doc Loans
  • Still free to roam: Conforming and Govt
    • Vanilla Fannie Mae: Full-doc type
    • Some stated deals still exist
    • FHA & VA
    • Dont get too comfortable

Mortgage Market Meltdown 8. Critical Question Mortgage Market Meltdown What would your life be like if you closed 50% fewer deals in the next twelve months? 9. It Doesnt Have to Be This Way

  • There are opportunities
  • Sellers
  • Buyers & Investors

Mortgage Market Meltdown 10. 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 11. 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 12. 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 13. Full Doc is Back With a Vengeance

  • Many lenders have killed Stated/No Doc
  • Where available, its more expensive
  • Provable income, assets, and good credit

Mortgage Market Meltdown 14. 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

Mortgage Market Meltdown 15. Future Possibilities

  • Subprime was 12.75% of all 2006 loans
  • There is still massive opportunity here!
  • Keep your head up

Mortgage Market Meltdown 16. 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
    • Dont be a cab driver
    • Real Estate investors: Cultivate relationships

Mortgage Market Meltdown 17. 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

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