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  • Slide 1
  • Mortgage Market Meltdown What it Means to You Presented to you by: Billy Campbell Mortgage Planner/President Alpine Equity Group Sponsored by
  • Slide 2
  • Mortgage Market Meltdown Perfect Storm
  • Slide 3
  • Mortgage Market Meltdown The Basics: Primary Mortgage Market: Lender deals directly with the borrower for underwriting (risk analysis to determine if the loan should be made), and origination of the loan (direct interaction with the borrower) Secondary Mortgage Market: Mortgage Loans and securities backed by mortgage loans are sold to investors, for inclusion as part of an investors portfolio assets (ie. like a mutual fund, their assets could comprise various stocks and bonds, some of which are mortgage backed securities)
  • Slide 4
  • How the Mortgage Market works Borrower Mortgage Professional Lender Borrowed moneys from investors
  • Slide 5
  • How the Mortgage Market works Rating Agency Lender Bought by investors Mortgage Backed Securities
  • Slide 6
  • Mortgage Market Meltdown History/ Major developments Prior to 1930s, no organized secondary market Great Depression sparks President Roosevelt's New Deal program 1934 Federal Housing Administration (FHA) Promote 30 year fixed rate mortgage 1938 Federal National Mortgage Association (Fannie Mae) Created to purchase FHA loans
  • Slide 7
  • Mortgage Market Meltdown History/ Major developments Huge surge in growth in the secondary market after WWII Great demand for VA loans Larger demand for long term investments by pension funds and life insurance companies 1970 congress creates Federal Home Loan Mortgage Corporation Stems development of PMI and MGIC
  • Slide 8
  • 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 cant pay it back
  • Slide 9
  • 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 dont want them! If I take them Ill pay you less! American Home & others cant cover losses
  • Slide 10
  • Mortgage Market Meltdown Results Slow Down in Real Estate Market 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
  • Slide 11
  • The Straw and the Camel Rating Agency Lender Bought by investors Mortgage Backed Securities
  • Slide 12
  • How the Mortgage Market works Borrower Mortgage Professional Lender Borrowed moneys from investors
  • Slide 13
  • Mortgage Market Meltdown Whats Next For Real Estate Fewer potential buyers Increasing inventory Increasing foreclosures Increased pricing pressure
  • Slide 14
  • 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 Govt Vanilla Fannie Mae: Full-doc type Some stated deals still exist FHA & VA Dont get too comfortable
  • Slide 15
  • Mortgage Market Meltdown What would your life be like if you closed 50% fewer deals in the next twelve months?
  • Slide 16
  • Mortgage Market Meltdown It Doesnt Have to Be This Way There are opportunities Sellers Buyers & Investors
  • Slide 17
  • 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
  • Slide 18
  • 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
  • Slide 19
  • 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
  • Slide 20
  • Mortgage Market Meltdown FICO Scores Rule the Land How To Monitor Your Credit For Free www.annualcreditreport.com www.annualcreditreport.com Stagger your request and effectively monitor your credit 3 times per year for free! Or prior to receiving financing look at all 3 bureaus to get a more accurate picture
  • Slide 21
  • Mortgage Market Meltdown FICO Scores Rule the Land
  • Slide 22
  • Mortgage Market Meltdown FICO Scores Rule the Land Recency of Events Often the recency of an event is weighed much more heavily than the amount of money involved Example: a $40 dollar balance on an account that is currently 60 days late will be much more detrimental to your credit than a $4000 dollar collection that appeared on your credit report 4 years ago.
  • Slide 23
  • Mortgage Market Meltdown FICO Scores Rule the Land Reporting Dates Common Misconception: Paying off your credit card in full every month guarantees a top-notch score. Example: A small business owner pays for everything on his AMEX for his cash back rewards. He has a 10,000 dollar limit and typically puts about 9,000 dollars on his card by the end of the month. He pays it off IN FULL, on the 28 th before his due date of the 1 st. AMEX reports his card to the CRA s on the 24 th showing him at a max credit limit, therefore penalizing him in terms of his credit score even though he handles his debt very responsibly.
  • Slide 24
  • Mortgage Market Meltdown 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
  • Slide 25
  • Mortgage Market Meltdown Partnerships Are Critical Title company that values continuing education. 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
  • Slide 26
  • Mortgage Market Meltdown Future Possibilities Subprime was 12.75% of all 2006 loans There is still massive opportunity here! Keep your head up
  • Slide 27
  • Mortgage Market Meltdown 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
  • Slide 28
  • Mortgage Market Meltdown Profit Looms for the Prepared Sellers Make your sellers wear a buyers hat prior to setting the price with them Use Valuecheck from LandAmerica to show them Stage the home to highlight its unique selling properties Instead of conceding on price, work with your mortgage planner to create finance options that will sell the home faster Paying for first 6 months mortgage payments Or pay the discount points to offer a strategic 2-1 buy down option for potential buyers
  • Slide 29
  • Mortgage Market Meltdown Profit Looms for the Prepared Buyers For high LTV loans consider FHA with down- payment assistance programs or seller gift CHAC Genesis Foundation My Community vs. Home Possible Credit Education Lock and Shop!
  • Slide 30
  • Mortgage Market Meltdown 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

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