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

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  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 Question What 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