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 closed 50% fewer deals in the next twelve 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 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 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 Future Possibilities  Subprime was 12.75% of all 2006 loans  There is still massive opportunity here!  Keep your head up

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  Don’t be a cab driver  Real Estate investors: Cultivate relationships

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