Mortgage Market Meltdown V2

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  • Mortgage Market Meltdown V2

    1. 1. Mortgage Market Meltdown What it Means to You Jonathan Tafuri Agency Lending LLC
    2. 2. Perfect Storm Mortgage Market Meltdown
    3. 3. Key Determining Factors <ul><li>Subprime and Alt-A Lending </li></ul><ul><li>Alt-A consists of reduced and no-doc </li></ul><ul><li>Accounted for 40%-70% of loans in 2005-06 </li></ul><ul><li>Investor appetite brings loose underwriting </li></ul><ul><ul><li>Everybody gets a loan </li></ul></ul><ul><li>Liquidity crisis hits subprime December ’06 </li></ul><ul><ul><li>Maybe everybody can’t pay it back… </li></ul></ul>Mortgage Market Meltdown
    4. 4. The Role of Mortgage-Backed Securities <ul><li>Most loans are sold as securities </li></ul><ul><li>Investors accept risk with reward </li></ul><ul><li>Delinquencies mount; risk outweighs reward </li></ul><ul><ul><li>Keep your loans – we don’t want them! </li></ul></ul><ul><ul><li>If I take them – I’ll pay you less! </li></ul></ul><ul><ul><li>American Home & others can’t cover losses </li></ul></ul>Mortgage Market Meltdown
    5. 5. Results <ul><li>Underwriting guidelines based on historical data, including rising prices </li></ul><ul><li>Consumer maxed-out and unable to repay </li></ul><ul><li>No more equity to support spending habits </li></ul><ul><li>“ Officer and a Gentleman” loans </li></ul>Mortgage Market Meltdown
    6. 6. What’s Next For Real Estate <ul><li>Fewer potential buyers </li></ul><ul><li>Increasing inventory </li></ul><ul><li>Increasing foreclosures </li></ul><ul><li>Increased pricing pressure </li></ul>Mortgage Market Meltdown
    7. 7. Borrowers Who Are Impacted <ul><li>Caught in contagion: Non-Conforming </li></ul><ul><ul><li>Stated income/asset borrowers Alt-A </li></ul></ul><ul><ul><li>No-doc Loans </li></ul></ul><ul><li>Still free to roam: Conforming and Gov’t </li></ul><ul><ul><li>Vanilla Fannie Mae: Full-doc type </li></ul></ul><ul><ul><li>Some stated deals still exist </li></ul></ul><ul><ul><li>FHA & VA </li></ul></ul><ul><ul><li>Don’t get too comfortable </li></ul></ul>Mortgage Market Meltdown
    8. 8. Critical Question Mortgage Market Meltdown What would your life be like if you closed 50% fewer deals in the next twelve months?
    9. 9. It Doesn’t Have to Be This Way <ul><li>There are opportunities </li></ul><ul><li>Sellers </li></ul><ul><li>Buyers & Investors </li></ul>Mortgage Market Meltdown
    10. 10. Action Steps for Sellers <ul><li>Get real about price </li></ul><ul><li>Consider seller-held seconds </li></ul><ul><li>Beware of the non pre-approved buyer </li></ul><ul><li>Get your financial house in order </li></ul>Mortgage Market Meltdown
    11. 11. Action Steps for Buyers <ul><li>100% financing programs have seen severe cutbacks </li></ul><ul><li>PMI: not so bad & possibly deductible </li></ul><ul><li>Get your credit in order </li></ul><ul><li>Get your docs in order </li></ul><ul><ul><li>Tax returns, bank statements, pay stubs </li></ul></ul>Mortgage Market Meltdown
    12. 12. FICO Scores Rule the Land <ul><li>720, 680, and 620 scores. That means exceptions (and Elvis) have left the building </li></ul><ul><li>Credit repair is paramount </li></ul><ul><li>Routine credit monitoring – annual review </li></ul><ul><ul><li>Start credit review process 3-6 months in advance </li></ul></ul>Mortgage Market Meltdown
    13. 13. Full Doc is Back With a Vengeance <ul><li>Many lenders have killed Stated/No Doc </li></ul><ul><li>Where available, it’s more expensive </li></ul><ul><li>Provable income, assets, and good credit </li></ul>Mortgage Market Meltdown
    14. 14. Partnerships Are Critical <ul><li>Not the time to refer three lenders! </li></ul><ul><li>You need one “go-to” lender </li></ul><ul><ul><li>Wide array of available product </li></ul></ul><ul><ul><li>Expert in underwriting </li></ul></ul><ul><ul><li>“ Credit analysis and repair” partnerships </li></ul></ul><ul><ul><li>Local and accountable </li></ul></ul>Mortgage Market Meltdown
    15. 15. Future Possibilities <ul><li>Subprime was 12.75% of all 2006 loans </li></ul><ul><li>There is still massive opportunity here! </li></ul><ul><li>Keep your head up </li></ul>Mortgage Market Meltdown
    16. 16. Profit Looms for the Prepared <ul><li>Sellers </li></ul><ul><ul><li>Educate sellers for realistic prices </li></ul></ul><ul><ul><li>Due diligence for buyers </li></ul></ul><ul><ul><li>Decrease marketing times </li></ul></ul><ul><ul><li>Prepare sellers to be buyers: Pre-approve them </li></ul></ul><ul><li>Buyers </li></ul><ul><ul><li>Due diligence </li></ul></ul><ul><ul><li>Don’t be a cab driver </li></ul></ul><ul><ul><li>Real Estate investors: Cultivate relationships </li></ul></ul>Mortgage Market Meltdown
    17. 17. Next Steps <ul><li>Seller Action Meetings </li></ul><ul><ul><li>Inform </li></ul></ul><ul><ul><li>Risk analysis meeting involving lender </li></ul></ul><ul><ul><li>Assess willingness to navigate waters </li></ul></ul><ul><ul><li>Promote aggressively to buyers agents </li></ul></ul><ul><li>Buyer Action Meetings </li></ul><ul><ul><li>Inform </li></ul></ul><ul><ul><li>Pre-approve with mortgage lender </li></ul></ul><ul><ul><li>Direct towards realistic sellers </li></ul></ul><ul><ul><li>Continually communicate with other listing agents </li></ul></ul>Mortgage Market Meltdown

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