Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Mortgage Market Meltdown V2


Published on

Mortgage Market Meltdown

  • Be the first to comment

  • Be the first to like this

Mortgage Market Meltdown V2

  1. 1. Mortgage Market Meltdown What it Means to You PHILIP GLOVER PROSPERITY MORTGAGE CO. 410-499-3456
  2. 2. Perfect Storm
  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>
  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>
  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>
  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>
  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>
  8. 8. Critical Question 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>
  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>
  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>
  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>
  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>
  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>
  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>
  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>
  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>