The document discusses the mortgage market meltdown caused by loose lending standards and risky mortgage-backed securities. Subprime and Alt-A loans accounted for 40-70% of loans in 2005-06 but delinquencies rose as borrowers could not repay. This caused investors to lose appetite for mortgage-backed securities. As a result, underwriting standards tightened, making it harder for potential homebuyers to qualify for loans. The meltdown negatively impacted the housing market through fewer buyers, rising inventory, and increased foreclosures. The document provides recommendations for real estate agents, sellers, and buyers to navigate through the difficult market conditions.

1. Mortgage Market Meltdown What it Means to You Jonathan Tafuri Agency Lending LLC

2. Perfect Storm Mortgage Market Meltdown

3. 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 can’t pay it back… Mortgage Market Meltdown

4. 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

5. 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

6. What’s Next For Real Estate Fewer potential buyers Increasing inventory Increasing foreclosures Increased pricing pressure Mortgage Market Meltdown

7. 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

8. Critical Question Mortgage Market Meltdown What would your life be like if you closed 50% fewer deals in the next twelve months?

9. It Doesn’t Have to Be This Way There are opportunities Sellers Buyers & Investors Mortgage Market Meltdown

10. 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

11. 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

12. 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

13. 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

14. 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

15. Future Possibilities Subprime was 12.75% of all 2006 loans There is still massive opportunity here! Keep your head up Mortgage Market Meltdown

16. 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

17. 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 Mortgage Market Meltdown