mortgage market meltdown redux
TRANSCRIPT
2007 Mortgage 2007 Mortgage Market MeltdownMarket Meltdown
What it Means to You as a Steamboat Springs RealtorWhat it Means to You as a Steamboat Springs Realtor
Chad W. James, Mortgage Broker970-846-2451
Perfect StormPerfect Storm
Steamboat Springs
Chad W. James, Mortgage Broker970-846-2451
Key Determining FactorsKey Determining Factors
Subprime and Alt-A LendingSubprime and Alt-A Lending
Alt-A consists of reduced and no-docAlt-A consists of reduced and no-doc
Accounted for 40%-70% of loans in 2005-06 Accounted for 40%-70% of loans in 2005-06 70-90% in Steamboat Springs!!!!!70-90% in Steamboat Springs!!!!!
Investor appetite brings loose underwritingInvestor appetite brings loose underwriting Everybody gets a loanEverybody gets a loan
Liquidity crisis hits subprime December ’06Liquidity crisis hits subprime December ’06 Maybe everybody can’t pay it back…Maybe everybody can’t pay it back…
Chad W. James, Mortgage Broker970-846-2451
The Role of Mortgage-Backed SecuritiesThe Role of Mortgage-Backed Securities
Most loans are sold as securitiesMost loans are sold as securities
Investors accept risk with rewardInvestors accept risk with reward
Delinquencies mount; risk outweighs rewardDelinquencies mount; risk outweighs reward Keep your loans – we don’t want them!Keep your loans – we don’t want them! If I take them – I’ll pay you less!If I take them – I’ll pay you less! American Home & others can’t cover lossesAmerican Home & others can’t cover losses
Chad W. James, Mortgage Broker970-846-2451
ResultsResults
Underwriting guidelines based on historical data, Underwriting guidelines based on historical data, including rising pricesincluding rising prices
Consumer maxed-out and unable to repayConsumer maxed-out and unable to repay
No more equity to support spending habitsNo more equity to support spending habits
““Officer and a Gentleman” loansOfficer and a Gentleman” loans
Chad W. James, Mortgage Broker970-846-2451
What’s Next For Real EstateWhat’s Next For Real Estate
Fewer potential buyersFewer potential buyers
Increasing inventoryIncreasing inventory
Increasing foreclosuresIncreasing foreclosures
Increased pricing pressureIncreased pricing pressure
Chad W. James, Mortgage Broker970-846-2451
Borrowers Who Are ImpactedBorrowers Who Are Impacted
Caught in contagion: Non-ConformingCaught in contagion: Non-Conforming Stated income/asset borrowers Alt-AStated income/asset borrowers Alt-A No-doc LoansNo-doc Loans
Still free to roam: Conforming and Gov’tStill free to roam: Conforming and Gov’t Vanilla Fannie Mae: Full-doc typeVanilla Fannie Mae: Full-doc type Some stated deals still existSome stated deals still exist FHA & VAFHA & VA Don’t get too comfortableDon’t get too comfortable
Chad W. James, Mortgage Broker970-846-2451
Critical QuestionCritical QuestionWhat would your life be like if you closed 50% fewer deals in the next twelve months?
Chad W. James, Mortgage Broker970-846-2451
It Doesn’t Have to Be This WayIt Doesn’t Have to Be This Way
There are opportunitiesThere are opportunities
SellersSellers
Buyers & InvestorsBuyers & Investors
Chad W. James, Mortgage Broker970-846-2451
Action Steps for SellersAction Steps for Sellers
Get real about priceGet real about price
Consider seller-held secondsConsider seller-held seconds
Beware of the non pre-approved buyerBeware of the non pre-approved buyer
Get your financial house in orderGet your financial house in order
Chad W. James, Mortgage Broker970-846-2451
Action Steps for BuyersAction Steps for Buyers
100% financing programs have seen severe 100% financing programs have seen severe cutbacks cutbacks
PMI: not so bad & possibly deductiblePMI: not so bad & possibly deductible
Get your credit in orderGet your credit in order
Get your docs in orderGet your docs in order Tax returns, bank statements, pay stubsTax returns, bank statements, pay stubs
Chad W. James, Mortgage Broker970-846-2451
FICO Scores Rule the LandFICO Scores Rule the Land
720, 680, and 620 scores.720, 680, and 620 scores.That means exceptions (and Elvis)That means exceptions (and Elvis)have left the buildinghave left the building
Credit repair is paramountCredit repair is paramount
Routine credit monitoring – annual reviewRoutine credit monitoring – annual review Start credit review process 3-6 months in advanceStart credit review process 3-6 months in advance
Chad W. James, Mortgage Broker970-846-2451
Full Doc is Back With a VengeanceFull Doc is Back With a Vengeance
Many lenders have killed Stated/No DocMany lenders have killed Stated/No Doc
Where available, it’s more expensiveWhere available, it’s more expensive
Provable income, assets, and good creditProvable income, assets, and good credit
Chad W. James, Mortgage Broker970-846-2451
Partnerships Are CriticalPartnerships Are Critical
Not the time to refer three lenders!Not the time to refer three lenders!
You need one “go-to” lenderYou need one “go-to” lender Wide array of available productWide array of available product Expert in underwritingExpert in underwriting ““Credit analysis and repair” partnershipsCredit analysis and repair” partnerships Local and accountableLocal and accountable
Chad W. James, Mortgage Broker970-846-2451
Future PossibilitiesFuture Possibilities
Subprime was (only) 12.75% of all 2006 loansSubprime was (only) 12.75% of all 2006 loans
There is still massive opportunity here!There is still massive opportunity here!
Light and Tend your Campfire!Light and Tend your Campfire!
Chad W. James, Mortgage Broker970-846-2451
Profit Looms for the PreparedProfit Looms for the Prepared SellersSellers
Educate sellers for realistic pricesEducate sellers for realistic prices Due diligence for buyersDue diligence for buyers Decrease marketing timesDecrease marketing times Prepare sellers to be buyers: Pre-approve themPrepare sellers to be buyers: Pre-approve them
BuyersBuyers Due diligenceDue diligence Don’t be a cab driverDon’t be a cab driver Real Estate investors: Cultivate relationshipsReal Estate investors: Cultivate relationships
Chad W. James, Mortgage Broker970-846-2451
Next StepsNext Steps
Seller Action MeetingsSeller Action Meetings InformInform Risk analysis meeting involving lenderRisk analysis meeting involving lender Assess willingness to navigate watersAssess willingness to navigate waters Promote aggressively to buyers agentsPromote aggressively to buyers agents
Buyer Action MeetingsBuyer Action Meetings InformInform Pre-approve with mortgage lenderPre-approve with mortgage lender Direct towards realistic sellersDirect towards realistic sellers Continually communicate with other listing agentsContinually communicate with other listing agents
GOOD LUCK, LET ME HELP!GOOD LUCK, LET ME HELP!www.steamboathomeloans.comwww.steamboathomeloans.com
If you need some help with a client or a scenario, please If you need some help with a client or a scenario, please give me a call at 970-846-2451, or email me at give me a call at 970-846-2451, or email me at
[email protected]@steamboathomeloans.com