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BAPRM Mobility Conference 2009

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BAPRM Mobility Conference 2009

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    2. The Lending Environment Then and Now

    3. Relocation In The News

    4. Housing Market Forecast

    5. 2008 Housing Market Update

    6. Yesterday…… Strong appetite for investors to buy mortgage backed securities Low down payments Low credit score options Limited documentation; even on high balance loans Speculators: Lenders and consumers jumped into the real estate market

    7. What was “new” over the past several years? Mortgage Products that helped fuel mortgage and home ownership growth Subprime/Alt-A – products designed for consumers with marginal credit and/or with income that is challenging to document Exotic Mortgage Products – Negative Amortization loans Blended Mortgages – 80-10-10, etc. “No-money down” mortgage financing

    8. Pitfalls – The Unintended Consequences Pitfalls of Subprime/Alt-A Speculators jumped into the market – both lenders and home owners Increases in delinquencies and foreclosures Prepayment penalties Consumer confused over product chosen – rate and payment adjustments lead to trouble Pitfalls of Exotic Mortgages – Negative Amortization Consumers principal balance increase over time – consumer not paying any principal ARM rate adjustments push already stretched consumers over the edge

    9. Today…… Private securities still not selling; investors continue to consider. This makes conventional jumbo loans difficult to originate. Significantly tightened underwriting standards. Transactions more complex for lenders and consumers. Government business consists of 26% (2008) vs. 3% (2007) of originations in overall mortgage market.

    10. Today…… New FHA guidelines as well as Freddie & Fannie Conforming loan limits. Mortgage companies and brokers continue to exit the market. Lenders working with consumers to avoid foreclosure. Increased loss on sale; reluctance to move Great market for first time home buyers.

    11. What is “new”…again? Fixed Rate Products 30, 20, 15 Year Fixed offer security and predictability Consumer impacted by sudden payment increases Consumer’s reluctance to move making a longer term mortgage instrument attractive FHA Financing – increased loan limits Fannie Mae/Freddie Mac – conforming loan limit increases VA Financing Private Mortgage Insurance (PMI)

    12. Qualifications Changes General Tightening of Underwriting Guidelines Increased minimum FICO Score Increased down payment requirements Property location Property type Credit profile Increased documentation requirements Enhanced Appraisal Review

    13. What is a Short Sale? A Short Sale is a work out program based on a verified hardship situation that allows the Homeowner to sell the home at fair market value and pay off the loan for less than the total amount owed. When a short sale is completed, it is reflected as “paid in full for less than full balance” on the customers credit report. Homeowners in “upside down” situations who are having difficulty making their mortgage payments, may find a short sale to be the solution to their financial challenges. Can help homeowners avoid further collection activity Avoid stress of foreclosure sale. Honorable exit to difficult financial situation

    14. Short Sale

    15. Creative Solutions For Recruiters

    16. What should relocation managers be aware of? Increased loss on sale tied to Negative Amortization products Increased negative equity tied to Negative Amortization products Increased requests for companies to reimburse for Prepayment Penalties tied to non-prime and some prime loans Reluctance to move as a result of equity position in old home Longer settling-in period for transferees as they look for their new market to “normalize”

    17. What does transferee utilization of “new again” products mean to relocation and relocation managers? Documentation requirement may require more collaboration between lenders, borrower and relo firms – FHA/VA and new FNMA/FHLMC increased conforming loan limits Policy decisions will need to be made around the VA Funding Fee – reimbursable – yes or no? Review reimbursement of PMI’s upfront costs – historically, not reimbursable under most company policies Long term benefits as customers are placed in product that meet their long term needs

    18. Managing Inventory in Turbulent Times

    19. Challenges Competition from Distressed Properties Local Economy & Media Lack of Visual Contact

    20. Distressed Properties Huge impact in some markets Fastest growing county in GA /1600 foreclosures in December East Contra Costa County/Riverside County Easier to Identify Overgrown/dead yards Paint Trashed interior Priced to sell

    21. Economy & Media Local Economy Plant closings Large scale layoffs Media Frenzy Good News travels slowly Doom & Gloom Predictions Lowball Offers

    22. Lack of Visuals Inventory Managers only see properties through photos or the web Market data supplied is the key to pricing Understand the impact of location

    23. Lack of Visuals

    24. Strategies Condition of Property Pricing Thinking Outside the Box

    25. Condition of Property Relo homes need to be in pristine shape Curb appeal/yard condition Lights working/bulbs replaced Paint/wallpaper Flooring

    26. Condition of Property

    27. Pricing Keep updating client on how market is changing # of For Sale signs in neighborhood Keep on top of absorption rate (# of comp homes divided by comps sold per month) Evaluate carrying costs vs. discounting Aggressive, pro-active pricing to stay in front of competition Use odd prices

    28. Thinking Outside the Box Staging Large homes Awkward floor plans Soft staging Buyer Incentives Paying taxes, HOA dues, Parking fees, Warranties Closing costs, Buy-downs Appliances, gift cards for home improvements

    29. Results Agents / Relo Directors Data Reporting Responsiveness

    30. Agents / Relo Directors Inventory is not for sissies! This is not “asset management”! Look at properties as buyers Do the REQUIRED paperwork Agents are our eyes & ears Training, Training, Training

    31. Data Reporting Reporting is imperative for inventory management Garbage in / garbage out Concise, meaningful data Reporting format often dictated by client More is better than less…if organized!

    32. Responsiveness Difficult decisions can take time Follow-up is a two-way street Discuss process at company meetings Re-assure buyers agents and buyers

    33. …but where are we going? Are we at the bottom and heading up or are we continuing to slide…here is a look at what the future may bring…

    34. What is the Reality…some facts… In December, 2008, 50% of all resale transactions were REOs; in December, 2007 it was 14% and in November, 2008 it was 46.8% per DQnews New Construction Inventory is dropping because most builders have stopped building and also dropped their prices substantially A few zip codes have actually stayed flat or gained value in 2008—in San Francisco, Berkeley and Menlo Park per Zillow.com. The average sales price is down 50.4% from the peak of June/July 2007

    35. A Quick Look at the Bay Area The areas that were the last to lose value and will likely be the first to recover will be those closest to San Francisco and where the amount of new construction is limited or have the best public schools The rental market has strengthened as former homeowners have become renters Prices have fallen in some areas so far that conforming loans can now be obtained

    36. How are home sellers reacting? Sellers are reducing their list prices or coming on the market at more realistic prices or if they do not have to sell they are not putting their houses on the market They are offering to pay closing costs or carry financing Properties are coming on the market in better condition than in the last few years Sellers are negotiating on both price/terms and commissions Developers are reducing prices Developers are offering unprecedented incentives to agents Some homes are now going to auction

    37. Short Term—What Will Happen Prices will continue to moderate where new construction competes with resale Investors are jumping into the market as they can get a positive cash flow with 25% down payments—this is strengthening the low end which will provide a trickle-up effect Those who do not have to move will not—especially those who have little or no equity Short sales will continue to hit the market The Economic Stimulus Programs—hard to say how they will affect us—certainly differently from lower priced parts of the country

    38. Long Term—What Will Happen? Builders have slowed down production so that demand can catch up—this will continue Homes that are located close to major employment centers and near to public transportation will sell quicker Prices will increase in areas of high demand and minimal supply The bottom line…as has been the case for at least the last 30 years—homes in good condition, in good locations, and priced competitively will sell

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