Buying in Today’s MarketHow To, Where To and Why – 2 Tips & A Case Study on Refinancing

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AgendaAgenda

• Market Overview• Two Buying Tips – to make closing easier

C S d h d j “d j b”• Case Study – why you need to just “do your job”

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Part 1: The MarketPart 1: The Market

1. $700B approved – derivatives first

2. $300B (McCain’s desire to target homeowners) – it will come

3. $1.3-1.4T – Option ARMs “non-performing”3. $1.3 1.4T Option ARMs non performing

4 S b i / Alt A / P i d li i ( O ti4. Subprime / Alt-A / Prime delinquencies (non Option ARM’s) - undetermined

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It’s BadIt’s Bad• G7 – 1st ever “bailout coordination” cutting rates

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It’s Bad againIt’s Bad – again • Dow – 9,000 exactly 10 ½ years ago

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It’s Bad some moreIt’s Bad – some more

• Unemployment up 40% (Aug 07-Aug 08) and p y p % ( g g )insurance … where is it?!

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And it’ll Get WorseAnd it’ll Get Worse …

• Consumption drives roughly 70% of Gross Domestic p g y %Product (GDP)

• Consumption is driven by cash available to the• Consumption is driven by cash available to the common person

• And “Mortgage Equity Withdrawal” (MEW) – the money taken out of homes through refi’s – has been a virtual ATMa virtual ATM

• Next Chart – note the drop

• But then also note that MEW only accounted for 10% of peoples’ disposable income

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And it’ll Get WorseAnd it’ll Get Worse …

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Where Would You Rather Be?Where Would You Rather Be?

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So What Does It All Mean?So What Does It All Mean?

• Wall St holding off on note salesThe Wall St. Note Selling Machine is Clogged Up

• One large firm – no trading for past 3 months, $1.7B in performing and non-performing notes

1 $9 2• They have only 1 pool out there right now - $9.2M

But Banks (Portfolio) Are Still Selling• The usual pools are circulating (monthly) But Banks (Portfolio) Are Still Selling

• Saprina / Janet lesson: monthly cycles for banks that• Saprina / Janet lesson: monthly cycles for banks that “own” their loans, goes on … every month

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ExamplesExamples

• Mortgage lender saw repo’s soarWarehouse lender

• Warehouse lender asked for $1.5M “haircut” on a $6.8M pool

• Warehouse lender now needs to sell those loans (16 notes)

• Monthly pool of $40M (550 loans on average)Bank

Monthly pool of $40M (550 loans on average)• Same cycle … no change

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More ExamplesMore Examples

• They will increase (lenders & borrowers)Bankruptcies

• Go after them• Partner up if you have deals but no money – referral

fees

Build Yourself a “Niche”• Probates (people always die) / Title IssuesBuild Yourself a Niche

• Bankrupt borrowers• Bankrupt borrowers• Downtown Philly or Cleveland or Detroit• Option-ARM’s

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Option ARM s