CMARC Presents Karnak the Magnificent

1
CMARC Presents Karnak the Magnificent!
2
Karnak discusses Finance/ Mortgage Future Trends

• In order to know where youre going, you have
  to know where youve been
• Well look at past, present, and future

3
Recent Past- Events leading to the mortgage
crisis of August 2007
2006
2007
2004
2005
Credit markets seize-up Commercial paper and Repo
markets dry-up
Financial Institutions Begin Write-Downs
HPA decreases
Rating agencies downgrade mortgage bonds
Investor demand for Mortgage-Backed Securities
decreases
Dramatic housing price appreciation (HPA)
Fed gives new interagency guidance on Subprime
Housing Inventories Increase
HPA slows
2004
Q1
Q2
Q3
Q4
2005
Q1
Q2
Q3
Q4
Tremendous growth in housing and lending
Tightened Underwriting guidelines
Subprime lenders fail
Crisis in confidence, liquidity
Mass exodus of mortgage lenders American
Home Homebanc Most subprime and Alt-A lenders
Wells 1.4 B BofA 5.7 B WaMu 3.0 B Citi 18
B Chase 1.3 B Wachovia 1.5 B Merrill 16.7 B
CFC 1.9 B
2 Bear Stearns hedge funds fail
New mortgage products Expanded guidelines
4
Market Reaction

• Non-Agency Investors (those purchasing loans
  greater than the Fannie Mae/Freddie Mac limit of
  417,000) in the secondary market abruptly
  stopped purchasing pools of loans creating a
  liquidity crisis for many lenders without a
  banking affiliate
• Hundreds of lenders have filed bankruptcy,
  abruptly closed their doors, have been sold, or
  are seeking a buyer
• Subprime lending tumbled more than 50 in the
  first half of 2007 and has virtually vanished
  since the credit crisis began in August 2007
• Tightening Credit standards have reduced the
  pool of eligible buyers
• Many lenders are eliminating lending through
  broker and correspondent relationships
• The entire stock market has become more volatile

5
Mortgage Qualification Tightens

• Higher credit scores are now required for lower
  down payments and higher mortgage amounts
• On November 19, 2007, federal regulatory agencies
  changed the debt-to-income qualification on
  Interest only and ARM loans
• 100 financing guidelines have tightened
  considerably
• Properties located in designated soft market
  areas require a higher down payment

6
Recent Past

• On January 30th, the Federal Open Market
  Committee cut the fed funds rate target by 50
  basis points to 3.00 this was on top on an
  emergency intermitting rate cut of 75 basis
  points the week before. Then, just Tuesday, they
  cut the rate again by ¾ to 2.25. Reasons for
  the cut
• A weakening economic outlook
• An increasing downside risk to growth
• Financial market deterioration
• Deepening housing contraction
• Softening in labor markets
• These rate cuts were decisive, and indicate that
  the FOMC is very concerned that the U.S. economy
  is falling into recession
• Central Bank also stepped in earlier this week to
  lower lending rates to financial institutions and
  create short-term loans

7
Feds Interest Rate Moves
8
Heres where we sit today

• The credit markets currently under tremendous
  pressure and very volatile, providing little
  visibility into the future
• Demand for mortgage-backed securities has
  significantly declined, even for highly rated
  AAA securities
• Most of the market has moved to conforming
  guidelines in alignment with demands of investors
• New stimulus package was approved and contains
  several features designed to improve the troubled
  housing market
• It increases the Federal Housing Administration's
  loan limits from 362,000 to as high as 729,750
  and those of the two federally sponsored
  entities, Fannie Mae and Freddie Mac, from
  417,000 to as high as 729,750. These new
  limits are only valid in high-cost markets and
  are temporary until end of 2008
• The measure would also enable the FHA to become
  more active in dealing with the direct impact of
  the housing crisis, permitting more customers
  facing defaults to refinance subprime loans
  through the federal agency

9
Now Karnak Tells us the Future

• Real GDP growth slow but positive until well into
  2nd half of 2008
• Core inflation remains in check but will face
  pressure
• Interest rates- Fed funds rate will be reduced to
  2 and perhaps slightly lower in 2008, but long
  term rates will edge up.
• Mortgage market- 29 decrease from 2007 in
  purchase originations to under 1 trillion
  refinance will increase to 1.6 trillion. Growth
  in single family mortgage debt to slow to 3 in
  2008 2009.
• There will be continued consolidation in the
  finance/ mortgage markets well into 2009.

10
Recommendations

• Employer
• Offer choice in lenders, unless were exclusive!
• Ensure employees are adequately counseled
• Be flexible
• Work with suppliers to reduce/ smart spend
• Inventory
• Elimination of junk fees
• National Title Programs
• Customer
• Know your credit score
• Understand your finances and budget for mortgage
• Shop around for price and product

11
TACKLING HOUSING CHALLENGES WITH CREATIVITY

• Speaker Cathy Bauman, Runzheimer International
• CMARC
• Thursday, March 20, 2008

12
TOPICS OF DISCUSSION

• Current state of the housing market
• Emerging trends

13
HOUSING MARKET

• Ongoing housing correction
• Slow real estate market
• Falling home prices

14
Will I Be Able to Sell Boardwalk?
15
Relocating the Transferee

• The Move

16
Youre Sending Us Where?
17
How Will We Sell Our Home?
18
NC/SC/GA Area
19
Midwest
20
WHAT ARE SOME COMPANIES DOING?

• Loss-on-Sale
• Financial Counseling
• Designated Network
• Staging
• Mortgage Subsidies
• Temporary Assignments
• Realistic Home Market Values
• Auction

21
SUMMARY

• -- Identify what works.
• -- Explore new ideas and best practicesto tweak
  what doesnt work.
• -- Be creative and flexible.
• -- Work together