the foreclosure market: observations & opportunities

8/14/2019 The Foreclosure Market: Observations & Opportunities

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The Foreclosure Market:

Observations & Opportunities

Copyright RealtyTrac Inc. 2008

COMPANY CONFIDENTIAL NOT FOR DISTRIBUTION


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What Well Cover Today

A brief introduction to RealtyTrac

2005 - 2008 Foreclosure Market Recap

2009 and Beyond: Foreclosure Market OutlookWorking with Foreclosures

Questions & Discussion


NOT FOR DISTRIBUTION


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About RealtyTrac




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RealtyTrac Overview

RealtyTrac publishes the countrys largest database of

foreclosure and bank-owned properties

Data collected from over 2,200 counties across the

country, covering over 92% of U.S. households

#1 Foreclosure site over 1.9 million foreclosure and



an -owne proper es rom across e coun ry

More coverage, more detailed information than any other

national provider

Over 3 million unique monthly visitors, and over 2.5million subscribers to daily e-mail notifications


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The RealtyTrac Brand:

Trusted by Government Organizations




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RealtyTrac U.S. Foreclosure Report Press Coverage




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2005 - 2008 Foreclosure Market Review




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2005-2008: The Foreclosure Tsunami

An historically unprecedented cycle

First wave not started by usual economic trends, but by

unsustainable home prices and high risk lending and

underwriting practices

Sub-prime loans started the wave, and provided the

tipping point for the mortgage market meltdown



Foreclosure activity has increased on a year-over-year

basis for 44 consecutive months, and is unlikely to

slow down until 2011

July 2009 was the highest month ever in terms of

foreclosure activity, with over 361,000 U.S. households

receiving a foreclosure notice


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2005 - 2008 U.S. Foreclosure Activity

U.S. Foreclosure Activity

2,203,295

3,157,806

2,330,483

2,500,000

3,000,000

3,500,000

U.S. Properties with Filings Total U.S. Foreclosure Filings



532,833

717,522

1,285,8731,259,118

885,468

0

500,000

1,000,000

1,500,000

, ,

2005 2006 2007 2008


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2005 - 2008 California Foreclosure Activity

California Foreclosure Activity

523,624

837,665

600,000

700,000

800,000

900,000

CA Properties with Filings Total CA Foreclosure Filings



49,837

87,576

249,513

61,563

142,429

,

-

100,000

200,000

300,000

400,000

500,000

2005 2006 2007 2008


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2009 Foreclosure Market




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2009 Foreclosures: The Second Wave

Second wave is driven by unemployment

Unemployment rates now over 10%

Estimate of 1 foreclosure for every 6-10 jobs lost

This will drive foreclosure activity at high levels through

2010



$60-$100 billion in ALT-A and Option ARM loans arebeginning to recast, and defaulting at higher rates than

sub-prime loans

The BIG wave of Option ARMs hits Q2 2010


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Foreclosure Activity & Unemployment Rate

U.S. Foreclosure Activity & Unemployment Rate

250,000

300,000

350,000

400,000

ilings

8

10

12

tRate

U.S. Foreclosure Filings U.S. Unemployment Rate



0

50,000

100,000

150,000

200,000

Jan-05

Fe

b-05

Mar-05

Apr-05

Ma

y-05

Jun-05

J

ul-05

Au

g-05

Se

p-05

Oct-05

Nov-05

De

c-05

Jan-06

Fe

b-06

Mar-06

Apr-06

Ma

y-06

Jun-06

J

ul-06

Au

g-06

Se

p-06

Oct-06

Nov-06

De

c-06

Jan-07

Fe

b-07

Mar-07

Apr-07

Ma

y-07

Jun-07

J

ul-07

Au

g-07

Se

p-07

Oct-07

Nov-07

De

c-07

Jan-08

Fe

b-08

Mar-08

Apr-08

Ma

y-08

Jun-08

J

ul-08

Au

g-08

Se

p-08

Oct-08

Nov-08

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c-08

Jan-09

Fe

b-09

Mar-09

Apr-09

Ma

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Jun-09

J

ul-09

Au

g-09

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Foreclos

ure

0

2

4

6

Unemplo

yme


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Two-Pronged Problem

Activity increasing in states with most severe problems60% of foreclosure activity in 6 states

Activity spreading to states with high unemployment



Idaho, Illinois, Oregon, Utah join the list of hard hit states


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Q3 2009 Foreclosure Activity




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2010 and Beyond

Copyright RealtyTrac Inc. 2008COMPANY CONFIDENTIAL NOT FOR DISTRIBUTION


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2010 and Beyond: Foreclosure Projections

Foreclosure activity will probably peak in 2010

Unemployment will drive high levels of foreclosure

activity through Q4 2010

O tion ARMs will be in resettin and defaultin in



high numbers in Q2 and Q3 2010

Strategic Defaults will increase

Current loan modification programs will be ineffective

in resolving any of these types of foreclosure problems


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Rising Foreclosure Rates

500,000

600,000

700,000

800,000

900,000

1,000,000

ithFC

Filings

2.5

3

3.5

4

4.5

5

sureRate

RealtyTrac Properties with Filings MBA Foreclosure Rate



0

100,000

200,000

300,000

400,000

Q12006

Q22006

Q32006

Q42006

Q12007

Q22007

Q32007

Q42007

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

Proper

ties

0

0.5

1

1.5

2 Fo

reclo


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Rising Rates of Distressed Assets

600,000

700,000

800,000

900,000

1,000,000

8

10

12

14

dingLoans

RT Properties with Filings MBA Delinquent or in Foreclosure



0

100,000

200,000

300,000

400,000

500,000

Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009

0

2

4

6

Pct.ofO

utsta


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2010 Foreclosure Projections

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

U.S. Properties with Filings Total U.S. Foreclosure Filings



0

500,0001,000,000

, ,

2005 2006 2007 2008 2009

(Projected)

2010

(Projected)


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Implications for the Housing Market

Foreclosure activity wont stabilize until 2011

Levels will not return to normal until 2012

REO inventories will stay at high levels through 2013

There is a massive shadow inventory that will slow downthe housing market recovery

900,000 REOs over 500,000 not listed for sale



.

5.5 million loans in some stage of delinquency

Most likely scenario is for these homes to make it to marketvery s-l-o-w-l-y over the next 3-4 years

This will prevent another massive crash in home pricesBut it will result in a long, slow, largely flat recovery


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Profiting from the Buyers Market:

Working with Foreclosures

Copyright RealtyTrac Inc. 2008COMPANY CONFIDENTIAL NOT FOR DISTRIBUTION


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Opportunity for Foreclosure Specialists

Listing Leads

The RealtyTrac database has nearly 1,100,000

homeowners in foreclosure

Inventory for Buyers

There are currently over 800,000 bank-owned homes

Competitive Advantage



Knowing which properties are in foreclosure and whentheyre due to be auctioned is a huge differentiator

REO Specialist

Working to resolve defaults will give you early access to

lenders, and an opportunity to solicit REO inventory


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Find Listing Leads in Your Area




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Research Properties of Interest




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Check Market Value




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Check Foreclosure Information




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Check Loan History




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Review Local Market Activity




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Check Sales Comps




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Review Whats on the MLS




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Review Local Market Sales Trends




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Contact the Owner




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Market Your Properties




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Working With Distressed Homeowners




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Strategies for Working with Distressed Homeowners

Be empathetic theyre already distressed

Be honest they need someone they can trust

Be informative they need to know what their options

actually are, so you need to be informed

Be present theyre being bombarded by letters,

postcards, late notices and phone callsface-to-face is



he best approach

Be patient, but persistent remember the stages: the

closer to the auction date, the more the motivation to

sell increases


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Exploring Options for Homeowners

Re-finance programs early in the process, there are

often opportunities for new financing

Traditional property sales but know how long it will

take and what the market value is likely to be

Forbearance programs work with lenders to extend

the foreclosure cycle while youre working on a deal



Short sales learn how this process works, and

develop relationships with lenders and loan servicers

Auction sales there are firms today who will include

brokers and agents in this process, which might be an

alternative in a short time cycle


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Short Sales and Auctions The Next Wave

Short Sales are growing in number, and will continue to

grow this year

Agents and brokers who learn how this process works

will be at a HUGE competitive advantage

Short Sales require a HARDSHIP and specific



paperwor on a en er- y- en er as s, as we as a

qualified buyer


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Becoming an REO Specialist

Working with lenders and asset managers on loss

mitigation activities and short sales will give you

access to decision-makers for REO contracts

REO agents and brokers will see steady, sometimesdramatic increases in inventory and activity over the

next two years



ecom ng an spec a s w requ re cer a n s s:

BPO expertise

Property management and maintenance

Strong logistical and organizational ability

Strong marketing capabilities


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Becoming an REO Specialist

Networking opportunities:

Five Star Default Servicing Conference

(www.fivestarconference.com)

REOMAC (www.reomac.com)Local/Regional investor groups



REO Outsourcing Companies

Keystone Asset Management (www.keystonebest.com)

USRES (www.usres.com)

National Default Servicing (www.defaultservicingllc.com)


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Closing Thoughts




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Closing Thoughts

There will be a growing inventory of foreclosure

properties across the country in 2009 and 2010

Foreclosure homes on average sell for 31% less than

full market value



Agents and brokers can leverage the inventory offoreclosure properties for both listing leads and

inventory for buyers

Foreclosures can present a true win/win/win scenario,and provide you with a competitive advantage


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Questions and Discussion



Rick Sharga

Senior Vice President

949-502-8300, extension 108

[email protected]

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