Actual - Real Estate

The End of the Subprime Industry

In late 2006, as real estate values continued to fall, the subprime lenders that made it possible for these borrowers to own homes begin to shut down. Within a period of 90 days between Dece

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

mber of 2006 and March of 2007 the entire subprime industry as we knew it, vanished. And as these lenders either shut down or tightened their guidelines, millions of potential homeowners have discovered that they don’t qualify for

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

ortgage financing anymore.

The Real Issue

As disappointing as it may be for those millions of hopeful homebuyers now discovering that they no longer qualify for home loans, the real problem lies elsewhere. Subprime mortgag

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

programs, as accommodating as they were of borrowers’ credit profiles, were strictly structured to compensate the lenders for taking on the additional layers of risk associated with these poor credit loans.

The Adjustable Rate

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

Impact

With few exceptions these loans carry adjustable rate features which are normally timed to adjust upward at some point during the first five years. The most popular of these programs is called the 2/28 which is timed to

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

adjust upward after two years. Most borrowers using these loans expected to refinance after the two year period. Refinancing was not expected to present a problem. After all, real estate values were increasing and home financing wa

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

easy to obtain.

A Changing Real Estate Market

In a perfect world, a subprime borrower would purchase a home using a product like the 2/28 and be worry free. The booming real estate market would virtually guarantee that he

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

would have sufficient new equity in his home to be able to refinance into a better mortgage when the time came. Or maybe he would just sell, and with his windfall be able to make a large down payment on a new home.

No One Belie

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

ed it Could Happen

The worst case scenario was unimaginable. Real estate values had moved upward for over a decade. Mortgage lenders had become more and more accommodating. Who imagined that home prices would slowly stop climb

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

ng and then sickeningly begin to fall? And even if this were to occur, who thought that every single subprime lender would hit the brakes simultaneously within a 90 day period of time?

A Personal Story

A personal acquainta

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

ce of mine went through a difficult divorce in 2005. During the divorce his credit, once without blemish, was seriously affected. When the divorce was finalized he decided to move to Florida to make a fresh start. He was lucky to h

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

ave enough money to be able to afford a 20 percent down payment on a new home. Because of his credit he was in a subprime category and elected to use a 2/28 for his financing.

A Reasonable Expectation

It was not unreasonab

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

e for him to feel fairly secure. He was purchasing a home in beautiful south Florida. Home prices were strong. His Florida mortgage was easily approved, and he had made a significant enough down payment to feel secure with his equi

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

y. It is now 20 months later. Four months remain before his mortgage rate will increase a full 2 percent. He figured that the timing was right to start planning his refinance.

Reality Dawns

His first shock was the discover

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

that home values on his neighborhood have fallen so much that his initial 20 percent equity is nearly gone. He no longer has enough cash to reduce his loan to 80% of the value, so he figured that he would have to refinance at a hi

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

her loan to value and just find a way to manage a higher rate than anticipated. Unfortunately, there was more disappointment to come.

The Result

He quickly discovered that he could not obtain financing at all. The combinat

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

on of his impaired credit, the lack of equity in his home, and the elimination of the subprime products that made it possible for him to purchase the home, have now made it impossible for him to refinance. Instead he is being force

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

to try to sell his home in an environment where he will just get enough money to pay his mortgage and his closing costs.

Where to Turn

There are millions of homeowners like my friend. The adjustable rate features built in

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

o their mortgages add a degree of urgency as borrowers will be facing higher rates. We have two suggestions. Consult your mortgage broker now. Don’t wait. There are new Fannie Mae programs that just might accommodate you. And consi

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

er credit repair. If your credit is marginal a credit repair professional might be able to help you improve your credit score enough to make all of the difference.

Copyright © 2007 James W. Kemish. All Content. All Rights Reserved

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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Negotiating a debt settlement isn't difficult, but it is essential to fixing debt problems and securing your future financial success.

The Internal Revenue Service (IRS) reports, home based business tax deduction scams have increased in popularity in recent years...Be Aware: Creating or being a party to a bogus home based business or other scheme to claim home business tax deductions puts YOU, the taxpayer on a slippery slope-

I have a good friend who works in an area of the US that has more than its share of poverty. He called me the other day with a very broken heart. He was feeling badly for the people around him who simply do not allow themselves to get set free financially. I could feel the pain he was feeling because I too, very often wonder why it is that some people experience financial independence and others do not. It really is a mystery.

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