60 Minutes interviews billionaire fund manager Whitney Tilson whose firm has done extensive research on mortgage-backed securities and the second wave of Alt-A and Option ARM resets coming in 2009. And if you thought foreclosure rates were high and median home prices were low right now, we ain't seen nothing yet. Says Tilson,
"The defaults right now are incredibly high, at unprecedented levels. You can look back at what (loans were) written in '05 and '06, look at the reset dates and look at current default rates, and it's really clear and predictable what's going to happen here." For visual confirmation, take a look at the bar graph prepared by Credit Suisse tracking the sub-prime loan resets (orange) which are starting to taper off fortunately. But it's the Alt-A and sub-prime resets (yellow) which will grow exponentially beginning in 2009 and not really peak for another 2-3 years.
The second half of the 60 minutes piece focused entirely on Miami-Dade, or as correspondent Scott Pelley calls it, "The Repo Riviera." Pelley says the second wave is coming ashore and interviews the few entrepreneurs poised to capitalize on the downturn...people like Oscar Muñoz whose company removes personal property from 20-30 foreclosed properties a day. "
We're one of the few companies that's hiring right now," says Muñoz,
"We have to hire people, because the demand is so high." As workers lug furniture, mattresses and TVs to the driveway of a foreclosed property, Pelley observes, "
People that have been evicted tend to leave stuff behind; the next house is usually much smaller. Banks hire Muñoz to haul the possessions out where, by law, they remain for 24 hours. Often the neighbors pick through the remains." 
An interesting face-off in the Miami Herald between analysts Jack McCabe and Michael Cannon over the status quo of the Florida housing market, the root causes of the mortgage collapse and the next shoe that will drop in 2009. On the latter subject, McCabe is bearish on commercial real estate.
"The next big bubble out there in South Florida and around the country is going to be in office and retail. We are going to see a commercial property bubble that will begin next year with a lot of these new [retail and office] buildings being finished. The truth is we are not seeing job growth; we are seeing job declines. We are not seeing businesses expand; we are seeing businesses contract or go out of business."
60 Minutes interviews billionaire fund manager Whitney Tilson whose firm has done extensive research on mortgage-backed securities and the second wave of Alt-A and Option ARM resets coming in 2009. And if you thought foreclosure rates were high and median home prices were low right now, we ain't seen nothing yet. Says Tilson, "The defaults right now are incredibly high, at unprecedented levels. You can look back at what (loans were) written in '05 and '06, look at the reset dates and look at current default rates, and it's really clear and predictable what's going to happen here." For visual confirmation, take a look at the bar graph prepared by Credit Suisse tracking the sub-prime loan resets (orange) which are starting to taper off fortunately. But it's the Alt-A and sub-prime resets (yellow) which will grow exponentially beginning in 2009 and not really peak for another 2-3 years. 
The second half of the 60 minutes piece focused entirely on Miami-Dade, or as correspondent Scott Pelley calls it, "The Repo Riviera." Pelley says the second wave is coming ashore and interviews the few entrepreneurs poised to capitalize on the downturn...people like Oscar Muñoz whose company removes personal property from 20-30 foreclosed properties a day. "We're one of the few companies that's hiring right now," says Muñoz, "We have to hire people, because the demand is so high." As workers lug furniture, mattresses and TVs to the driveway of a foreclosed property, Pelley observes, "People that have been evicted tend to leave stuff behind; the next house is usually much smaller. Banks hire Muñoz to haul the possessions out where, by law, they remain for 24 hours. Often the neighbors pick through the remains." 
An interesting face-off in the Miami Herald between analysts Jack McCabe and Michael Cannon over the status quo of the Florida housing market, the root causes of the mortgage collapse and the next shoe that will drop in 2009. On the latter subject, McCabe is bearish on commercial real estate. "The next big bubble out there in South Florida and around the country is going to be in office and retail. We are going to see a commercial property bubble that will begin next year with a lot of these new [retail and office] buildings being finished. The truth is we are not seeing job growth; we are seeing job declines. We are not seeing businesses expand; we are seeing businesses contract or go out of business."
8 comments:
These two morons will say anything to have their names in the media. They are BROKERS and want to sell anything to earn a commission
Re: CBS 60 Minutes "The Mortgage Meltown" aired on Sunday 12/14/08.
Scott Pelley's piece on the 2nd Wave of Foreclosures overlooked a critical fact. The next wave of Foreclosures in 2009 Will Take Self-Employed and Smaller Businesses who have these TOXIC mortgages. In fact, ALT-A, Option ARMS, Interest-Only, the TOXIC Mortgages that are considered the "Troubled" assets in TARP were marketed to the self-employed who fell prey to them.
An NASE survey,www.nase.org, was the first to provide compelling evidence of small business involvement in the upcoming toxic mortgage crisis. The survey was created by Prof. Samuel D. Bornstein and Jung I. Song, CPA of BornsteinSong Consultants in Oakhurst,NJ,and was conducted by the National Association for the Self-Employed (NASE) which issued a Press Release on November 21, 2008. According to this survey, it is estimated that 3,709,800 small business owners hold Alt-A and other toxic mortgages, and 1,279,800 are already delinquent as they have missed one to three or more monthly mortgage payments at mid-November, before the expected Resets that are scheduled to begin in 4th Quarter 2008 through 2012. These small business owners will be at-risk of payment shock and default as their monthly mortgage payments skyrocket. Small business owners were especially targeted for these Alt-A loans which required little or no documentation of income which appealed to many small business owners who previously were unable to qualify.
The resulting defaults will be the cause of the upcoming second tsunami wave of foreclosures that will dwarf the subprime crisis and will take many homeowners and small business owners.
Interesting survey results. Are the majority of these small businesses located in the same states where the residential fallout has been the greatest or are they fairly evenly distributed nationwide?
To Anonymous. The survey was done at random to the NASE national membership. I will try to get an indication of response by state.
Dear Prof. Bornstein,
What is the defination of Self-Employed or Small Business Owner in your survey? Have they been cross-referenced with Federal tax database or something similar?
In place like Miami, most real estate speculators described themselves as self-employed. They had no income, no assets and no job. Many of them purchased million dollar properties and are still living in them without paying any mortgage
The demographics of the NASE membership indicates that these self-employed are micro-businesses who may have filed as sole proprietors or as closely-held corporations. This group has between 1-10 employees. These individuals were prone to use their homes for easy access to capital to run their businesses. That is why I chose NASE to run the survey. Furthermore, mortgage brokers targetted these individuals for ALT-A and Option ARMs because these self-employed micro-businesses were perfect targets for these forms of small business financing.
Very interesting. Thanks for your insight.
Prof.
I have been a small business owner for past 20 years. Annual revenues over $2 million and 6 employees.
This is the first time I have heard about NASE! But then again - there are so many so called National Associations - which have been started as small business by some self employed person.
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