60 Minutes Reveals More Trouble Ahead From Mortgage Defaults

12/15/2008

posted by N. Sioris

Stumble It!

If you missed Scott Pelley's report on Sunday evening on 60 Minutes, you should take a few minutes to view the video link below. Scott interviews Whitney Tilson, an investment fund manager, who says we are only half way through the mortgage carnage. According to Tilson, there is a second mortgage shock heading for the economy. He said "We had the greatest asset bubble in history and now that bubble is bursting. The single biggest piece of the bubble is the U.S. mortgage market and we're probably about halfway through the unwinding and bursting of the bubble. There is still a lot of pain to come in terms of write-downs and losses that have yet to be recognized."

Tilson explains that although billions of dollars of the sub-prime mortgages reset last year and this year we are at the beginning of the second wave, which are the Alt-A and Option ARM resets which will take place over the next three years. Tilson estimates that more than 50 percent of the Option ARMs and possibly as high as 70 percent will default. When Scott Pelley asked him how he knows that, Tilson explained that he predicates this estimate based upon the current default rates before the loans reset. That means that people are even having difficulty keeping their mortgages current with the low teaser rates and interest only payments they started with.

Tilson went on to say; "The defaults right now are incredibly high. At unprecedented levels. And there's no evidence that the default rate will tapper off. Those defaults almost inevitably are leading to foreclosures, homes being auctioned, and home prices continuing to fall."


Mortgage Defaults Plus Unemployment: "The Perfect Storm"

Couple the stark reality of the 60 Minutes report and the daily increasing numbers of people that are suddenly finding themselves unemployed, and you cannot escape the fact that we are in for a long difficult time ahead for real estate values. Not only do we have all the "exotic" loan resets to contend with but now we have unprecedented numbers of unemployed people that will most certainly fall behind on their mortgage payments. The end result will no doubt be a continuation of falling home values across the nation.

If you are a senior homeowner considering a reverse mortgage, keep in mind that your loan amount will be based upon the value of your home, your age, and the current interest rate. If the value of your home declines you will be eligible for less money. So please do not hesitate or wait until you get older if you think a reverse mortgage might benefit you and your family. Waiting until you are older may not offset what you will lose if your home continues to lose value. Request your personalized reverse mortgage loan quote today!

Click The Image To Watch The 60 Minutes Interview