Last week 60 minutes ran an exclusive report on the mortgage crisis and how we may have a second wave of mortgage defaults in 2010 and 2011 from Alt-A loans and option arm resets. In the interview Investment fund manager Whitney Tilson says we may only be half way through the unwinding bursting of the bubble. He claims that the trouble now is that the insanity didn’t end with sub-prime loans. Two other types of exotic mortgages, namely Alt-A and “option arms” are now starting to default and he projects that number to increase significantly over the next 2-3 years.
Watch the video below….
It is very interesting listening to this interview and wondering how accurate his prediction is as there are so many variables that may affect this mortgage mess in the coming years. For instance, how many mortgages will be refinance before the resets? Will lower interest rates stem some of this pain? What will congress do over the next year to stimulate housing? What will the state of the economy be in the next year or two? How about the psychology of the home buyer and whether they think housing is a bargain? etc…..
So much to consider, but one thing is for sure……it will be one wild ride!
