Lender View: Here's what coming next....the outlook is not good.

[Paul Birkett]

Mortgage Update: Outlook is not good.

The economy continues to shudder to a halt. As I write, lower manhattan looks like a ghost town. My local coffee shop typically turns about $1,000/day. Yesterday, Carlos had taken $92 with $15 in tips. In Manhattan, that buys 2 subway rides and a sandwich.

So what?

Carlos lives with his extended family in a 3-unit building where he rents 2 units and lives in the basement. His tenants have asked if they can pay late. You can probably guess where this is going.....

A small portion of our loan book consists of performing mortgages (~5%). Almost all are late.

What next?

1. Expect up to 25% of mortgages to go delinquent in the next 90 days. 20% of the workforce are employed in leisure, retail and consumer-facing services. They are all missing paychecks.

2. So far, 11 states have issued debt collection, eviction and foreclosure advisories or moratoriums (requesting creditors to cease recovery activities). Most states will follow.

3. Delinquent borrowers living pay-check to pay-check will not be able to catch up. Whether it's 3 payments or 5 or 10....how can you pay when you have no job?

4. We could see a repeat of 2008. I guess its a 30% probability

Paul Birkett