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

[Jay Hinrichs]

Originally posted by @Cameron Tope:

Originally posted by @Bob Malecki:

Sure @Cameron Tope since I can't evict my tenants and they can't pay rent from being laid off should I just pay my mortgage anyway. There are thousands of mom/pop investors who will experience this. 

How many tenants do you have and how many of them are laid off? 

The odds of all your tenants being laid off is extremely low as the unemployment rate went from 3.5% to 5.5%. 

My point was that it's easier to pay a mortgage on a small portfolio of SFRs than a multi-million dollar apartment complex. 

Does that make sense?  

one of my bizz partners I was talking to yesterday ( doing a lot of that lately) has 150 unit building B class Pac Nor west .. his PM called and said to expect 40% non pay for April.. as long as this is confined to 1 to 2 months most every landlord should be able to pull through this. If its really prolonged then of course its everyone's guess.

the latest crop of I want to be a syndicator and doing their first deals I think will be the first to tumble.