Wednesday, May 20, 2009

Are we in the eye of the mortgage storm?

Hurricane Floyd

Whitney Tilson,hedge fund T2 Partners who predicted the credit crisis late last year, spoke in detail on 60 minutes and again on's article More Mortgage Meltdown.
Here are some interesting statistic from Whitney when asked the following on 60 min - "How big is the potential damage from the Alt As compared to what we just saw in the sub-primes?" Pelley asks. "Well, the sub-prime is, was approaching $1 trillion, the Alt-A is about $1 trillion. And then you have option ARMs on top of that. That's probably another $500 billion to $600 billion on top of that," Tilson says. Asked how many of these option ARMs he imagines are going to fail, Tilson says, "Well north of 50 percent. My gut would be 70 percent of these option ARMs will default."
"How do you know that?" Pelley asks.
"Well we know it based on current default rates. And this is before the reset. So people are defaulting even on the little three percent teaser interest-only rates they're being asked to pay today," Tilson says.

And on May 20th Reuters reported that Hedge fund T2 Partners LLC is selling financial stocks that have soared since March, expecting the fallout from the mortgage crisis will produce more losses for banks. read on

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