Morton

Tell your car repair mechanic, your favorite restaurant owner, and the owner of your pool cleaning service that it is last call for subprime industrial loans. I estimate that the subprime commercial mortgage loan market will reduce by 75% within six months. When they don't apply within the next couple weeks if these small enterprises are actually going to draw some money out of their commercial houses to tide them through the coming recession, it may be too late.

The way in which that Wall Street creditors, like Bayview Financial (a fine organization and friends of ours), increase their lending money is always to securitize their subprime commercial loans. They place the loans in a huge share. They assign the share of loans to a trust. The trust problems bonds guaranteed by the loans in the trust.

Then investment bankers sell these securities in to the Asset-Backed Securities (ABS) market. Along with subprime industrial loans, credit card debt and car loans are also often sold as ABS ties.

The issue is that the customers of these ABS bonds are now requiring massively higher yields. I read in Bloomberg yesterday that the buyers of AAA-rated ABS bonds are currently demanding yields that are the full the next day (200 basis points!) greater than these were just nine months ago. The appetite for ABS ties is obviously waning.

Additionally, Wall Street subprime commercial lenders may also be having to reduce their loan-to-value ratios. For instance, its high-LTV program was recently lowered by Silverhill Financial from 97% to only 85% loan-to-value.

These changes are a warning that the marketplace for ABS ties could be drying up. If Bayview, Lehman Brothers and the relaxation of the Wall Street subprime commercial creditors suddenly call back their programs, the relatively small tough money commercial lending companies will undoubtedly be unable to handle the overflow. Subprime industrial mortgage lending could mostly dry out, and it could happen rapidly.

Therefore you have to tell the master of your preferred coffee shop and your auto body repair person that if they're actually going to try to borrow against their buildings, they better do it! cleaning service