The Next Subprime Mortgage Default Tsunami Will Affect Business Owners

An National Association of Self Employed (NASE) survey at www.nase.org (created by Prof. Samuel D. Bornstein and Jung I. Song) was the first to provide compelling evidence of small business involvement in the next wave of defaulting subprime mortgages.

According to this survey, it is estimated that 3,709,800 small business owners hold toxic mortgages and 1,279,800 are already delinquent as they have missed one to three or more monthly mortgage payments at mid-November, before the expected resets that are scheduled to begin in 4th Quarter 2008 and continuing through 2012. There are an estimated 16 million small businesses employing 1-10 people in this country.

These self-employed small business owners will be at risk of default as their monthly mortgage payments skyrocket when the resets occur. When combined with the overall reduction in revenues this problem is rapidly growing to be the biggest economic problem of all. Small business owners were especially targeted for these loans which required little or no documentation of income and that appealed to many small business owners who were previously unable to qualify. These loans provided the necessary capital required to fuel small business start-ups and development.

The resulting defaults will be the cause of the upcoming second tsunami of foreclosures that will dwarf the previous subprime crisis and will take many homeowners and small business owners out of their homes and businesses, as well as costing the economy millions of lost jobs. The important point for the small business owners who borrowed to fuel their businesses to be aware of is that they are vulnerable and should take action as soon as possible. Every day that the small business owner fails to act and attempts to absorb losses they are wasting precious capital and attempting to tread water in this deep water environment that includes increasing debt service and reduced revenues. There will be few who survive if preventative action is not initiated.

You are not alone. There will be millions of small business owners in a defaulting position and likely to fail and lose everything, including their homes, if something is not done to provide relief. Unfortunately, there are few programs available to address this issue leaving each to fend for themselves. Fortunately, we at Second Wind Consultants have a plan to address this issue which will provide significant debt reduction relief and preserve the assets important to the successful implementation of your business. Act now, delay can be fatal.