A Second Mortgage Disaster On The Horizon?

<i><b>60 Minutes</b></i>: New Wave Of Mortgage Rate Adjustments Could Force More Homeowners To Default

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That second wave is coming ashore at a place you might call the "Repo Riviera" - Miami Dade County. Oscar Munoz used to sell real estate; now his company clears out foreclosed homes.

"Business is just going through the roof for us. Fortunately for us, unfortunately for the poor families who are going through this," Munoz explains.

"I wonder do you ever come to houses where the people are still here?" Pelley asks.

"Absolutely," Munoz says. "That's really a sad situation. I'd rather not meet the people."

Asked why not, Munoz says, "It's not easy to come in and move a family out. It's just our job to do it for the bank. It's just the nature of what's going in the market right now."

Munoz says his company alone gets about 20 to 30 assignments per day. "And we're one of the few companies right now who are hiring. We have to hire people because the demand is so high," he tells Pelley.

People who've been evicted tend to leave stuff behind. The next house is usually much smaller. Banks hire Munoz to move the possessions out where, by law, they remain for 24 hours. Often the neighbors pick through the remains.

Once the homes are empty the hard part starts - trying to find buyers in a free-fall market.

Miami real estate broker Peter Zalewski talks like a man with a lot of real estate to move. "We have 110,000 properties for sale in South Florida today, 55,000 foreclosures, 19,000 bank owned properties. Sixty-eight percent of the available inventory is in some form of distress. They need someone to clean it up."

Asked what the name of his company is, Zalewski says, "It's called Condo Vultures Realty."

What does that mean?

"That in times of distress, and in times of downturn, there's opportunity. And you know, vultures clean up the mess. A lot of people seem to think they kill, but they don't actually kill, they clean," he says.

The killing, in Miami, was done by the developers back when it seemed that the party would never end. They sold hyper-inflated condos at what amounted to real estate orgies-sales parties for invited guests who were armed with option ARM and Alt-A loans. "There were red ropes outside. They had hired cameramen, and they had hired photographers to almost set the scene of a paparazzi," Zalewski remembers.

"They were hiring fake paparazzi? To make the customers feel like they were special?" Pelley asks.

"You were selling a lifestyle," Zalewski says.

Asked what roles these exotic mortgages played, Zalewski says, "They were essential. They were necessary. Without the Alt A or option ARM mortgage, this boom never would've occurred."

It never would have occurred because without the Alt As and the option ARMs, many buyers never would have qualified for a loan. The banks and brokers were getting their money up front in fees, so the more they wrote, the more they made.

"They stopped checking whether the income was even real. They turned to low and no-doc loans, so-called 'liar's loans' and jokingly referred to as 'ninja loans.' No income, no job, no assets. And they were still willing to lend," Tilson says.

"But help me out here. How does that make sense for the lender? It would seem to be reckless, in the extreme," Pelley remarks.

"It was," Tilson agrees. "But the key assumption underlying, the willingness to do this was that home prices would keep going up forever. And in fact, home prices nationwide had never declined since the Great Depression."

On the way up, everyone wanted in. No one expected to feel any pain. People like acupuncturist Rula Giosmas became real estate speculators.