1.5 Million Face Immediate Risk of Job Loss as a Result of Small Business Owners Who Took out Toxic Home Mortgages according to Bornstein & Song, CPAs & Consultants Study with MerchantCircle
Toxic Mortgage Study will Continue Nationally, Including Florida, Arizona, Michigan, and Nevada
Los Altos, CA April 23, 2009— New study results show more than one-third of all California small business owners took out risky or toxic mortgages such as Alt-A, Alt-A ARMs, Option ARMs, Interest-Only, and Subprime, etc. to get cash for business expenses during the peak of their home values from 2004 to 2007. As the first wave of mortgage resets hit, small business owners will be at-risk of “payment shock” and default as their monthly mortgage payments skyrocket. The toxic mortgage resets began in the 4th Quarter 2008 and will continue through 2012. “The resulting defaults will be the cause of the 2nd “Tsunami” Wave of Foreclosures that will dwarf the subprime crisis and will take many homeowners and small business owners by surprise. In California, these inflated mortgage payments will threaten more than 2.1 million small business jobs,” said Prof. Samuel D. Bornstein.
The California Small Business Toxic Mortgage Survey is the first to provide compelling evidence of California’s small business involvement in the toxic mortgage crisis, foreclosures, and job loss. The survey was created and analyzed by Prof. Samuel D. Bornstein and Jung I. Song of Bornstein & Song, CPAs & Consultants, as part of their small business research which they have been conducting since 2000.
MerchantCircle was selected by Prof. Bornstein & Jung I. Song, CPA to run this survey. MerchantCircle comprises the largest number of small business owners in the US with more than 770,000 members. Its membership provides a legitimate sample of the nation’s small business owner community.
“I purchased my home in 1999 for 235K,” says Keith Capsuto, owner KC Photography & Music in Oxnard, CA. “Within the first 3 yrs. it had a value of $650K. I did the foolish thing of buying the home with an ARM loan to save money for business expenses. Up to the turnaround in the real estate market, I had been doing a fair amount of business, but it dwindled off sharply and by 2008, I was almost bankrupt. Now in 2009, business is about gone! I am 8 months behind on my mortgage with credit cards up to the hilt from business expenses. I am attempting to work with my mortgage company and on the brink of filing for bankruptcy.
This survey confirms Prof. Bornstein and Jung I. Song, CPA’s research and highlights the fact that “small business holds the key to a solution of this crisis and must be addressed in order to mitigate the nation’s foreclosures and job loss.” The survey determined that a significant number of California small business owners are at-risk of losing their homes to foreclosure and their businesses to failure at the resetting of their toxic mortgages. “The resulting job loss will contribute to California’s spiking unemployment and cause further financial distress to California’s economy,” according to Prof. Samuel D. Bornstein.
“Small business owners are the key to our nation’s future success – as they create roughly 2/3 of all new American jobs,” says Darren Waddell, Vice President of MerchantCircle. “With the nation’s largest small business membership base, it’s very important that we work to highlight issues that they face collectively as a group and bring it to the attention of our elected officials.”
Survey Highlights:
“It is a tragedy when an individual borrower defaults on the mortgage and loses his/her home. The tragedy is magnified when the borrower is a small business owner employing from 1 to 21+ employees. The loss of jobs related to mortgage default and the resulting business failure will further weaken our economy and prolong the recession,” said Prof. Samuel D. Bornstein.
Estimated Job Loss for CA Small Business Owners Who are “Very Worried”(2009 to 2012)
Estimated Job Loss for CA Small Business Owners Who are Now Delinquent
* Based upon 3,363,476 CA Small Business Owners, according to 2007 report prepared for the Small Business Administration’s office of Advocacy.
Founded in 2005, MerchantCircle is the largest social network of local business owners in the nation, combining social networking features with a customizable web listing that allows local merchants to attract new customers. More than 15 million MerchantCircle business listings across the country are easily accessed on major search engines.
Currently, over 670,000 merchants on the MerchantCircle network upload pictures, blog, create coupons and newsletters, and connect with other merchants. In addition to its free services, MerchantCircle offers a portfolio of online advertising services including Search Engine Marketing, Website Directory Submission, Web Content Creation, Instant Website Development and Business Verification Services.
MerchantCircle is located on Main St. in downtown Los Altos, Calif., and is funded by Rustic Canyon Partners, Scale Venture Partners, Disney’s Steamboat Ventures, and IAC. Learn more at www.merchantcircle.com.
