Here is an update on the news about the upcoming mortgage crisis, how this works, and what it means for everyone watching - add me on Instagram: GPStephan
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Helpful source: https://www.mbshighway.com/mortgage-crisis.html
When you go and apply to get a home loan, you do what’s called a “RATE LOCK” on your mortgage. But, when you lock in a rate like this…the bank is agreeing to give YOU a promised rate, but the BANK doesn’t know what the ACTUAL rate is going to be at the time you actually close the loan. So, because the bank doesn’t want to lose money in the event interest rates change…they’ll hedge their investment but making the reverse bet of whatever YOU do. So, they do this by SHORTING Mortgage Backed Securities.
HOWEVER…when the FED steps in and says, “Don’t worry guys…we’re going to guarantee these loans, nothing to see here!” - it drives interest rates DOWN, causing the price of these mortgage backed securities to go UP - causing banks to lose a LOT of money on their hedged, short positions, betting that the prices of these investments would go down.
So, banks go and put up more capital to offset those losses…that means, less money they can lend to consumers…and, from there, a problem arises when less money flows back into the economy to people like you and I.
But then, there’s one more layer of complexity with this whole situation…somewhat on topic of what we talked about, but it’s another potential issue that I’ve been been seeing on multiple articles lately…and that’s missed mortgage payments.
Part of the relief package includes potential mortgage payment forbearance of up to 180 days, with another possible extension of an additional 180 days beyond that.
HOWEVER…even though YOU aren’t making the payments on your mortgage, the mortgage servicer - or, the ones who handle and process those payments - are still on the hook for paying what you don’t. They’re obligated to keep the money flowing into those mortgage backed securities, the same ones which were bought by investors who want a safe and stable return on their money.
And that poses another problem…if a significant amount of people hold off from paying their mortgage, how much will these loan servicers be out, and how long can they stay afloat during a time where they’re obligated to continue making payments?
If you’re in a position to invest money, then - sure - you might be able to buy something at a lower price. And, if you’re SELLING your home, it could be slightly more difficult to get a high price, and a buyer who’s fully qualified to close on the loan.
But, this is most likely going to affect smaller, more vulnerable banks in the short term than it is going to affect you and I directly. Again, JUST MY OPINION HERE.
And now - at the very least - I hope this provides some context and explanation for what’s been going on, so the next time you read a headline about the mortgage crisis - you have some background, and can stay better informed and kept up to date.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available.
Get 2 Free Stocks on WeBull when you deposit $100 (Valued up to $1400): https://act.webull.com/k/Vowbik9Tm5he/main
NEW: JOIN THE WEEKLY MENTORSHIP - https://the-real-estate-agent-academy.teachable.com/p/graham-stephan-mentorship-program/
The YouTube Creator Academy:
Learn EXACTLY how to get your first 1000 subscribers on YouTube, rank videos on the front page of searches, grow your following, and turn that into another income source: https://bit.ly/2STxofv $100 OFF WITH CODE 100OFF
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
Helpful source: https://www.mbshighway.com/mortgage-crisis.html
When you go and apply to get a home loan, you do what’s called a “RATE LOCK” on your mortgage. But, when you lock in a rate like this…the bank is agreeing to give YOU a promised rate, but the BANK doesn’t know what the ACTUAL rate is going to be at the time you actually close the loan. So, because the bank doesn’t want to lose money in the event interest rates change…they’ll hedge their investment but making the reverse bet of whatever YOU do. So, they do this by SHORTING Mortgage Backed Securities.
HOWEVER…when the FED steps in and says, “Don’t worry guys…we’re going to guarantee these loans, nothing to see here!” - it drives interest rates DOWN, causing the price of these mortgage backed securities to go UP - causing banks to lose a LOT of money on their hedged, short positions, betting that the prices of these investments would go down.
So, banks go and put up more capital to offset those losses…that means, less money they can lend to consumers…and, from there, a problem arises when less money flows back into the economy to people like you and I.
But then, there’s one more layer of complexity with this whole situation…somewhat on topic of what we talked about, but it’s another potential issue that I’ve been been seeing on multiple articles lately…and that’s missed mortgage payments.
Part of the relief package includes potential mortgage payment forbearance of up to 180 days, with another possible extension of an additional 180 days beyond that.
HOWEVER…even though YOU aren’t making the payments on your mortgage, the mortgage servicer - or, the ones who handle and process those payments - are still on the hook for paying what you don’t. They’re obligated to keep the money flowing into those mortgage backed securities, the same ones which were bought by investors who want a safe and stable return on their money.
And that poses another problem…if a significant amount of people hold off from paying their mortgage, how much will these loan servicers be out, and how long can they stay afloat during a time where they’re obligated to continue making payments?
If you’re in a position to invest money, then - sure - you might be able to buy something at a lower price. And, if you’re SELLING your home, it could be slightly more difficult to get a high price, and a buyer who’s fully qualified to close on the loan.
But, this is most likely going to affect smaller, more vulnerable banks in the short term than it is going to affect you and I directly. Again, JUST MY OPINION HERE.
And now - at the very least - I hope this provides some context and explanation for what’s been going on, so the next time you read a headline about the mortgage crisis - you have some background, and can stay better informed and kept up to date.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available.
Glad things worked out 🙂
I'd love to have a retrospective on this video on how things actually turned out because yeah, there's no shortage of mortgages going around rn.
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Love what you're doing for the Velocity Banking Community. Keep it up!
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We are in a prop up economy. We need to go back to Main Street and not Wall Street.
Greetings from Canada! Excellent video Graham! You provide outstanding information, please keep it up 🙂.
i want to go to real estate school, is the timing good? PLEASE ANSWER ME
Do a quick google search for ECOM BAZZOID someone posted your courses Graham
Do a quick google search for ECOM BAZZOID someone posted your courses Graham
Air BnB should switch to renting for seecurity
Minimum wage markets and earners really run the cash cycles around the business world. There at home right now living on savings or gov stimulus. Those secure in savings or debt ratio or employment aren't slowed down.
This is a fantastic video for us amateurs to want to be informed and need the basics to understand it all.
Expertly explained!
I’ve pretty much started mutilating the Like button as soon as your videos start. Glad I found your channel!
Hey Graham! Since Mreit's are down is it a good time to invest in them.
Acting like Printing money and bail outs won’t have an effect at all…
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I have a credit score of 485 and so many negative items on my credit report that are from 6 month ago, I also have a good mix of credit which is student loan and credit cards. I have been declined of a car loan, A friend of mine introduced me to a ethical credit repair specialist and digital forensic specialist Mr ANdy, He help me increase my credit score to 800 excellent plus and also delete all my negative items of my credit report. Contact him through his website… andyhackscreditfix org,👏👏👏
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I actually understood that. I'm impressed with myself.
24 Trillion Dollars inDebt!