Mortgage Loan

The 2020 Mortgage Crisis Explained





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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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.

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25 comments

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    Reply
  2. Maybe the banks could rework and come up with a different system instead of preserving the old.
    I believe there are many other practical ways for property purchase and viceversa?

    Reply
  3. I believe your right! Do you think this is a good time to save your money to get realest at a good price in a few months? You should make a video on that topic! I believe if your able to save some cash this might be a great buying opportunity.

    Reply
  4. So if your rental(s) are owned outright with no mortgage the tenant is still require to pay rent or risk eviction. Thanks for your opinion

    Reply
  5. You’re a smart guy… Did you get DW to send you a free kit to advertise it in the background? 🤔🤔🤔

    Reply
  6. Thank you for your detailed explanation for common folks like me who does not understand any mortgage terminology.

    Reply
  7. 09:37 Freddie Mae and Fannie Mac!!! I'm just excited because I used to them confused with each other, and I'm able to recognize it now. Kinda like when I was 4 and I was able to recognize my shoes being on the wrong feet.

    Reply
  8. I smashed the like button. Instructions unclear… penis is now broken

    Reply
  9. Hi Graham, please post my comments in your next videos too, otherwise I ll call you stupid too 🤣😂🤣😂🤣 just kidding

    Reply
  10. Just bought my first house at 21 yay!

    Reply
  11. I've taken to watching/muting the commercials on your and other channels I support so you get the advertising $$! Community support Thanks for all your awesome content.

    Reply
  12. I wonder what is your advice for those who are leveraged to their eyeballs expecting houseprices to be inflating and their tenants making their payments on time. Guess it will be a long year for them.

    Reply
  13. investing in stocks was difficult at first when i was struggling with the market and little knowledge i had until i met Mrs Sandra Gail Gaines a financial broker now my portfolio manager… i started trading with her this time 2019 and i have made about a million dollars..by this time next year, i hope it gets to 2 million dollars….she's the best out there

    Reply
  14. My mind is blown.

    Reply
  15. Got my home refinanced for 15 years at 2.5% APR. I had a 30 year mortgage for 3.625% APR and had 21 years left but now I'm paying an extra $150 a month but only 2.5% interest which is UNHEARD OF and practically free money!

    Reply
  16. Freddie Mae & Fannie Mac…who caught that! 🤣 Great video, keep it up!

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  17. money printer go brrr

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  18. I think you just solved the Toilet Paper shortage, the Federal Reserve can just print more money so we can all wipe.

    Reply
  19. 9:39 *Fannie Mae and Freddie Mac

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  20. Sorry Grant but unfortunately you are completely wrong on this one, things are going to get worse, much, much worse, especially as the problem grows exponentially. I've been prepared since Feb and I feel I'm late to the party and can only imagine those that are still in denial. Put your blinds on because it's going to be a scary roller coast ride. Stay Safe!

    Reply
  21. Hello graham. I am a young man looking about to start a small business. Any advice? What do you think is most important for me right now?

    Reply
  22. That is not what happened in 2008

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  23. I’m about to put my house up for sale and I’m a bit nervous 😬

    Reply
  24. But Graham what kinda of watch are you wearing?

    Reply
  25. Dang Graham, that’s a lot of info to unpack. Great video man, I learned a lot.

    Reply

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