Mortgage Defaults Are About To SKYROCKET

One of the main arguments I see about why right now in 2025 is nothing like how it was back in 2008 regarding the housing market is because the lending situation is much improved versus back then because you see back then anybody could get a loan if you had a pulse essentially. There was almost no underwriting standards in place. It was very loose and very easy to get a mortgage even if you were not qualified. Well today that is no longer the case supposedly, but it seems like a lot of the policies that are going into place are all aimed at rolling back a lot of the protections that were put in place after the last 2008 housing market crash. And one recent example of that is the vantage score. When Biden was still president his administration took steps to enable less credit worthy borrowers to qualify for mortgages to support the housing market. But now that Trump is president he's doing the same thing trying to boost homeownership and boost home sales by lowering the borrowing standards. Because here's the thing, government sponsored loans from Fannie Mae and Freddie Mac have long required that home lenders use credit scores generated by the Fair Isaac Corporation also known as FICO. That's your FICO score, your credit score from FICO. Well now that Bill Pulte who is the CEO of Pulte Home Builders is the director of the Federal Housing Finance Agency. He's a big proponent for now using the vantage score as well as the FICO score to be able to qualify for a home loan. And this is going to change the landscape of how easy or difficult it is to receive a mortgage in the future. Right now it's being said that the vantage score is more inclusive than the FICO score because it incorporates rent, utility, and telecom payment histories which is not necessarily a bad thing. But this also means that younger and lower income people who rarely borrow or use a credit card can still get good vantage scores doesn't necessarily mean that they're qualified to buy a home. In fact they're saying right now that the vantage score could allow up to five million more prospective homebuyers to qualify for loans right now. Check this out there's a deer crossing the street right in front of me. Oh there's a bunch of them. It's a family, a deer family. So cool. Now Bill Pulte he says that the vantage score will boost competition and reduce closing costs for borrowers since FICO does charge a fee for its scores. But we're talking you know very small reductions in closing costs here nothing really to worry about. But one of the big risks moving forward is that lenders will rely on vantage scores ratings to qualify marginal borrowers and make riskier loans. And one of the reasons this can be risky is because traditionally the vantage scores are higher than FICO scores and if lenders start relying on this more well then obviously that's going to shift the landscape of who's qualified and who's not. And we're already in a situation right now actually where mortgage delinquencies are on the rise as borrowers are being squeezed by inflation and rising homeowners insurance premiums, rising property taxes, the whole thing. So we're already seeing financial distress among current homeowners before they put this into place. Imagine what it's going to be like afterwards once it's easier for people to get a mortgage. And these people who got the mortgages were traditionally lower risk. So if the vantage score opens up a pool of 5 million additional homebuyers that are actually a higher risk, what do you think the default rate is going to be in the future? And think about it like this, during the pandemic we had all the stimulus checks, there was a lot of payments on pause, people didn't have to pay rents, people didn't have to pay mortgages, people didn't have to pay for student loans. Well now that all that has been reversed some of those borrowers got loans back then and it seemed like it was less risky at the time because they just didn't have those payments but now fast forward they have all these payments and clearly people are struggling financially that's why we're seeing these delinquencies shoot up. This is especially true for student loan borrowers because TransUnion they recently reported that 31% of federal student loan borrowers had a payment due in April that were 90 days late or more. So the delinquencies are triple what they were a few years ago and a lot of these newly delinquent student loan borrowers have seen their credit scores drop on average 60 points but how many of them qualified for mortgages based on previously artificially high credit scores? That's the same problem we could be looking at with the vantage score thing. So we're already seeing problems develop in the housing market, we're already seeing home prices come down, we're already seeing borrower delinquencies go up and somehow the current administration thinks oh this must be a good time to ease lending standards you know it's just like one bad decision after another really when it comes to trying to juice the economy because that's what they're doing right they're trying to juice the economy and make things look good. No president or no administration ever wants things to look bad under their watch so they do things like this that are not really very smart they try to make things look good in the short term that makes everything worse in the long term kind of like the big beautiful bill check out this gto this thing is sweet very nice ride and another thing that's happening is more people are being pointed towards getting an adjustable rate mortgage in this environment because mortgage rates have not come back down to where everybody was hoping that they would. You know I just made a video the other day talking about how a lot of these homeowners that bought in the past two or three years who are betting on interest rates to come down haven't seen that reduction and they're now paying the price because they got either a mortgage rate buy down or they bought a house they could barely afford three years ago and now the mortgage payments are up you know four or five hundred dollars a month due to higher insurance premiums due to higher property taxes and suddenly it's unaffordable and that promise of being able to refinance is no longer there since rates haven't really budged well now more people are being pushed into trying to get one of these adjustable rate mortgages this is the advice that a lot of lenders are giving homebuyers today and you know the crazy thing is guys think about this as well we're already in the middle of july right now the home buying season is essentially over you know school starts again in like what a month from now something like that and this is pretty much when home buying season is winding down to a close you start seeing home sales start to go down from this point forward throughout the rest of the year and the crazy thing is they never even really went up so the mortgage industry obviously is getting desperate so what are lenders telling people you should start looking at adjustable rate mortgages one mortgage lender here in this story says that they can offer an adjustable rate mortgage with an interest rate well below six percent so what is well below six percent to me that means somewhere probably in the low fives right so probably like a point and a half lower than getting a traditional 30-year mortgage right now i can tell you right now guys whatever the savings is it is not going to be worth it at least for the vast majority of people unless you have an exit strategy where you know you're going to be able to get out of that loan before it's time to refinance because with adjustable rate mortgages the loan rate that you're getting is usually fixed for the first five to seven years and then after that it can adjust every six months thereafter and it is working on some people some people are taking the bait on this because according to the mortgage bankers association 7.7 percent of applications last week were for adjustable rate mortgages and i just have to say as somebody who sold homes for a living for a solid 13 years guys it's just never worth it you know i think the whole time i worked as a real estate agent i had one client get an adjustable rate mortgage and the reason he did it is because he knew he wasn't going to keep the house for more than five years that was the plan he already had an exit strategy the plan was to buy the house live in it for a few years remodel it turn it around for a profit so for him it didn't matter because he knew he wasn't going to stay living in the house so by the time that the period was over and the mortgage could adjust he would already be out of the house so it did work for him and that's pretty much the kind of person it's meant to be for you have to be savvy with these things but if you're buying a home with an adjustable rate mortgage with the hope that you're going to be able to refinance later down the road and your plan is to stay in the property long term that can be a very bad move just like people who were promised that a few years ago if you missed that go watch this video because it's a great example of how people kind of believe that lie and are now stuck with payments much higher than they thought they were going to be in fact you are always better off trying to get a lower price off of the listing when you're going to buy a home rather than jump into some kind of sketchy mortgage situation that you're not sure you're going to be able to get out of or refinance out of into the future and here's what i mean Ron one of my viewers sent me this email from a 55 and older community at least it seems like one of those in Ocala Florida and look at this headliner here save up to 78,000 dollars on exclusive move-in ready homes and then they show you this banner here of the homes that are available for sale and how much they're slashing prices here like these are good like 15 percent price reductions here and some of these homes are still sitting on the market you know going down from 544,000 down to 465,000 and still unsold that's quite the discount and some of them that did sell sold for about 15 off and something i have said like a hundred times before on this channel but i will say it again especially if it's the first time you're ever watching one of my videos is you can never change the purchase price of the house you can always change your interest rate at some point doesn't mean it's always going to be a favorable time to refinance but it is possible to change it you're not in control of how much your property taxes go up you're not in control of your homeowner's insurance or anything like that but you are in control of how much you pay for the property and i think that is the most important factor that you pay attention to moving into a home purchase now and into the future and speaking of insurance another story that was recently sent to me was about how a lot of insurance companies are now refusing to cover properties in climate change risk zones that's what insurance companies label some of these areas as climate change risk zones where it's so risky that they're refusing to write coverage and some of those are right here in california and in florida where i live take a look at this there's been a surge in non-renewals for insurance policies from 2018 to december of 2024 about 1.9 million home insurance policies were non-renewed in the united states that's 2 million people losing homeowner's insurance and remember you need to have homeowner's insurance in order to comply with the terms of your mortgage if you have a mortgage in fact non-renewal rates have tripled in over 200 us counties and california florida and north carolina are the hardest hit states out of all of them and obviously this is because of the storms because of wildfires because of flooding because of hurricanes all of it and the damage from these storms has been astronomical in terms of cost mainly because of inflation and labor costs how expensive everything has become after the pandemic and these companies they just don't want to pay or they don't want to take the risk that they might have to pay you see take a look at this this is what i was talking about in you got solar panels on top of a shingle roof where they have to poke holes in the roof that's exactly what professionals say not to do right there so the government's response to this is that some states are kind of allowing insurance companies to raise premiums if they continue coverage in the high-risk areas and that's like the trade-off in the deal that they're making so people can still keep their insurance but obviously your insurance rates then go through the roof companies like all state they stopped selling new homeowners insurance and condo policies in california back in 2022 citing rising costs and weather risks state farm also halted new housing insurance sales in california in 2023 and about 12 insurance companies have pulled out of florida since the beginning of 2024 so little by little it's like some of these areas are just becoming uninsurable and this can have real implications on the future housing market because not being able to obtain insurance on large areas of the country leads to declining home values and lower demand and ultimately empty homes lower property values even further and it reduces local tax revenue so basically more and more communities are at risk of being left behind if there's no action taken but honestly you know people want the government to do something all they typically do is mess things up and make things even worse for us in general so i don't really see the solution to this guys really the only solution i think that's really gonna work for most people and it only works if you have no mortgage is going to be self-insuring in the future i think that's the direction things are heading is having no mortgage and self-insuring and having that be a problem in a lot of areas across the country is greatly going to reduce property values because if you have to be able to have no mortgage well guess what who's going to be able to buy those properties only people that actually have enough cash to buy them right that's it here's a house that was listed for sale back in april for 1.4 million then they did a 50,000 price cut and shortly after that they were actually able to get the house under contract right now this place is pending it looks like these are the type of houses you really see selling around here in marin county are the more affordable houses i know 1.35 million doesn't seem very affordable for a lot of areas across the country but when median home prices around here are about three million dollars that's not a bad deal now one other thing i want to bring up is this hoa nightmare story that was sent to me that i thought was kind of interesting and funny at the same time because i've never heard of anything like this before so i wanted to share with you guys there's a neighborhood in pinellas county florida called stonebriar and this community is a community of single-family homes that is within an hoa and they are facing an 82 000 special assessment all because one neighbor decided to put up one of those plastic snap together sheds in their backyard and what happened is the neighbor put up this shed and they were asked nicely by the hoa to remove it he refused to remove it and he actually put in the application with the hoa to get their permission and they never said if it was okay or if it wasn't okay so he ended up just putting it up anyways well now because of this shed the hoa is going through a lawsuit with this one property owner to get him to remove this shed and the 82 000 special assessment is for all the legal fees that are being incurred by the hoa to fight this lawsuit and everybody in this hoa has to pay i mean i have never heard of anything like this before guys if you have let me know but this just sounds ridiculous and it's funny because the story that talks about this has some pointers on what you can do in order to make sure you don't get blindsided by one of these special assessments well first of all there's nothing you can do to prevent getting blindsided by a special assessment they can just come out of nowhere especially when things like this happen but the first one that's kind of funny it says budget for the unexpected like as a homeowner you got a budget for the unexpected no matter what type of property you buy that is the reality guys whether it's a property in an hoa a condo a regular single family home like in a neighborhood like this you always got a budget for the unexpected because you will get hit with the unexpected one day in fact you should be saving somewhere in the neighborhood of probably at least five grand a year putting that towards just the unexpected fund for your property unexpected household expenses typically add up to being about one percent per year based on the home's value so if you have a three hundred thousand dollar house you can expect three thousand dollars a year to be spent in unexpected expenses that's a realistic number and obviously it goes up from there but really the best way to avoid situations like this like a big unexpected special assessment the god's honest truth is to just stay away from buying any property in an hoa that's the only foolproof way 100 guarantee that you're never going to have to pay a special assessment that's it you're still going to have unexpected expenses as a homeowner but special assessments are in addition to that so if you never want to face a situation like this never buy a home in an hoa community that's basically the only thing i can really tell you that will help you so if you enjoyed this video make sure you subscribe to the channel and if you don't want to wait for my next video to come out check out this one on the screen right over here and i'll see you in the next one