February 24, 2025 • 8 mins
Chris discusses the current state of the mortgage market, drawing parallels to the 2008 financial crisis. He highlights the risks associated with government-backed loans, the increasing debt-to-income ratios of borrowers, and the implications of government intervention in preventing foreclosures. Markowski emphasizes the burden on taxpayers and the unsustainable nature of current housing policies, warning that the situation may lead to another crisis. www.watchdogonwallstreet.com
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Episode Transcript
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Speaker 1 (00:00):
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact it we'll have on everyday Americans. Author,
investment banker, consumer advocate, analyst, and trader Chris Markowski.
Speaker 2 (00:16):
Yeah, we got ourselves another big mortgage mess. Gonna be
two thousand and eight, two thousand and nine style. No, no,
but again, we the taxpayers are going to end up
getting stuck with another big bill. We already have been,
but we really don't even know how much. Listen Finley
(00:36):
had a great piece today in the Wall Street Journal
highlighting the well the ridiculous risk that these government agencies
are are taking on when it comes to mortgages, risks
with our money. Now, I want to go back in time,
all the way back to the last mortgage blow up,
(00:59):
great recession and financial crisis. It wasn't born in two
thousand and five, two thousand and six, Okay, it took
a long time. You go all the way back to
the nineteen seventies with the Community Reinvestment Act, but it
really got put on steroids. It was really basically facilitated
(01:21):
by the Clinton administration under Andrew Cuomo, who was in
charge of housing and urban development, where they started having
all of these funky mortgages. Yeah, no interest, no job,
no assets, ninja loans, all of these adjustable rate crap
that came out of the Clinton administration because everyone has
(01:45):
to have a house. Yeah anyway, anyway, you take a look.
Now the federal government has allowed has allowed borrowers to
take out much bigger mortgages than they should and to
(02:07):
prevent foreclosures. It's bailing people out when they miss payments. That,
my friends, is not a gully. Okay, this is another
housing bubble, and it's one of the reasons why housing
prices are so high now. Obama, during the whole hamp program,
(02:31):
eased underwriting standards by enabling home buyers whose debt payments
exceed forty three percent of income to qualify for government
back loans. On like say, government back loans. Okay, you
have to all the time. You have to take government
out of it. Taxpayer backed loans meaning you and I,
(02:52):
You and I are lending to our fellow citizens, okay,
the money to buy homes that they shouldn't buy in
the first place. Now prices have gone up. Federal Housing
administration ensuring more loans to financially stretch borrowers with as
(03:14):
little I mean three point five percent down. You think
it's great to allow someone to buy a house for
three point five percent down whose debt payment succeed forty
three percent of income? What do you think is going
to be You're right? Do you think you're actually helping
that individual out? Again, the lenders don't care, and the
(03:38):
lenders don't care about much, the same thing they didn't
care back in, you know, two thousand and five, six seven,
and then when everything collapsed two thousand and eight, because
they were just selling off the mortgages again. They didn't
want to hold on to the paper, and the ones
that were holding onto the paper are the ones that
got burnt. Back in two thousand and seven, thirty five
(03:59):
percent of new FHA bowers had debt to income ratios
above forty three percent. By twenty twenty, it's fifty four percent. Now,
they keep ensuring mortgages to borrowers that are increasingly levered up.
Sixty four percent of FHA borers last year exceeded that
(04:20):
forty three percent threshold. They shouldn't be in the home
in the first place. The actual loan portfolio is riskier
now than it was in two thousand and eight. Alyssa
points out from the American Enterprise Institute Ed Pinto and
Tobias Peter, seventy nine percent of FAHA first time borrowers
(04:42):
have a month or less in financial reserves. This is extraordinary. Okay,
people are missing payments, recent bowers, people who just closed
on their house. Seven point zero five percent of FHA
mortgages issued last year went seriously delinquent. That's ninety days
(05:08):
or more past due when a payment is due. That's
within the first twelve months of getting a mortgage. Think
about that for a second. Now, under COVID, Biden basically
again paid off borrowers and mortgage services to prevent foreclosures. Now,
listen to this. Of the fifty two thousand, five hundred
(05:31):
and thirty one FHA loans last year that went seriously delinquent,
only nine were foreclosed on.
Speaker 1 (05:40):
I it's nice.
Speaker 2 (05:41):
You don't want to be throwing people out of their homes. Yeah,
this is a cash cow for mortgage servers. Okay, again,
they're getting paid to make the payments for their The
mortgage services are getting paid by the government to make
(06:03):
payments for the people that borrowed the money. This is crazy.
Mispayments are added to the loans principle without interest. The
FAHA pays the services to cut the monthly payments by
twenty five percent for three years, and that payment reduction
(06:28):
is added to the principle. Again, what's the point of
even paying. Okay, So if you're a borrower and you've
missed five four thousand dollars monthly mortgage payments, that again
the service is going to add twenty thousand dollars in
mispayments to the mortgage and reduce the monthly payments on
(06:49):
top of that by one thousand bucks for three years.
That's another thirty six thousand, So fifty six thousand dollars.
You're going to be deeper in debt. No additional inter
on this. What happens if you do it again? Eh,
rinse and repeat. So again you are you're keeping people
(07:10):
in these homes that they don't belong in, they can't afford.
And again this is all on the tax payers dime.
This is we're paying for this. Fanny and Freddie instituted
similar home retention programs for delinquent borrowers. With the Biden
Administration's blessing. The issue is right now, who wants to
(07:31):
deal with this mess? Nobody? And this is something quite frankly,
that Doge is going to have to look into. But
the reality is if we start foreclosing on people, oh
my god, oh terrible of all Trump's throwing people out
of their homes and people saying, it's my home, it's
my home, it's not your fricking home. I'm not going
(07:54):
off on this rant. Back then, during the whole mortgage crisis,
people they go, oh, you're throwing people out of their homes.
It ain't your home until you pay for it. Okay,
you cut a deal. You cut a deal with the lender,
and the deal was either you pay and they're gonna
repossess your home. It's just that simple, all of a sudden,
(08:16):
all of a sudden, Yeah, that's what actually started the
whole tea party thing with Rick Santelly on CNBC. Oh,
it's just goowing up. Be great, it's gonna be wonderful.
Now I gotta start paying for other people's mortgages. We
still are, in fact that it's probably worse now, quite frankly,
than it was then. Watch Dog on Wall Street dot
(08:37):
Com
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact it we'll have on everyday Americans. Author,
investment banker, consumer advocate, analyst, and trader Chris Markowski.
Speaker 2 (00:16):
Yeah, we got ourselves another big mortgage mess. Gonna be
two thousand and eight, two thousand and nine style. No, no,
but again, we the taxpayers are going to end up
getting stuck with another big bill. We already have been,
but we really don't even know how much. Listen Finley
(00:36):
had a great piece today in the Wall Street Journal
highlighting the well the ridiculous risk that these government agencies
are are taking on when it comes to mortgages, risks
with our money. Now, I want to go back in time,
all the way back to the last mortgage blow up,
(00:59):
great recession and financial crisis. It wasn't born in two
thousand and five, two thousand and six, Okay, it took
a long time. You go all the way back to
the nineteen seventies with the Community Reinvestment Act, but it
really got put on steroids. It was really basically facilitated
(01:21):
by the Clinton administration under Andrew Cuomo, who was in
charge of housing and urban development, where they started having
all of these funky mortgages. Yeah, no interest, no job,
no assets, ninja loans, all of these adjustable rate crap
that came out of the Clinton administration because everyone has
(01:45):
to have a house. Yeah anyway, anyway, you take a look.
Now the federal government has allowed has allowed borrowers to
take out much bigger mortgages than they should and to
(02:07):
prevent foreclosures. It's bailing people out when they miss payments. That,
my friends, is not a gully. Okay, this is another
housing bubble, and it's one of the reasons why housing
prices are so high now. Obama, during the whole hamp program,
(02:31):
eased underwriting standards by enabling home buyers whose debt payments
exceed forty three percent of income to qualify for government
back loans. On like say, government back loans. Okay, you
have to all the time. You have to take government
out of it. Taxpayer backed loans meaning you and I,
(02:52):
You and I are lending to our fellow citizens, okay,
the money to buy homes that they shouldn't buy in
the first place. Now prices have gone up. Federal Housing
administration ensuring more loans to financially stretch borrowers with as
(03:14):
little I mean three point five percent down. You think
it's great to allow someone to buy a house for
three point five percent down whose debt payment succeed forty
three percent of income? What do you think is going
to be You're right? Do you think you're actually helping
that individual out? Again, the lenders don't care, and the
(03:38):
lenders don't care about much, the same thing they didn't
care back in, you know, two thousand and five, six seven,
and then when everything collapsed two thousand and eight, because
they were just selling off the mortgages again. They didn't
want to hold on to the paper, and the ones
that were holding onto the paper are the ones that
got burnt. Back in two thousand and seven, thirty five
(03:59):
percent of new FHA bowers had debt to income ratios
above forty three percent. By twenty twenty, it's fifty four percent. Now,
they keep ensuring mortgages to borrowers that are increasingly levered up.
Sixty four percent of FHA borers last year exceeded that
(04:20):
forty three percent threshold. They shouldn't be in the home
in the first place. The actual loan portfolio is riskier
now than it was in two thousand and eight. Alyssa
points out from the American Enterprise Institute Ed Pinto and
Tobias Peter, seventy nine percent of FAHA first time borrowers
(04:42):
have a month or less in financial reserves. This is extraordinary. Okay,
people are missing payments, recent bowers, people who just closed
on their house. Seven point zero five percent of FHA
mortgages issued last year went seriously delinquent. That's ninety days
(05:08):
or more past due when a payment is due. That's
within the first twelve months of getting a mortgage. Think
about that for a second. Now, under COVID, Biden basically
again paid off borrowers and mortgage services to prevent foreclosures. Now,
listen to this. Of the fifty two thousand, five hundred
(05:31):
and thirty one FHA loans last year that went seriously delinquent,
only nine were foreclosed on.
Speaker 1 (05:40):
I it's nice.
Speaker 2 (05:41):
You don't want to be throwing people out of their homes. Yeah,
this is a cash cow for mortgage servers. Okay, again,
they're getting paid to make the payments for their The
mortgage services are getting paid by the government to make
(06:03):
payments for the people that borrowed the money. This is crazy.
Mispayments are added to the loans principle without interest. The
FAHA pays the services to cut the monthly payments by
twenty five percent for three years, and that payment reduction
(06:28):
is added to the principle. Again, what's the point of
even paying. Okay, So if you're a borrower and you've
missed five four thousand dollars monthly mortgage payments, that again
the service is going to add twenty thousand dollars in
mispayments to the mortgage and reduce the monthly payments on
(06:49):
top of that by one thousand bucks for three years.
That's another thirty six thousand, So fifty six thousand dollars.
You're going to be deeper in debt. No additional inter
on this. What happens if you do it again? Eh,
rinse and repeat. So again you are you're keeping people
(07:10):
in these homes that they don't belong in, they can't afford.
And again this is all on the tax payers dime.
This is we're paying for this. Fanny and Freddie instituted
similar home retention programs for delinquent borrowers. With the Biden
Administration's blessing. The issue is right now, who wants to
(07:31):
deal with this mess? Nobody? And this is something quite frankly,
that Doge is going to have to look into. But
the reality is if we start foreclosing on people, oh
my god, oh terrible of all Trump's throwing people out
of their homes and people saying, it's my home, it's
my home, it's not your fricking home. I'm not going
(07:54):
off on this rant. Back then, during the whole mortgage crisis,
people they go, oh, you're throwing people out of their homes.
It ain't your home until you pay for it. Okay,
you cut a deal. You cut a deal with the lender,
and the deal was either you pay and they're gonna
repossess your home. It's just that simple, all of a sudden,
(08:16):
all of a sudden, Yeah, that's what actually started the
whole tea party thing with Rick Santelly on CNBC. Oh,
it's just goowing up. Be great, it's gonna be wonderful.
Now I gotta start paying for other people's mortgages. We
still are, in fact that it's probably worse now, quite frankly,
than it was then. Watch Dog on Wall Street dot
(08:37):
Com
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