FOLLOWING THE ECONOMIC COLLAPSE IN 2008 THERE WAS SOME EFFORT
BY THE OBAMA ADMINISTRATION AND MEMBERS OF CONGRESS TO REGULATE
THE BIG BANKS THAT WERE GIVING OUT ADJUSTABLE-RATE MORTGAGES TO
INDIVIDUALS WHO DID NOT REALLY QUALIFY FOR THOSE MORTGAGES.
FAST-FORWARD TO 2018 AND IT TURNS OUT THAT NON- THINK
LENDERS WHO ARE NOT REGULATED THE SAME WAY BIG BANKS ARE
THROUGH DODD-FRANK ARE HANDING OUT MORTGAGES TO A TON OF
PEOPLE WHO DO NOT QUALIFY AND MANY OF THESE MORTGAGES ARE
BACKED BY U.S. TAXPAYERS.
LET ME GIVE YOU THE DETAILS.
THERE IS ONE NON-BIG LENDER THAT WAS PROFILED BY BLOOMBERG
AND THEY DID A REALLY GREAT JOB IN PROFILING THEM.
IT IS THE AMERICAN FINANCIAL NETWORK AND ONE OF THEIR
EMPLOYERS IS A MAN NAMED ANGELO CHRISTIAN.
HE IS A HEAVY HITTER WITHIN THIS NON-BANK ORGANIZATION.
HE IS AGGRESSIVE AND HE IS WILLING TO WORK WITH ANYONE
WITH ALMOST ANY CREDIT SCORE TO GET THEM A MORTGAGE.
TO GIVE YOU AN EXAMPLE, THERE WAS A MAN BY THE NAME OF
TAYLOR, A CORRECTIONS OFFICER BY THE NAME OF JOSEPH TAYLOR.
HE HAD JUST GONE BANKRUPT BECAUSE HE HAD $25,000 CREDIT
CARD DEBT THAT HE COULDN'T PAY OFF AND BECAUSE OF THE
AMERICAN FINANCIAL NETWORK HE WAS ABLE TO SECURE A MORTGAGE.
THAT IS NOT A GOOD THING.
THE WAY THAT YOU GET APPROVED FOR A LOAN IS THAT THEY WANT TO
ENSURE THAT YOUR DEBT TO INCOME RATIO IS IN A GOOD PLACE,
SO YOU DON'T HAVE A LOT OF DEBT BUT YOU HAVE DECENT INCOME BUT
MORE IMPORTANTLY, THEY WANT TO MAKE SURE THAT YOU GET
APPROVED FOR A LOAN WHERE YOU ARE NOT SPENDING MORE THAN
30% OF YOUR INCOME ON YOUR MORTGAGE OR YOUR HOUSING
AND IN THIS CASE, YOU HAVE AN INDIVIDUAL WHO HAS TERRIBLE
CREDIT, WHO IS ALREADY GONE BANKRUPT GETTING APPROVED
FOR A LOAN AND PAYING HALF OF HIS INCOME ON HOUSING.
MANY OF THE CUSTOMERS FOR AMERICAN FINANCIAL NETWORK
HAVE NO SAVINGS, POOR CREDIT OR NO INCOME AND SOMETIMES ALL 3.
SOME LIKE JOSEPH TAYLOR, A CORRECTIONS OFFICER WHO SAW
A ROAD SIDE BILLBOARD TOUTING ZERO DOWN MORTGAGE.
HE HAD RECENTLY FILED FOR BANKRUPTCY BECAUSE OF HIS
CREDIT CARD DEBT.
NON-BANK LENDERS ARE LOOSELY REGULATED COMPARED TO THE J.P.
MORGAN CHASE'S OF THE WORLD AND THERE ARE THEY ARE BIGGER
PLAYERS TODAY THAN THEY WERE DURING THE LAST MORTGAGE BUBBLE.
THEY ARE MAKING ALMOST HALF,
50% OF NEW LOANS COMPARED WITH 19% IN 2017, IN 2007.
THEY ARE PLAYING A LARGER ROLE BECAUSE OF THE FACT THAT
THEY ARE NOT DEALING WITH THE SAME REGULATIONS OF THE BIG
BANKS ARE.
50% OF THESE LOANS COME THROUGH THESE ORGANIZATIONS.
THIS IS NOT GOOD NEWS.
THESE ARE PEOPLE WHO ARE ONE PAYCHECK AWAY FROM NOT
BEING ABLE TO PAY THEIR MORTGAGE AND WE HAVE SOME NUMBERS ON
HOW MANY OF THEM HAVE ALREADY DEFAULTED ON THESE LOANS.
THESE ARE ONES THAT ARE SUPPOSED TO BE BACKED BY THE GOVERNMENT
AND THE NUMBERS INDICATE THAT RIGHT NOW, THE AMOUNT OF MONEY
THAT THESE HOMEOWNERS ARE SPENDING ON THEIR INSURANCE IS
NOT ENOUGH FOR THE GOVERNMENT TO COME IN AND SAVE THEM
SHOULD THEY BEGIN DEFAULTING ON THESE LOANS.
THIS IS BREWING.
THIS IS SOMETHING THAT I HAVE BEEN SEEING AND I HAVE BEEN
BRINGING UP BUT EVERY TIME I DO IT PEOPLE ROLL THEIR EYES AND
TALK ABOUT HOW DIFFICULT IT IS TO BE APPROVED FOR A MORTGAGE.
KNOW IT'S NOT.
THERE ARE THESE PREDATORS OUT THERE WHO ARE WILLING TO DO
ANYTHING AND EVERYTHING IT TAKES TO MAKE A BUCK AND THAT IS
WHAT IS HAPPENING WITH SOME OF THESE NON-BANK LENDERS TO
EXACTLY WHAT YOU SAID.
HE WILL ABSOLUTELY GET YOU BECAUSE IT MAKES HIM A LOT OF
MONEY, JUST AS PROFILE ON HIM, IT MAKES HIM A LOT OF MONEY.
THIS IS A VERY SUCCESSFUL BUSINESS FOR HIM, BUT ALSO
WHAT YOU WERE TALKING ABOUT, PAYING MORE THAN 50%
OF YOUR INCOME, THE REASON THAT YOU CAN'T EVEN GET INTO AN
APARTMENT ON THOSE TERMS IS BECAUSE IT IS NOT SUSTAINABLE.
YOU CANNOT CONTINUE TO DO THAT LAST TIME THIS ALL BLEW UP, THIS
IS HAPPENED BEFORE, THE INSURANCE OF THE GOVERNMENT
MAKES THESE PEOPLE WHO ARE TAKING THESE LOANS OUT JUST IN
CASE THEY CAMPAIGN IT BACK, THE INSURANCE COULDN'T COVER IT.
SO THERE ARE FORMER GOVERNMENT EMPLOYEES WHO
SPOKE TO THE BROOKINGS INSTITUTE WHICH DID AN INCREDIBLE
STUDY ON THIS AND I HIGHLY RECOMMEND YOU GUYS READ IT.
THEY SPOKE TO THESE RESEARCHERS AND SAID THE NUMBERS DON'T
ADD UP.
A LOT OF THESE FIRST-TIME HOMEOWNERS TO SECURE THESE
LOANS ARE SUPPOSED TO AT LEAST TO MAKE A DOWN PAYMENT OF
3.5% BUT IN MANY CASES THESE NON-BANK LENDERS GIVE THEM
THE LOAN WAS ZERO DOWN.
THAT IS CRAZY.
NOW LET'S GET INTO SOME MORE DETAILS ON THIS STORY THAT
ARE INCREDIBLY RELEVANT.
DOES ANY OF THIS SOUND FAMILIAR TO YOU GUYS?
IT'S THE SAME DANCE FROM BEFORE.
LOOK, I SAW THIS STORY ON BLOOMBERG.
I THINK THEY DID A DECENT JOB COVERING IT BUT I WANTED TO
READ THE ORIGINAL STUDY BY THE BROOKINGS INSTITUTE BECAUSE
BLOOMBERG MADE A POINT TO INCLUDE SOMETHING ABOUT HOW
THIS IS DIFFERENT, THIS IS NOT AS BAD AS WHAT WAS
HAPPENING PRIOR TO THE ORIGINAL OR FIRST FINANCIAL COLLAPSE
RELATED TO THE HOUSING MARKET BUT THEN I LOOK AT THE
STUDY BY THE BROOKINGS INSTITUTE AND THEY ARE SOUNDING THE
ALARM'S AND ESSENTIALLY SAYING THE SAME THING IS HAPPENING.
I THOUGHT IT WAS FASCINATING TO COMPARE THE TWO DIFFERENT
PERSPECTIVES AND I DO NOT KNOW WHY BLOOMBERG WOULD PRETEND
THIS ISN'T CAUSING A HOUSING BUBBLE THAT COULD COME
CRASHING DOWN VERY SOON.
IT SEEMS TO BE AT ODDS WITH THE FACTS.
THOSE OF FLIMSY STANDARDS THAT WERE PUT IN AFTER THE FALL IN 08
AFTER THE HUGE CORRECTION, AFTER THESE PEOPLE WHO PUT NO MONEY
DOWN ON MORTGAGES AND WERE GIVEN MORTGAGES WHEN THEY DIDN'T HAVE
THE ABILITY, THEY DIDN'T EVEN HAVE TO SHOW PROOF OF INCOME TO
GET SOME OF THESE LOANS APPROVED, AFTER ALL OF THAT
THERE WERE CERTAIN SAFEGUARDS PUT INTO PLACE, THEY WERE
FLIMSY, THEY DIDN'T EVEN GET ALL THE SAFEGUARDS THEY WANTED.
WHY?
WALL STREET LOBBYING AND BANKING LOBBYING BUT IN ANY CASE
MANY OF THOSE UP AND ROLLED BACK SEE DON'T EVEN HAVE THOSE
FLIMSY STANDARDS ANYMORE SO IF EVER, AND NOW WITH THIS
INFLUX OF THE SAME KINDS OF LOANS, IF EVER THERE WAS A
SITUATION WHICH WAS RIPE FOR FAILURE IT IS THIS ONE AND
GUESS WHO IS GOING TO HAVE TO BAIL OUT THESE HUGE
INSTITUTIONS AGAIN JUST LIKE THE LAST TIME?
YOU AND ME.
WE HAVE AGAIN SOCIALIZED OUR CORPORATE PROFITS.
THEY ARE ALLOWED TO MAKE THE MONEY.
WE DO NOT SHARE THEIR PROFITS DURING THE BOOM TIME BUT
WHEN THEY GO DOWN YOU WERE GOING TO HEAR, TOO BIG TO FAIL,
THE AMERICAN TAXPAYER HAS TO PAY UP AND WE ARE GOING TO HAVE
TO BAIL THEM OUT.
YES.
ONE THING I REALLY WANT TO MAKE SURE NO ONE MISSED, JUST IN
CASE BECAUSE THEY DO NOT SPELL IT OUT FOR YOU BUT THIS IS
WHAT IS GOING ON.
GO BACK TO GRAPHIC 40.
COME BACK TO ME.
THEY USE LINES OF CREDIT.
WHERE DO YOU THINK THOSE LINES OF CREDIT COME FROM?
THEY COME FROM THE BIG BANKS.
THE BIG BANKS ARE ESSENTIALLY BYPASSING THE FINANCIAL
REGULATION THROUGH THESE NON-BANK LENDERS IN ORDER
TO DO THE SAME THING, TO GIVE OUT THESE LOANS TO PEOPLE
WHO DO NOT QUALIFY.
WHERE DO YOU THINK THE MONEY COMES FROM?
IT DOESN'T COME FROM SOME RINKY-DINK COMPANY THAT
JUST STARTED.
COMES FROM THE BIG BANKS.
THEY ARE BYPASSING THE REGULATION WHICH WAS TOO
WEAK TO BEGIN WITH.
IT WAS WEAK REGULATION.
IF IT WASN'T WEAK, THEN THEY WOULDN'T BE ABLE TO BYPASS
IT AND DO WHAT THEY HAD PREVIOUSLY DONE THROUGH
THESE NON-BANK LENDERS.
OKAY, JUST MAKING THAT CLEAR.
LET'S FAST-FORWARD TO 42.
HOW MANY PEOPLE HAVE DEFAULTED ON THESE LOANS?
AT THE HEIGHT OF THE FINANCIAL COLLAPSE, ABOUT 14% WERE
DEFAULTING ON THESE LOANS, SO THIS DOES NOT LOOK GOOD AND
AGAIN, FOR ANYONE PAYING ATTENTION, ALL OF THESE ROSY
STORIES ABOUT THE ECONOMY ARE JUST TERRIBLE BECAUSE IT IS
VERY SURFACE AND SUPERFICIAL.
IT DOESN'T REALLY GET DEEP INTO WHAT IS REALLY HAPPENING.
WHY IS THE HOUSING MARKET THE WAY THAT IT IS.
HOW ARE THESE NUMBERS SOME INFLATED WHEN AMERICAN
WAGES ARE STAGNANT?
HOW IS IT ALL HAPPENING?
YOU DIG A LITTLE DEEPER AND YOU FIND OUT THAT THE SAME BS
IS TAKING PLACE AGAIN.
THIS IS AGAIN THE SAME DANCE.
WERE IN A DIFFERENT WAY THAT THESE FINANCIAL
INSTITUTIONS ARE GETTING IN TROUBLE YOU COULD SAY THEY
SHORED UP ONE PLACE BUT THEY HAVE LITTLE LEAK SPRING IN
ANOTHER PLACE BUT THAT IS NOT THE CASE.
IT IS EXACTLY THE SAME DEAL AND I AM SO GLAD YOU BROUGHT UP
THE WAY THAT THESE INSTITUTIONS GET AROUND EVEN THE FLIMSY
RESTRICTIONS.
THEY POUR THE MONEY INTO LOANS INTO THESE FLY BY
NIGHT, THESE INDEPENDENT LOAN PROVIDERS LIKE THIS GUY
PROFILED IN THAT PIECE.
IT'S A BONFIRE THAT IS BUILDING AND EVENTUALLY IT IS GOING
TO CONSUME THE REAL ESTATE INDUSTRY AGAIN AND THE REST
OF THE ECONOMY.
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