EP 10 - 2020 Mortgage Crisis & New $2,000 Stimulus Package?
Welcome to the broke millennial finance podcast a podcast about boosting your financial literacy and giving you the tips and incites to brighten up your financial future. We'll share personal experiences and real world examples to help guide you on your financial journey. Are you ready? I'm ready. I'm ready? I'm ready to show start right now. What's up everyone this is Mohammed Khan here host of broke millennial finance podcast talking about episode. Ten today yes. We have finally achieved ten episodes. Who are in this week's episode. Fahahd will not be actually joining us today kind of sad about that. He's a little bit sick. He does not have the virus just an FYI but he is a little bit sick. He has a sore throat so he won't be able to join US. Kinda sad special episode episode ten very happy very excited. A lot of people are listening to us. You know checking us our listen to our podcast checking out the channel a whole lot of the good stuff so we really appreciate it from all if you all of our listeners and viewers and thank you wanted to like just let you guys know that but today's episode we're going to be talking about the possible twenty mortgage crisis and a new two thousand dollars. Stimulus package that is being proposed by the I believe Democratic Party so so I point we're GonNa talk about is in this episode will be the mortgage crisis on my. I guess my current perception of how everything's going to be playing out and how like banks and other party members are like taking this into consideration just because of current times that are occurring so right now the reason I brought this up because our housing market in general and the US was booming. A Lot. Recently we were actually doing really good house. Prices were going out. Price appreciating pretty damn. Well there was a lot of supply. Demand was really high. I feel like the demand was actually. The supply was not meeting the demand so that was actually happening a lot so there was certain states. Were doing a lot of constructions. So construction was booming. All but certain states weren't able to keep up with construction similar. I would say something like New York City. Because not enough. Land whatever's there is there so prices just appreciate people just wanted to buy so a lot of people are usually just telling their houses and then retiring bows next thing. That was happening. A lot of people were just retiring. General selling their houses. So a lot of millennials such as ourselves are most listeners on this show I should say we're ending up like buying houses trying to become first time homeowners etc and it was actually going down that route but now it's going to be a little bit more tricky with specific states. I should say or majority of the country. Actually I should say what I mean by that. A lot of lenders so a lot of the banks and mortgage brokers. They're going to be more strict. They've already said like people at J.P. Morgan have explicitly said a and a few other banks where they're not going to just randomly lend out loans anymore to people and this is what caused the two thousand may crash. They weren't stopping. They were giving loan sick everyone. It didn't matter if you had a job. It didn't matter if he had no credit score. Some loans where two zero percent down there were just giving it to you. Hence why the crash? Because when the crash happened people couldn't say people wanted foreclosure every little situation for everyone. People lost banks loss and it just went on a very bad hole which obviously there thanks of learn. They are trying to avoid certain banks. Don't really want a bailout. J. P. Morgan was one of them but they were kind of forced to take most banks. I believe paid their loans back so again. It's just not a good situation for anyone to be in there. Rather just be safer than sorry so now what this does is. If let's say you're in a let's say I would say like buffalo houses for example since it's cheaper than obviously nearest city houses and you were trying to buy a house for one hundred k. And you were eligible for like ten percent loan. They might bump that up to twenty percent now so they would say not ten percent down anymore. You have to give twenty percent down. So that's going to be a huge flaw or a huge setback for people that were eligible with ten percent which would have been like ten thousand at the time. Now they're going to have to give twenty thousand which might not be enough either an investor or a first time home buyer. There will be new what this is too hard for me. I might not be able to do this. So they will end up not purchasing set property so this is going to impact them to a certain degree like so. That's going to be like the one thing. That's going to literally stop the demand. The supply is still there because obviously the people selling the houses are still going to sell the houses but the demand is going to split basically plummet down a little bit. It's good I'm still going to have to see how the market ends up being because of this but most likely it's going to slump down a the next one is they're also increasing like the income they're also increasing credit score. So let's say six fifty was eligible for. Let's say three percent now that you need at least seven hundred or seven fifty for that same rate because if you're at six fifty they might just reject you or they'll offer you a higher interest rate like four percent as an example. I don't think that would happen. I think they were just straight up. Deny you so that's going to end up causing obviously impact down the road because this will slump the economy because obviously buying real estate is huge in the countries like China dollars worth so it obviously impacts significantly where houses are going to be so less because the demand is going to drop because people can't purchase anymore applies still there to basically make up for that match those requirements. These sellers are probably going to drop their prices down for their houses again. Depending on certain markets the reason I said that places like California and New York City. It doesn't matter in the sense that because these people were already having to pay twenty to twenty five percent down unless you're getting FHA LOAN. The banks are still going to be asking those same requirements. Those same dollars because you can't obviously making a normal salary like forty to fifty the average salary. I should say and get house in New York City. You need six figures depending on where you purchased the property like you do need those things. Those things matter either a very large down payment or a very large income ratio. Obviously like that matters a lot like I purchased property myself in New York City. Like it's hard. It's hard they ask a lot of questions. They're extremely tough in New York City again. If it's not an effigy on their even effigy Lonzo. Tough is just the alone. Makes it better in the sense? You're giving us down. Three three percent minimum release which is still huge. When you're buying a million dollar house in New York City and again it depends on the neighborhoods where you buy it and whatnot but yeah varies significantly. So these things are going to be happening a lot the next thing. That's a part of the mortgage crisis. That's going to happen. That's happening right now. So certain states have said and I believe the country's two months but certain states like New York state has done like cannock tenants for the next three or so months they might extend that a little bit more. What this is going to end up doing is less to say. These tenants were possibly like. Ooh I'm assuming most of them are. They had jobs that for load or did just fired and they can't work anymore and obviously you can invite them unless they want. This thing is all over and they don't get a job in time and you couldn't work out an agreement with them which is probably going to happen to a lot attendance. You'RE GONNA kick them out. You can affect them eventually and once. They're out the house if you're a landlord who's take regular normal multibillion dollar landlord which for some reason most people think they are. These people are going to if they're also relying on these rents to pay mortgages and they don't have a job or whatever they're going to be impacted significantly and they're going to end up being foreclosed themselves and because the mortgage company is damn it. We have we need them to pay us. We understand there was a situation. We can't continue being in this situation. We got to sell the house. So the banks will literally end up. Making the foreclose sell the house to basically get their money back and obviously the bank hates doing this also because when they buy a foreclosure houses a huge hassle lawyers get involved so much stuff gets involved then they end up selling the house. It's a huge hassle. It's huge pain. I don't even want to say the word. It's a huge so they do end up like taking it gets one starts happening again. House prices start tumbling again more. Foreclosures are happening. This is the drop ends up occurring. Is it going to be so much? Two Thousand Eight. I don't think so. I think there will be either a slump in prices for a year or two. I think I personally for two to three years. It's going to be a slump. Maybe a little bit declined. Maybe some declined significantly in certain states and cities and maybe even some increases in certain states and cities. I can see California New York City like not changing much but anyways I would say from that perspective that's going to cause this to be impacted significantly. The third one is this is a tricky one that people might not notice is a lot of people are thinking. They're there for baying their mortgage payment so they're not deferring doing for berries and what this does is. Let's say you do a six month forbearance as of today the next six months. Let's see mortgage with a thousand dollars a month. You will owe them six thousand dollars at the end of six months right away in bulk not at the end of the loan at the end of those six months so a lot of people don't know that and I don't think mortgage companies are pointing this explicitly to people and that's going to end up causing a huge problem because these people are going to wait what I thought you deferred the payment or I thought you were going to charge this at the end of the loan which is twenty years down the line. We're all have six thousand dollars saved up. Most people won't be able to do. They want to understand it and then going to cause the bank to obviously the. Max maybe work it out again. And they'll defer payments actually or they'll be like too bad you always six thousand if you don't give it to us. We're foreclosing the house so it was going to end up. Being very is going to be a sticky situation so I do believe this mortgage crisis is going to be impacted like significantly in the market and just how overall going so. Yeah I feel like that covers the mortgage crisis piece of is going to be interesting. I really do want to see how this plays out and the next thing is this. I feel like a lot of people would be interested in hearing this one is the one of the Democrats lawmakers are a publishing or is proposing. I should say a new two thousand dollars a month stimulus package the way. This one is going to work is still is still being thrown around. It's going to be dissecting an e in Law. I doubt even get past just because of the dollar amounts it is but this is going to be the way just to get talked about like high level. It's going to be for six months long and re looked after the six months is up to see if this is needed for another six months so if the economy is still in a slump people unemployed with the large amount. They are right now. I believe ten. Plus million people already unemployed Higher than like the great recession numbers significantly higher right now so if they still think this situation is still the same. In six months they will push it for another six months now. This applies to literally any adult sixteen and over who has making under one hundred thirty km that is about ninety percent if not more and believe it was ninety percent last. I look of the. Us population most of them do not make more than one hundred thirty K. Only very select few of handful of cities will be will be making that would be Kelly and New York City so like places like that. It's like San Fran and whatnot. Only those wouldn't be making that amount not fall into this category but if you're a family of two so like you have a spouse and whatnot it turns to to sixty similars loss time So this is interesting so a of people are getting now again. People Sixteen most likely don't even work or have tax or pay taxes and whatnot are getting it as well so that was very interesting. They did that obviously. If your family children you get five hundred dollar per child similar to this current one but up to three kids. I think it's the same as the current one. That was just passed now the way this is before you get way too excited. And what's GonNa Happen if I'm going to get this two thousand dollars a one? Do I get this the way this is going to be proposed and it's going to happen is essentially is still needs to go through the house which was by the Democrats for so. They obviously have to talk it out. They've got to go to the nitty-gritty make sure read every single word dissect. Sc What's in there? What happens and then it goes through the Senate Republican only GonNa obviously talk about it from their side dissect every single word probably more than the House and then once they pass it. I believe in the beginning. That's fifty percent have to vote on it. And then they go to the president which he may or may not signed obviously completely up to him if he rejected and vetos it goes back to the Senate that I believe. Two-thirds have to vote on it and say yes. And that's going to be extremely tough. I even believe the fifty percents is going to be tough. The two-thirds is going to be even more tough. And I don't believe this will get passed. Maybe something will get past for the people. Because I don't know what's going to happen. I do believe they're trying to reopen the economy in certain states like Florida Texas already tried to open New York and California said No. We're waiting at least till the fifteen to see and reevaluate. What is currently happening? So this is going to play around a lot of different direction now. The funny thing on what this is going to cost which I feel like a lot of people are not really looking into is this is going to cost four to five hundred billion dollars a month so that is literally a little bit less than the the military budget for the year within a month so this is going to cost trillions of dollars. This package I understand it just literally printed by trillion dollars the bar if from themselves i. It's very interesting. How they it just works in general but even doing this would be way more. I understand that it will literally be pumped back into the economy in a sense but it's a lot of cash being pumped to run day operations. Which was already running on a normal basis but as certain points is a lot of cash for certain people. Like does it really. Is it really fair to give a kid who's sixteen? Who probably doesn't even work to give this cash to them. If there's a lot of questions that come into this I understand certain situations. They may or may she should deserve it but I feel like it should be for taxpayers only or where technically paying taxes to a certain degree because this has to be paid back eventually is going to go onto the national debt and it could or could not 'cause inflation's probably won't just because of like again extremely low interest rate not their barring from themselves with status why it doesn't make sense to pay back as soon as possible. It's really weird. How it works but still just keep doing. That is not a solution. Obviously they do need to work something out. I do believe they gotta figure it out either. Do More testings and gut the economy up and running again or Abe plan all right by this time everyone should be in the house. You're not move. And then after this slowly. Open this this these types of businesses. I at these types of businesses lots lower taxes for the first. I don't know six months for these small businesses or a year. Actually a like they should be helping small businesses going from there because even the small business loan ran on a cash believe it was two hundred fifty billion boom gone. There's no more or less like that South Park character. It's got and it's gone. It was literally like within ten days or something out of cash so they do need to like work something out more specifically for businesses to help them pay for either their workers or pay for themselves to keep afloat. Because it's going to be interesting. I really do think this is going to be interesting to see how this country is going to handle those situations than his going to be is going to be a long ride man. It's going to be the next few bumpy rights. I will obviously keep you guys informed and updated on like how the situation going. Maybe possibly Michael is going to be like helping everyone to either make better decisions on like from a financial perspective. You know not a financial advisor. Would I try to my own personal experience in preference to everyone so I do? We'll be like letting you know any possible new investments. I make any real estate specifically investments. I do because that is going to be Michael. I'm going to be looking at certain cities and stays very closely New Jersey. Being one of them. I am going to be like very closely looking at that. Seeing how the highest prices go obviously if it drops that's kind of better for me because then I can go entering into the market and make an investment because as I said in another podcast. The rental prices rarely ever drop in a recession. In fact the opposite happens when the two thousand and eight recession happened. The houses prices plummeted from like a million plus. Talk less than half a mil to like four three hundred K. But rents did not change. They actually went because all those people who were buying houses started renting and they were actually able to pay for Bat. Specific rent prices just skyrocketed up because more demand for rent was there with not as much supply so that obviously caused the prices to rent significantly so again like I said. I'm very interested to see how it happens. It'll be fun for me but again the loans would affect me them because I would obviously need better debts income ratio or a bigger down payment as an investor. So I'll keep you updated. Hopefully I do take the venture into purchasing house and then I will like make a whole podcast talking about that situation. Possibly make some movies on Youtube. So you guys can definitely check me out over there and yeah it'll be it'll be a fun and interesting venture to take it from there so we're going to end up episode ten from there again. Apologize events that those in here. This is the first time we've done a podcast with just a host so just myself do hope. It was fun and helpful and informative for you guys. We are open to feedback guys so definitely gives us whatever feedback you guys have for us to like improve if you guys want to be interviewed on this. Show more than happy to do so as well. We're currently making a website right now. Where you guys will be able to leave feedback over there having a mailing list all that other good stuff. So that's currently in the works But if you do want to leave something do social media channels Brooklyn on. You'll find on twitter and instagram and we youtube channel where you can obviously leave a comment under our videos. If you'd like to you can subscribe to us. There and we have a lot of plans are a lot of plans. I should say on Youtube as well to make certain video content for you guys to check out and watch so yeah happy. Ten episodes very happy very excited a thousand followers also on spotify. Very happy about that. Thank you all for who who follows US. Spotify really appreciate it and peace out. We'll see you next week say safe. 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