Melody Wright warns the U.S. housing market faces a 2008-like crisis, with FHA as the new subprime, investors strained, and affordability collapsing for younger generations.
Melody Wright argues the U.S. housing market is set for a painful reset despite unprecedented post-COVID interventions: FHA has effectively replaced subprime (~13% share) with low-down-payment, low-FICO lending; affordability is crushed by surging property taxes, insurance, and utilities; first-time buyers have collapsed as credit tightens (student loans back on reports, high refi rejections), so even lower rates won’t revive demand. Institutional landlords overbuilt luxury units, are underwater in key metros, and may trigger localized distress. With 15.6M boomers aging out by 2035 and housing used as a speculative store of value, she expects rising delinquencies now and a meaningful foreclosure wave starting in 2026 as FHA “guardrails” end serial modifications.
Wright’s prescription is to stop engineering outcomes, let prices normalize, and make housing “boring” again, shelter first, not a casino. Bailouts to protect boomers risk further crushing younger generations; solutions should refocus locally (stronger city planning, repurposing vacant stock) while households avoid leverage in a volatile credit cycle. Without a credible path to affordability and hope for younger Americans, economic and social strain will intensify.
0:00 - Intro
1:33 - Mortgage Crisis Signals Return
3:50 - Affordability Crisis & Government Lending
8:08 - Housing Costs vs Bitcoin Store of Value
16:01 - Bitkey & Unchained
17:42 - Supply Myths & Melody's Housing Tour
29:18 - Obscura & SLNT
31:31 - Historical Cycles & Auto Crisis Leading
40:27 - Opportunity Cost
41:11 - Bailouts vs Generational Solutions
54:34 - Bitcoin Innovation & Local Community Focus
1:05:45 - FHA Changes & Rising System Costs
(00:00) They put the guard rails on this FHA program which could single-handedly take down this market. This is going to be uglier than most people think. They're underwater. They're getting hit with property taxes, insurance, at the same time their cost of funds to keep that Ponzi scheme going. We have seen unprecedented intervention.
(00:18) So many people took forbbearances during co we have the highest folks working two jobs that we've ever seen. After 2008, the banks really stepped back out of the mortgage market. You only have to have 3 and 12% down. That share of the market right now is around 13% which is about the share of what subprime was the last time things started falling apart.
(00:36) I think the banks want them out of mortgage. There's going to be a cycle where they've brought everybody in they can possibly bring in. But it is a ponzi. It's a drug and it becomes very addictive. These were middle class people that were coming and moving. Ultimately, they're being priced out. So even if rates go lower, you're not going to have a lot of people who are going to be able to qualify.
(00:53) We had the lowest first-time home buyers on record last year. 15.6 6 million boomers are going to age out between now and 2035 and they own the majority of homes. We had all this built for rent. All the homes were empty and and I was just like, what is going on? A lot of them look like army barracks. It's all luxury.
(01:09) It's like everybody forgot who lives in this country. We might see a bailout in the form of Fanny and Freddy, a government agency, buying back the homes from private equity. By privatizing, I think that Fanny and Freddy would suicide themselves. Being a landlord is not going to be cool. It's not cool. Whatever they try to do to help the boomers is going to crush the younger generations.
(01:34) Melody Wright, welcome to the show. Thank you for joining me. Well, thank you so much for having me. It's my pleasure. Well, as I was I was saying before we hit record, I was on Michael Ferris's show, Coffee and Mike, last week and after our conversation off the record, he said you have to reach out to Melody.
(01:51) I was telling him I'm in the market to buy a house. uh where I live in the northeast in the Philadelphia area and you've been on his show. I've since my conversation with Michael watched a few of the podcasts you've been on in recent months and I think this is a conversation that I'm not only going to get value out of but we have a lot of millennials Gen Xers uh in the audience who are probably in a similar position than I am. So I'm really happy to jump in and talk about the real estate market with you. Awesome. Looking forward to it.
(02:22) Yeah. And like I said, I wanted to open with a chart. You come with a bunch of quantitative hard data. Uh something I like to follow not only in real estate but just generally is is Google trends. And if we look at Google trends right now particularly for the search help with mortgage we are at uh we have reached uh March 2009 levels. Yeah. Yes.
(02:52) Uh this is not surprising at all. Um and you know what's crazy about this though, Marty, is if you think about it, we have seen unprecedented uh intervention already and loan modifications and workouts that you know so many people took um forbearances during co and once those forbearances were over um you know you could go up to 18 months of not making payments.
(03:18) You had to have some sort of workout to deal with those foreborn payments. And so what many people did was a payment deferral if you had a Fanny or Freddy loan or a partial claim if you had a FHA and they put it at the back of the loan to be paid off when you sell the home or pay off the mortgage. Um and then many people did modifications as well uh reducing their payment.
(03:41) So this is quite shocking because we've had intervention that far outweighs what we saw after the last housing crisis and yet people need help with their mortgage. And what is driving this uh specifically? You think it's um the labor market, people becoming unemployed, not being able to afford it. Is it mainly homeowners who got um committed to adjustable rate mortgages and with the mortgage rate being above 6% their their payments just became too much is a combination of things. It's a combination of things.
(04:17) um and based but you know a lot of it is yes the labor market is weak you know we have kind of um the highest uh folks working two jobs and those are part-time jobs right now um that we've ever seen and so you know I think the labor market has been weak for some time but people got into mortgages they couldn't afford um what a lot of people don't understand about this market is that after uh 2008 the banks really stepped back out of the mortgage market this was because of Basel 3 requirements the supplement or leverage ratio, things like that. And the non-bank stepped in, but they did um
(04:51) they're funded basically by the government sponsored enterprises and agencies. And so what you have now is a largely government market and um the FHA program specifically kind of stepped in where private was last time with subprime. Um people getting mortgages with credit scores of 580 if you have a big down payment, for instance. Uh you only have to have three and a half% down.
(05:16) And so that share of the market right now is around 13%. Which is about the share of what subprime was the last time things started falling apart. And so people just simply can't afford it. And and something I said years ago is that we wouldn't even have to have a deteriorating labor market to see a crisis because property taxes and insurance have risen so much that people simply what you know they were already taking out um too much leverage that they really couldn't afford.
(05:45) you know, based on uh these loans they were getting from these government agencies, but then you tack on uh property taxes and insurance. And I've seen um you know, your mortgage serer pays those and they put it into your payment. And I've seen escrow notices go out saying we're sorry.
(06:04) Uh well, they don't even really say we're sorry, but you know, hey, your payment has just increased uh it's just doubled because like if you're in California, for instance, because of that insurance increase after the fires and and property taxes. So, I think it's just a real affordability crisis at this point. Yeah. And you property taxes are interest. They've been a topic of conversation the last couple of podcasts, particularly after Ronda Santis started on his campaign trail of eliminating property taxes in Florida specifically, and I think I forget who it was, but basically described property taxes as unrealized cap gains taxes that are really pushing people out of the market.
(06:40) And I imagine they are affecting uh the boomers the most in retirement age. They thought they had their nest egg in their retirements account, the retirement accounts. They're looking at their average mortgage payment and say, "Okay, we need to hit this level.
(07:00) We could sustain these payments and buy food and go on trips and whatever." And then you see inflation across the board and the triple whammy, I guess, with with property taxes going up as well. Yep. When I was in Miami of of uh July of 2023, there was actually uh seniors stormed a condo ad administration building because they got notices that their HOA fees were going up. And this is, you know, I think this is what the whole country has forgotten.
(07:25) Places like Las Vegas, Florida, uh here in East Tennessee, Gatlinburg, is that these were middle class people that were coming and moving uh and you know, they weren't the super rich, right, Californians. and uh ultimately they're being priced out.
(07:46) So, this was a very, it was in Pinroke Pines, a very middle class or even blue collar um condo, big condo development. Um and they just got a notice, hey, that your property tax, your HOA fees are going up like $500 because of insurance and different things like that. And they stormed the police had to be called like a an old man was like pushed to the ground. It was terrible.
(08:06) I mean, so what you've seen since then is inventory just fly onto the market in Florida. And I think that's a big question is what's going to give first? Is it going to be mortgage rates or the prices of these homes? Because I think that's what again putting my millennial perspective home buyer hat on. I'm looking at the prices of the houses in my area.
(08:31) I'm like, h they're not uh they they've dropped a bit. Uh they certainly haven't risen in the last 6 to 8 months, but they're still relatively elevated, especially when you factor in the mortgage cost. And I've been saying on this show, like it's two parts of the equation of housing affordability of the cost of the house and the mortgage.
(08:48) And if rates aren't going to fall, we need to see the people that currently own the houses just stomach the fact that they're going to have to sell them at at lower cost than than they expected. Correct. And even if rates do go lower, Marty, it's not going to be enough to really juice the housing market again.
(09:06) And so I think that, you know, because of those existing lower interest rates and for rates to really go lower, you would have to have uh the Fed buying mortgage box securities again or somebody buying mortgage back securities again. That could be one of the things on the table is Fanny or Fanny May and Freddy Mack doing that.
(09:24) Um and so that's the only way those rates go lower. But even then, if you I can remember 2010, uh that was everybody's great hope as that rates would go low and they could refi and we did have a mini refi boom back then, but it did not stop home prices from u correcting and I feel that because of where we are. The other thing you asked about affordability, but also people can't access credit right now.
(09:48) You know what's happened with those student loans now that they're reporting and this is important of course for your millennial and even Gen X. I had them uh you know is now that those are credit reporting we've seen massive impacts to credit scores you know and the Fed had a study in February where 40 almost 42% of mortgage refinance applications were rejected I mean that was the highest they'd ever seen in their series and so people can't access credit anymore you know these places that are now reporting or I think it's actually only a firm that's now reporting to credit but now
(10:22) that they're reporting to credit they can't do buy now pay later anymore and so the doors are just closing all around. And so even if rates go lower, you're not going to have a lot of people who are going to be able to qualify. And the fact of the matter is is we had the lowest first-time home buyers on record last year since they started tracking in the 80s.
(10:42) And I think a lot of people fundamentally misunderstand this housing market. It's about investment and speculation and not really home buyers and such. you got to think about what's going to happen um in a a speculative environment. Yeah. Well, that's a great point to bring up considering the fact that this is a Bitcoin podcast.
(11:04) I'd love to get your thoughts on this and sort of uh sort of thrusting this on you because we didn't talk about it in prep, but that's one of my strong beliefs is that the the fact that real estate has become this store value asset and investment vehicle um that individuals and institutions use to attempt to outpace inflation when one can make a strong argument that that real estate is not really fine-tuned for uh a store value asset.
(11:28) It's a consumable good and depreciating asset. It's a depreciating asset. And one of my big thesis and many Bitcoiners thesis is that you're going to see a value leak uh in terms of from real estate to Bitcoin as people begin to wake up that you don't need to use your house as a savings vehicle.
(11:53) can use this digital scarce asset in Bitcoin which has far superior properties in the fact that it's scarce divisible can send it over the internet has no maintenance costs no property taxes uh and that's seems to me over the course of many decades moving forward that it's going to become obvious to people but I think right now the big problem is again going back to the boomers is that this is what they were taught their their whole lives in their whole careers growing up is like you get a job, you funnel it into real estate and financial assets and you're going to be good. Um but we've gotten to this cross point society where it just
(12:29) doesn't work cuz um it's you're driving this affordability crisis which is getting out of hand. You mentioned uh the new home buyers number being the lowest on record last year, but then you also have like the median age of a homeowner or a new homeowner, even with it being lowest point in history, the the median age was 56.
(12:53) It's insanity. And so, you know, what's happening right now, people don't understand. I mean, there's so much data you need to look at when you're looking at the housing market. And most people look at like two factors, you know, inventory and price and that's it.
(13:11) But what people don't understand is that, you know, the the municipalities got drunk on the American Rescue Act money. Like they got all this they were infused with money. Um, and so they did all kinds of programs like, you know, uh, down payment assistance programs, housing affordability programs, but they just they got used to it and they didn't think, oh, how can we how is this how we're going to reproduce this? you know, as I was taught when I was little, money doesn't grow on trees, right? Um, and but they just kept spending and spending. And so, unfortunately, people are going to think, well, home prices are going to come down. Maybe my
(13:41) property taxes are. In reality, those municipalities are going to be uh after you. And so, I think this whole Florida Dantis thing is kind of funny. Let's see where it ends up. Because you look at somewhere like Boston who because they have lost um tax revenue from commercial real estate, they're putting that bill out to homeowners and it's I mean that's that's crazy.
(14:05) And so unfortunately I think that this is going to be uglier than most people think and those property taxes are really going to uh way and that leakage that you're talking about because if you think about a house that costs that much to man maintain then that value that's not the the value just continues to erode. Yeah. And how how much of a I mean you mentioned institutional buyers.
(14:30) How much of effect do they have on the market? I've seen headlines and data coming out that like the Blackstones and Black Rocks, Burkshshire Hathaways of the world have been buying up um single family real estate or uh multif family real estate uh to use as an investment vehicle, buy it, rent it out.
(14:48) Uh seems like they're underwater on a lot of the properties across the country. They are. And it's so it's people this is a huge debate of how how how much how big are they really? What's the percentage? But it just it really you don't even need to aggregate percentage. It's just very it matters locally like in San Antonio, Atlanta, these places where they did go big.
(15:09) Um you're definitely seeing prices fall much faster cuz they're underwater. They can't they don't have a homestead exemption. They So they're getting hit with property taxes, insurance. At the same time, their cost of funds for the borrowings that they have that to keep that uh Ponzi scheme going is are higher and higher. And so they're underwater and they're selling what they did in 23 and 24.
(15:33) A lot of what they did was trade amongst themselves so that they could sell it off to like uh like American Home for Rent would buy some of LAR's uh a new build's um neighborhood, but they and at that price they could turn around and refinance and get more borrowings. And so they were kind of all in the family trading so so that they could continue to access credit.
(15:52) But we're hitting the point now where they're going to have to distress sell. And you're seeing it has massive impact on neighborhoods and you don't even know usually if you have one of these next to you. Sup freaks. This rip of TFTC was brought to you by our good friends at BitKey. Bit Key makes Bitcoin easy to use and hard to lose.
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(17:11) So, what's next? Tester is back with the 2025 edition, refreshed for the midcycle moment, packed with new data, new insights, and Tur's latest price outlook. Plus, you'll get exclusive access to Charting Our Way Through Chaos, TUR's new 30inut Q3 2025 presentation explaining why this bull run might be only just beginning and what forces could push it to the next level.
(17:28) Read the first ever midcycle report from Adomantress Research at unchained.com/tc. That's unchained.com/tc. And also, if you're using Unchained, you can use the code TFTC for $50 off any of their services. Go check it out. And that's the other thing too because I I'm sure I know you've heard this because I was just listening to a podcast this morning you did with Adam Tagert recently where you mentioned it but I think to set up this part of the conversation there's u I'm sure you're aware of the All-In podcast uh Jason Calcanis David Freeberg David
(18:03) Saxs Chimoth Pal Papatia I've been like beating the proverbial desk on X every time they talk about the real estate market cuz they're like we just need more supply we deregulation. We need to take the federal lands and just build housing on uh on federal lands. We need more supply.
(18:22) And it's just abundantly clear to me that's not the solution to this problem. If anything, you're going to exacerbate it and you're going to end up building lowquality housing that really doesn't have any value at the end of the day. Uh particularly in the long run. And it is mindboggling to me that um some in the financial cognizanti really can't see that the problem to me seems like a financial engineering problem where again going back to we're using housing as a savings vehicle and um more supply is not going to solve the problem. Right. No. And and in fact I would I will take them on a tour if they would
(18:56) like to go see what I have seen on the road. And everybody here's the thing about permits. They think that they can track this by the permits. Well, they can't. Number one, we've seen reduced participation in those surveys, and that's how you find out how many permits. It's a survey.
(19:15) Um, and then secondly, in unincorporated areas in places around me, Tennessee, Texas, you don't have to file permits. And so, I could, if I took people to see what I have seen, Marty, there there is no way. And that low quality you talk about, it's already out there. And it was as if they were building army barracks, Marty.
(19:34) I mean, all over Florida, Texas, I mean, Tennessee, it is it's actually insane how much inventory is out there. Raleigh, outside of Raleigh, North Carolina. I mean, all over the country. And so, I'd love to take them on a tour to show them all of the supply as well as all the vacancy.
(19:55) all over this country there's vacancy because we've had a lot of foreign buyers use the market uh for money laundering uh or or just you know parking their cash there. Um, but a lot of it is money laundering. And so there's just a misunderstanding of what's going on out there because most people can't wrap their heads around the fact that this became a this became a casino.
(20:20) And how it happened is essentially they saw Wall Street buy up those homes at the last at the end of the last crisis. I was there at the auctions and the banks were just begging them please because you it's not profitable to foreclose no matter what anybody says. just the way the machine works. And so the banks were begging. They came in and bought them. And then everybody got hooked on that whole idea of fixing and flipping, renting out a house. I mean, it was the it was a national obsession.
(20:48) But for whatever reason, people just can't admit that that's what's happening. I have a you you pro if you listen to that podcast, you know that I asked Adam this question. It's like most people think the average household size in the United States is around three or four. Um, in reality it's at like 2.5 and that's because of all of the second homes and all of the investment that's happened.
(21:12) And you know, I have a friend who says, "Do we really want to get down to one house per person?" I mean, is that what we want American life to be? Um, but there's just a huge misunderstanding of what's happened in real estate. And they just they and I don't know. Sometimes it feels willful uh like like you know that actually they do understand what's happening. So, who knows? Yeah.
(21:34) Well, let's expand on your offer to take anyone on a tour because from what I understand, this is part of what's opened your eyes. You literally traveled around the country to see this and I mean, you alluded to the experience, but let's expand on that experience. What What drove you to get in the car, hop on planes, and travel the country? like one morning Bloomberg edition just in January of 23 just infuriated me because they were talking about the housing market was coming back and I was like are you guys on crack? Like what how could you pos and at the time I was looking all around looking at all the analysts that you
(22:11) know I had previously followed people like Ivy Zelman who kind of called you know was poison Ivy last time who called it. Uh she was talking about demographics at the time. She was one of the only ones. Um, but people just weren't putting the whole all of the pieces together.
(22:28) They weren't putting that, you know, we're, as Harvard says, 15.6 million boomers are going to age out between now and 2035 and they own the majority of homes. People weren't putting together that we had all this built for rent, single family residents, like you were just talking, being built for rent, all this new home development, all this multif family.
(22:47) And so and then you know um and then I'm I I also come from mortgage credit and so I also understood there just wasn't enough people out there that could afford. So I read this article and just decided at that moment I had no pre-plans of this that I was going to get in my car and I was going to I was going to go to Austin. Um but you know I stopped in Nashville was my very first city on the way.
(23:11) Um, and I got to Austin and I mean I will never forget standing in my first mega site in Austin and just going I mean I was physically nauseous, Marty. I I was just like, "What is happening? This can't be happening again." Because as someone who lived through the last crisis, I swore up and down. We swore as an industry, this would never happen again.
(23:30) We would never The builder swore this would never happen again. you know, they got Lenar got a tax bill out last time um and swore it would never happen again. And they were swearing on earnings calls they weren't doing it. And I was standing in that mega and what is a mega site? People might not know. It's where all the builders build in the same site.
(23:48) And so you have like Toll Brothers, Ryan Homes, regional builders, and they just have this massive development and they were just building up into the hills and but all the homes were empty and and I was just like, what is going on? And then I saw that over and over all over the country. Florida is it's depressing, Marty. I mean, again, a lot of them look like army barracks. And I just it was insane.
(24:13) And that's because I I track data religiously. You know, 85 markets. I look at them every week. But you you have to at some point you have to get out and go look for yourself because and that's what I tell people. Just take a left turn on your commute instead of a right. and you will see what I'm talking about.
(24:31) Yeah, it's funny you bring up Austin because I I just moved back to the Philadelphia area where I was born and raised from Austin. We did a four-year stint in Austin. Moved there in 2021 when the real estate market was screaming and we luckily and I like to think uh very smartly decided to rent and we rented the whole four years we were there.
(24:52) And our rent never went up. And I think that was because uh right after 21 things started cooling off. And it's not only on the residential side. If you we were in South Austin, if you look north, the downtown there was I I think all the multif family there was 10 cranes in in the sky the whole four years that we lived there and you talk about like that's one thing I worry about my commercial real estate friends in Austin specifically is because uh there's a ton of inventory coming on market both in residential and
(25:23) commercial real estate. I used to rank a city on how many cranes I'd have. They call it like five crane sand even though Austin I would argue there were probably like 30 cranes when I was there. Um you know I I often wonder where are the cranes going to go to die. You know these are usually individual operators a lot of them.
(25:42) And so Nashville was the same. You know Nashville I think was the first to really get started. They started really around 2018. Um but yeah it was that multif family. And this is the thing Marty it's all luxury. It's like everybody forgot who lives in this country like and I think that this because we saw wages going up, you know, for that brief moment. And you know, and it was like, oh, we're all getting rich.
(26:06) We're all going to be rich. We're all going to get fairly paid and life is going to be golden. And you know, because you had a handful, this is what's so funny. you had a handful of Californians and people like this move into certain areas and people are like they're all moving to my city and then built for that Californian.
(26:26) Well, the fact is there's a limited number of those Californians that are going to come and this luxury nobody can afford and Austin has all I mean the vacancy in multif family there is just staggering because they all built these luxury highrises in downtown that are empty. Yeah, the luxury.
(26:45) And then they they had like the California white boxes that they were building. We were in the Zilker Park neighborhood and there was the California box style house that sat for sale. The black houses. Did you see those? And all I was like, what what is this? This is what What was that? It's not really aesthetically pleasing either.
(27:05) And and then I saw what's that um uh movie series Despicable Me? Is he the one? Yeah. With he has the black house. I was like, is this what this is? like I I just it made no sense. But anyway, okay. Building for grew. You don't want to do that. Uh as a father of of young children, very familiar with the Despicable Me series. Uh the uh No, that's I mean I'm I'm not sure if you're a fan of urbanism or like Chuck Marone's Strong Towns concept, but that's something that I pay very much attention to.
(27:34) And it's the reason why we moved to the section of the Philadelphia area that we did is because you have houses that are literally 100 years old that were built well. And I think that's one thing that really disheartens me in today's day and age is it literally taught to get on the hamster wheel of competing and outpacing competing with and outpacing inflation.
(27:58) And that just leads to completely misaligned incentives in terms of the quality of builds and what you're getting to market at the end of the day. Right. I think that's going to be a massive problem that we have to deal with decades from now. It's like during these periods of the mega sites that you were Yeah. mentioning what are we going to do when nobody buys these houses? And we'll we'll we bulldozed it last time.
(28:18) We bulldozed it in the 30s. Like we'll bulldoze it. I mean, there's actually there's a book called Swamp Peddlers, also another book called Bubble in the Sun about Florida. They take you through this history. This is something that happens over and over, and there's a picture of a guy on a bulldozer in a subdivision from back, you know, in the 30s.
(28:40) And so and and now what was crazy for me because I did manage default um at the end of the last crisis and and spent most of my time in Florida and I would go and look and they were building on the same subdivision that had been bulldozed before. I mean that that was just like that is when I knew in the middle of Florida flooding everywhere low cell service 21 of these mega sites.
(29:03) I was just like, whoa, that's Lakewood Ranch. That that will go down in history and not a good way. Um, and so that's what we're going to have to do. And I often say I'm bullish bulldozers, although John Deere is having a little bit of trouble right now. So, uh, but freaks. This was brought to you by our good friends at Obscura. Obscura is the first VPN that can't log your activity by design.
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(31:35) As you described earlier, it seems like the dynamics of the debt markets, the credit markets, and real estate are different um than they were in 2008 with the banks sort of fading real estate due to reserve requirements and um basel um what's the other one? Oxley. What's the uh first word there? Oh, socks. Sarbain. Sarbain. Yes.
(32:00) I'll never forget socks. Yes. Um most of my mid30s. Yeah. Yeah. So, how do you how do you think this deleveraging plays out and how does it differentiate from 2008 if it is upon us? You know, I think that um private equity, private credit, like this is one big mess and it's going to be ugly. Um I I have a theory and this is I I often talk think way into the future, Marty, and you know, I'll lose a lot of people that way.
(32:28) Um, but uh I have a theory we might see a uh bailout in the form of Fanny and Freddy, a government agency buying back the homes from private equity because and you know under the ruse the ruse it will be a ruse under the ruse of affordable housing. Um because I these guys are so over their skis. Um and the banks are exposed here as well because they've lend to these private credit and and and it's just like what we're just now seeing with uh this auto subprime auto dealer that you know just blew up um claims of fraud and we're seeing Fifth Third had to make a huge write down uh almost 10% of their
(33:09) existing reserves. Um, so you know this is for one one one one loan guys. One loan. So if if you're not paying attention, you need to pay attention to thisricolor start because it's going to be ironic. Um I used to so my company was originally owned by my former company by GM back during the crisis. Okay. So we were very closely aligned with our auto partners.
(33:35) we were the mortgage arm and you know back then it was all uh you bad bad mortgage people how could you ever you know get like get us in this position and then of course we we got TARP money and uh it became Ally Bank who guess what they've done in auto they went wholehog into subprime and so it's so it's just it's for someone who is you know in a corporate culture where we were the redheaded stepchild like this is actually kind of funny, but um they they're impacted and so this I think auto is going to be the first place we see the fires um and then
(34:15) it's going to have a contagion effect. Um but the ABS is uh in bad shape again. It's the same thing. It's like people have been sharing the meme of Georgia from the big short, you know, she's got uh the dark glasses and at S&P I think it's S&P. Uh it they don't I mean they're again they're asleep at the wheel or or or you know they actually know and they just don't care.
(34:38) Well, that's um it's interesting you bring that up because as I mentioned before we hit recorded just had our third child. So we I mean we're very uh very conservative with household finances as as Bitcoiners. We save in Bitcoin. We try to spend less than we uh way less than we make. U but we had to upsize uh and get a second car.
(35:00) uh due to the fact that we need a third row now, which is a good thing. But the financing of the car was very interesting. I have a very good credit score and um I got I got ping ponged around by different financers and had to pay I'm paying a crazy rate on it that I'm hoping to refi at some point next year.
(35:17) Um that's wild. Really? Yeah. Oh, so that Wow. So that mean that tells you what's happening. Like I like me knowing sort of following what's happening, I'm like, "Oh, wow. They're really desperate for yield here. Yeah. Yeah.
(35:38) And I mean, but that's that's how the these games go like auto origination, mortgage origination, like they always forget there's going to be a cycle where they've brought everybody in they can possibly bring in and then but you but it is a Ponzi. You need the way the securization markets work um it's a drug. You need that gain on sale. you need that to originate that loan so you can sell it into the capital markets and get that hit and it becomes very addictive and when you get in these down cycles they simply cannot cover their cost of funds like they can't you know and so you're they are that that is very
(36:10) telling actually Marty thank you for sharing that with me I mean I could feel it I could see it but that's that's wow so yeah I think let's watch auto I think that is you know um it it it behaved rather well during the last crisis because people did they chose their house uh um over their I'm sorry they chose their car over their houses because they needed to get to work.
(36:34) But this time around I think because of all this crazy lending um we could really see fires in auto and and it could cause quite a disruption in the credit markets. Yeah. I mean, since you mentioned the uh Fanny Freddy bailout, potential bailout theory um to just buy up the houses from these these credit funds and PE firms uh using the guise of housing affordability.
(37:07) I mean it seems like and if uh there are sort of uh if there's an order of operations to this on the front order of operations beginning to signal to the market as an administration that this is what you want to do and it seems like Scott Passand Bill Py and Donald Trump have explicitly been more explicit in recent months about housing affordability housing emergency yes a housing a housing crisis housing emergency and there's much talk about uh the Trump administ ation spinning out Fanny May and Freddy Mack as a private company to sort of allow them to get out of the Obama era bailout and feeding their their profits into the federal government.
(37:45) I have a theory on that as well. Let's hear it. I think the banks want this. Uh I think the banks want them out of mortgage. uh I they they really you know the banks really mortgage is a great product uh when it's working well and you can make a lot of there's not much you can make this much money on and because of those requirements they had to scale back and and I can tell you that nobody back then nobody wanted to be a government lender because of the just the red tape all of it it it's crazy and then they they always Marty find a way to make you pay
(38:21) um it's never as good as like oh your FH HA loan is fully backed. Oh, no it's not. I've never seen one claim like a full claim payout. Uh, and I manage a claims department because they will nickel and dime you. They'll also charge you fees for things that you can't control. They'll also make you repurchase loans.
(38:39) Anyway, working with them is a nightmare. So, I have a theory that the banks want them out. Um, and do by privatizing, I think that Fanny and Freddy would suicide themselves. Um, and so I think that this could be actually one of those things where on the surface it looks like one thing, but it's really about another.
(38:59) And I'll I'll tell you why I believe this. So recently, um, our Congress somehow passed the trigger ban. I mean, they can't do anything else. Trigger lead ban. What is this? This is where when you go to get credit for a mortgage, um the credit agencies will sell you that that you're actually you just got a hard pull for credit to all of these non-bank originators.
(39:21) Um and they'll buy so those non-banks will buy up those leads and then they'll call you and you will get like if you do this you will get hammered. Okay? And so essentially this is this is very beneficial to the non-banks out of nowhere and I talked to a lot of people in the industry.
(39:43) I was like did you see this coming? And typically when you get some type of legislation in mortgage, the mortgage bankers association, they're at the front lines. All the everybody, everybody was taken by surprise that now you cannot. They've done a a trigger lead ban. And this benefits the banks and it benefits um companies that do own, you know, both their origination and servicing, but in reality, I think it benefits the banks the most. And it's a way uh to start pushing out the non-banks again.
(40:09) So, I think there's more a foot here than uh what's being uh than all the noise around this. Um and it's funny, you know, you heard that the banks came down to talk to Trump about this privatization plan. And that's partly, I think, as well, why they got the SLR, why they've been lobbying hard to get that uh those requirements reduced. So, freaks, guess what? We launched a browser extension.
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(40:55) We don't collect any data. All of the conversions happen in your browser on your local device. It's a great way to recalibrate your life and begin thinking in SATS. Go check it out at opportunitycost.app. That's opportunity cost.app. Now, it's very, very interesting times because I have a lot of conversations on this show with analysts with very different thesis about where we're going.
(41:28) And I think the predominant thesis thesis that's been expressed on the show over the last month is that we're going to get lower rates. The Trump administration is going to do anything they can to make sure that the market keeps screaming and it's all systems go moving forward which I could definitely see happening.
(41:47) But then you look at all this anecdotal data like the chart I showed to open the episode. you look at delinquency rates, the the amount of credit card debt that exists where stocks are trading their PE levels at.com um historic highs and it's just like a you squint at the situation like okay how how can they right really keep continue doing this um without first saving the middle class or making making life better for the middle class more affordable for the middle class right right and and I think the train has left the And and what I've been trying to tell people is like, you know, you've got to really somehow figure out how to reduce the noise and look at the
(42:27) real signals. And it's increasingly hard to tell what is a real signal, especially when they're screaming about the uh the the national emergency on housing. Um but you know, Bent did a very interesting op-ed that not many people talked about. It was really weird. um in the Wall Street Journal and everything that I've seen action-wise action not words out of this administration is they they may perform um some sort of uh bail out or whatever but they're they're leaving it alone and you know they put the guardrails on this FHA program which could singlehandedly take down this market actually and so
(43:10) maybe they don't understand what they did um but I if If if so my former CEO or actually he wasn't a CEO at the time. my former he was a boss of mine uh at my former company is the CFO at Freddy Mack and um he was the only one left standing you know cuz you remember PY went in there and just like cut everybody out and I have to believe that he understands and and immediately following that Fanny and Freddy took 9 well so Fanny took a 900 million almost a billion dollars in provision for loan loss um and so I think there is
(43:47) awareness and I think there will some performance, but right now it feels as if they're going to let this thing loose. They're going to let it go. Um, so we'll see. You have to keep, you know, again, it's kind of like we also heard from them in April, you know, Main Street over Wall Street and then we got a few stock market losses and you could tell, you know, it was like, oh, the big freakout.
(44:13) And so you never know once we get into the situation um they might put the brakes on but what will probably happen is the state ags will get involved especially if we get into another foreclosure crisis to slow it down. What do you think is the best path forward? Do you think we just need to take the hard medicine of stomaching this deleveraging and let it fall back to um prices that that are probably more representative what these properties are actually worth? Um, is it as existential as we were made to believe it was in 2008 where the housing market is a corn cornerstone of the American economy and you simply can't
(44:50) let it fall to come in and bail out at all cost. uh as somebody who's been through uh a couple of these cycles now at least what what do you think is the best course of action um despite what may or may not happen if we don't give our uh younger generation something to hope for soon Marty I don't think anybody's going to want to live in this country I mean it's I think we're I think it is somewhat so I think it's existential in the other way like right it's like we had to save u the housing market last time. Um, you know, the boomers, I mean, that the
(45:28) and I don't like getting into the generational wars or whatever, but um, you know, I think this time around, if we don't give our younger generation something to hope for, we're going to see um, more of what we have been seeing. And and it's just the neilism, you know, the depression, the deaths of despair.
(45:47) Like I think we're reaching a point where we have to have um young people who can dream again, dream about the things that uh really are important to us as Americans. And so I think yes, I think they need to let it. I think housing has to become boring again. And you know, this happened at before the Great Depression as well. Everybody was a landlord. Everybody thought that was the way to get rich.
(46:10) And then you suddenly realize, oh my gosh, you know, I'm getting phone calls at midnight on Friday. I don't have a weekend anymore. My property tax and insurance are going through the roof. Um I can't find tenants who can pay. Like if I'm in California, I can't evict them, you know, or New York or whatever.
(46:30) And so I think that the landlord class, and you kind of mentioned this earlier in the show, you know, they there's now Housecoin. And I often get people uh well I I've got a huge crypto uh community now that kind of every time I post something negative about housing they come in you know saying many of the things that you said and so I think this is taking hold and I think the reason this sentiment changed is with these natural uh disasters that we had last year um with Helen with Milton with the fires um you know that it ch that was in huge areas where people had gone in bigly for Airbnbs, short-term rentals,
(47:06) and all of a sudden overnight you have this massive nightmare and losses and you know the Palisades. I mean that that destruction was insane. And so I think this is the sentiment has been changing for some time, but being a landlord is not going to be cool. It's not cool. And so I think that housing could become boring again if they stop intervening.
(47:26) And they can continue to try, Marty. I mean, they're going to try something, right? But I think that we've we've reached the point that whatever they try to do to help the boomers is going to crush the younger generations. And I think as you can I I I think that some of our recent events that have occurred, we can see how much anger is really out there. And um we're going to have to contend with that.
(47:51) And when people talk about UBI or things like that, I just look at them and say, do who's going to be giving out the houses? Because that person is probably I mean they're going to need significant security detail. And in fact, it won't be enough, you know. So, there's just I think that everybody's saying lower rates. Well, okay, that's up to the bond market.
(48:10) I mean, what has been is not necessarily going to be so, you know, for the past 40 years. And I think, okay, well, you've got a globally synchronized economy that so many are facing some sort of trouble. They're you're going to have people are going to have to get like, you know, tribal. They're going to have to defend their currencies.
(48:27) They're going to have to do things and and it might mean selling off the 10-year and we won't get the lower rates. I mean, Bent's been saying that since what, December? And we have not gotten there. And so, we can't get below four. Like you and I were just talking.
(48:46) I was like, "Oh, where's the tenure? Are we below four yet? Are we below four yet?" We we haven't gotten there. We might get there. Um, but will we stay there? I I'm not sure. No. And that's I think that's the collective market has amnesia in terms of this idea that if you lower the Fed funds rate the 10 and 30 year will follow exactly a year ago. Exactly a year ago. Like what's I are we all this silly? I mean I I don't understand.
(49:16) So it's like this time I mean Marty for three years because I well really honest to God it's been uh five years. um you know it just my entire industry it's like oh light rates are going to go so low so low you know um and and then when we got the hikes um you know people just couldn't believe and they just that's all they've been selling for the last 3 years you know so it's it's crazy now to your point about the existential crisis being in the other direction this time around that's that's my biggest worry too is if you think about who are
(49:49) the largest donors who are the most politically active, who is the most representative in the political class? It's the boomers. And so, if we do get to the precipice of if and when we do get to the precipice of a real estate and broader economic crisis, I do fear just not even fear, it's just like what is the most likely outcome? If you're looking at incentives, it's the people funding the campaigns who are the most politically active.
(50:20) And um from an age perspective, uh most representative in Congress and the Senate, it's probably most likely that they're going to get another bailout. I think they're going to try, but I don't know if you follow Russell Napier at all. Um I do. I do. Yeah. And I think that, you know, what I have learned from Russell and and and just talking to other people, it's like think about what they have to do versus what they, you know, want to do.
(50:49) And at this at some point, Marty, like you know, they they've gotten rid of a lot of the SNAP benefits uh through the BBB, Medicare. Um they've done what they can to like the lower middle class. They're going to have to go where the money is and and the money is not, you know, in the middle class anymore and it's not in the lower class and they're squeezing that as much as possible.
(51:09) And so I think they're gonna, you're right, they're going to try everything they possibly can, but I just don't think it's going to work this time. Um because and you know they're gonna ultimately we're gonna have to go where the money is. Yeah. It's a crazy time to be alive.
(51:30) So it really is cuz I'm just thinking through it like cuz I don't like if even if we do have an asset price deflation and correction like the the amount of money that's going to need to be printed in reaction is going to be inflationary. And um just to think that people living off of retirement can continue to subsist on that sustainably uh is very hard to believe. And it's I think we put ourselves in a rock and a hard place. Again, Bitcoin podcast.
(51:55) I think this is all derived from the money itself and the corruption of how money works and the cost of money uh by manipulating interest rates and and I think part of the solution is not going to be mechanical in terms of the different policy decisions and where you decide to inject liquidity.
(52:18) I think it's going to be philosophical and more human where I think there's going to be there's going to have to be a a moment where individual individuals realize like, hey, my parents are retired. They're not going to be able to live off their retirement. We may need to get back to multigenerational housing instead of the son living in their parents' basement, the parent hopefully living absolutely the child's home.
(52:42) And um I moved my mom in with me a year and a half ago. Um, and you know, before that, I had just considered buying her house. It just it just didn't make sense, you know, it's like, okay, and you know, Gen X, I'm a Gen Xer. Gen Xers were so independent, were so individ, you know, and so the whole the idea of it was just insane.
(53:02) But in reality, I just looked at the money and I was like, this is not and also knowing, you know, I was studying macro at the time and thinking, no, we need to batten down the hatches. Um, and because I think the worst thing you can be in right now is in debt. I mean, I think that those that are in debt are just going to get crushed um by those higher interest rates on credit cards.
(53:21) You know, it's just I I I always say say no to debt slavery because in these hard times, those are the people that just get absolutely crushed. So, but yeah, I it's already happening. That's we saw household formation slow last year. Um people are consolidating. Some of the most active construction projects are adding on like your mother-in-law apartment or an ADU on your property, but like you say, it's going to it's going to shift.
(53:50) It's going to be the kids that have to take the parents in because the actually the boomers are the largest increase to the homeless population right now. Now, of course, they're the largest group of people, but still not every boomer is rich. Many of them got wiped out during the GFC. Um, you know, and and don't have savings.
(54:09) In fact, my family got wiped out during our last bout of inflation. Uh we lost my home to foreclosure when I was nine and a part of my family never recovered. And I think this is what happens in these huge cycles is you kind of take out massive swaths of the population um that just you you take away their future, their financial freedom and their future to be able to be in a position um to have enough money to live. Yeah.
(54:34) want to get your thoughts on potential solution uh selfishly because outside of this show I'm a managing partner at a fund that invests in Bitcoin infrastructure. It's called 1031 and we've invested and actually entered in joint venture with a company called Battery Finance.
(54:54) uh they spun out a new market capital which is a traditional structured credit fund but their founder and CEO Andrew Hones and their CIO really caught the Bitcoin bug in 2020 and they're looking out at this problem that we're describing today particularly with a focus on commercial real estate right now but ambitions to get into residential real estate and saying we've got a mismatch in terms of the quality of the assets that are sitting within these structured credit credit products and the the reality of the economy and what they're doing is combining Bitcoin
(55:24) and these assets to try to make make it easier to underwrite from a from a credit perspective because you have sort of uncorrelated, highly liquid um fungeable collateral sitting alongside the real estate. And so they underwrote their first project last year here in Philadelphia.
(55:50) actually this commercial real estate um multi-purpose uh building down uh in center city Philadelphia and they basically refied I believe is a $12.5 million loan. Eight was or nine was used to pay off the existing mortgage. Two was set aside to um uh to do repairs and maintenance and upgrades to the property.
(56:16) and then one to one and a half I believe was used to buy Bitcoin to sit in the loan structure. Um with the idea that this is a 10-year loan, uh we'll offer you a lower rate and maybe a longer amortization schedule um but we're going to both participate in the upside of the Bitcoin. The bet they're taking is, hey, we're going to derisk our exposure um to this real estate by adding Bitcoin to the collateral package.
(56:43) And yeah, we uh we backing battery and very confident and passionate about it cuz I think when you're looking out at the world and you're thinking of ways to fix this problem, I think you have to get creative. Yeah. And bold. I think this is a bold creative solution. And one of the big memes the last 5 years was the soft landing um that the Fed and the Treasury have been trying to manufacture.
(56:59) And I don't think they can manufacture it. think you need to begin to wean people off of real estate as a savings vehicle by introducing what should actually be the savings vehicle to these credit structures. Right. Right. Yeah. I mean solutions I think um we have to uh we I would I would love if they just let the market they'd leave it alone and we did actually get the GSC's out of uh you know or at least a reduced presence.
(57:30) Um, but I think that the solutions lie within us, Marty, and that we have to start caring locally again. And I think this is I love that you actually are um investing where you live, you know, and I think this is important because we're we don't like you say all the Congress folks are bought and paid for, right? And they're they're and and they're also of an age that don't they don't have a lot of in common with us.
(57:55) And so, but we can't do anything about that really. I mean, we can vote, of course, but they're all bought and paid for. And so, what I say is we have to vote with our dollars and we can't, you know, spend stupid money on stupid things. And we have to start caring locally. Like, you have to start caring.
(58:14) Like, if people had cared in Austin, that city council sold them down the river. I mean, like just sold them out. And and so that's where I think uh the solutions start is um let's do city planning again. Let's sit down and talk about these empty buildings as a community. What are we going to do about it? Perhaps there are people that do like you that want to come in and invest and help us revitalize our neighborhood.
(58:37) Take back our cities from these speculators because that's the other thing. None of these speculators live in these cities, Marty. I mean, they're, you know, they're they're either overseas or they're in California or New York. And so they're they're not living there. They have no um allegiance.
(58:57) And so in reality, what I'd love to see is government gets out of housing altogether. And that I think the market will take hold because supply, people are going to be so surprised by the amount of supply we're going to see in the next 5 years. And so the supply is going to drown out any any other narrative or anything like that.
(59:21) And so I just wish we could actually sit down and talk about it so that we could um come up with solutions, but I think it has to start loco. Yeah, I completely agree with that. And again, I mentioned it earlier, but have you read Strong Towns by Charles Marone? Chuck Marone? I I haven't. I don't think I've read the book. Don't they have a newsletter? They have a newsletter. Okay. Yeah, I I get that.
(59:40) Yeah, they have an initiative. I believe they just did something with Pensacola or some some town down in Florida. But I I I've anybody who's listened to this podcast for long enough is like, "Marty, why are you mentioning strong towns against?" Because I'm passionate about it and because I think Chuck is really um tuned into what makes a strong town and is really focusing locally. I'll read that.
(1:00:00) And most importantly, like the the the metric that he hones in on um for like a local economy is revenue per square foot for the small businesses. So like utilizing the space, that wasted space that you're describing. And um I think it's actually something we do well here in Philadelphia.
(1:00:18) At least we did to a certain point. I just moved back so I haven't been paying as much attention, but my cousin worked for the horicultural society for for a long time. And um it was probably about 10 years ago, but in the summer they would go to vacant lots and activate them like have food trucks and stand up beer gardens and really get people invigorating and most importantly monetizing those spaces was what we what we need much more of small businesses.
(1:00:46) And that's the great shame of particularly the political reaction and the the policy reaction to COVID specifically just decimated small businesses and the middle class. It it Yeah, it's so depressing. And Marty, when you drive as much as I do across the country, it is just it's heartwrenching. It is just, you know, it we are not living in the America that we remember.
(1:01:11) And um it our cities have just I mean I've seen people OD in front of me like in San Antonio. I mean it I you know I recently went out to California to Skid Row. I mean, I was that I thought I was in South Africa. I thought I was in Cape Town. I mean, it was it was insane. And this is all over the country.
(1:01:33) Every downtown, even my little city, Johnson City, Tennessee, this little city in the mountains, kind of like Asheville, um is uh full of homeless people. You know, they come here for the Veterans Hospital, but it's it's one of the best in the country. It's just we are not living in the country we remember. And so many of us really don't get outside of our little circle and don't understand that.
(1:01:52) And and that's why I just think we have to one of my I'm so passionate about people just talking. We have to be able to talk to each other and and even if we don't agree on anything, we have to be able to talk about what's best for our communities and our families. And I think most of us share a lot of the same ideals, but a lot of what's programmed out there, the bots, want us to be yelling at each other.
(1:02:18) And and so I I just feel like we have to get back to that small town um type understanding our culture where we can we can recognize and appreciate difference but it's not everything we talk about like we just t it's just tolerance like we all love each other because we're working for the same thing. We want to provide our families a future. We want to provide you know um our kids hope and so and you know a lot of that in America is that dream of home ownership.
(1:02:41) And so I just feel um we as a nation we have just completely uh let sort of uh social media take us apart and and we just have to start fighting back in my opinion and and getting involved locally and doing things probably nobody wants to do. Talk to other people. You have to talk to other people. Agreed.
(1:03:05) It's incredibly ironic because the state of discourse that you're describing is just feeding the negative feedback loop and the state of discourse is driven by the problems that the underlying systemic problems that exist. of people, right? No matter if they're red or blue or right MAGA or democratic socialist, whatever it is, like they're suffering from the same economic systemic economic problems that have um very unique and specific problems at their core.
(1:03:38) And the discourse is just driving a wedge between everybody and exacerbating those problems cuz you uh you find that you actually never talk about solutions with other people and uh ever. Yeah. Ever. It's it's been what's most frustrating to me is that I just kept thinking like a dodo bird. like we would get to that point like people would be more aware by now cuz they would just drive and look and see what's happening and uh that we could start talking about solutions and I mean we just we're not there yet.
(1:04:12) I mean it does feel like though things have started to accelerate um recently. I often talk about because you know people say oh you've been saying this for two years. I've been saying what the path is like where we're headed and basically I say we've either sped up or we we've slowed down and we are we this summer we started to speed up again and and actually we're September uh 16th today uh that FHA program gets its guard rails um at the end of this month starting in October and it will take time this is not something that's overnight but this is going to have a massive impact on uh the housing market and most people are not
(1:04:47) paying attention. I was on site at a very large uh mortgage serer uh two weeks ago and they said, "Melody, you're the only client that started talking about this. We just had one other person bring it up, but I was like I I I mean I was screaming when I found out about it because this is going to double their work almost overnight.
(1:05:08) " And and and so most people though in the industry that are left in the industry don't remember what happened last time. They have no uh they don't understand a fault. And so the whole industry is asleep as well. So I mean it's, you know, this is going, like you say, these are very interesting times.
(1:05:27) And I just the people that say like they've got the script and they know exactly what's going to happen. I call total BS. I mean, I think we are in the wild west right now. Um, and people just want to believe they understand what's about to happen. But I think I think we are in we are living in the moment, Marty, right now. Um, and it it's going to be kind of crazy. Yeah.
(1:05:50) And could could we um just reiterate what those FHA guard rails are? Sure. Yeah. So, this is this program was crazy and there was a recent Wall Street Journal article. So, it kind of got exposed in April uh because of a a Wall Street Journal article. Um but it was nuts.
(1:06:08) So, basically what the Biden administration did is um you know, back during the uh after the crisis, we had to reunderite you if you were going to get a loan modification. we actually cared. Could you actually pay this modification? If we give it to you, will we modify your note? Um, and some people could not. And so we we did not give them a modification.
(1:06:27) Um, and but what happened this time around because of COVID and and then and the stress of COVID, uh, people didn't have to send in financials anymore. In fact, they didn't even have to call their mortgage serer to become to be put on a forbearance. You just automatically kept putting on it, uh, getting put on it. Um and so then that wasn't enough, Marty.
(1:06:44) We saw in June of 23 people um going into delinquency in the FHA and we knew the administration knew that there was going to be an election and that was just not uh they couldn't have it. And so they came up with this this like partial claim supplement modification where you essentially could go and say, "You know what? I I can't pay. I didn't pay for 3 months." And they say, "No problem.
(1:07:08) let me take those three months, put it at the back of your loan. Uh, and then you didn't pay for three more months and then you just went back again and then you went back again. I have a colleague who um has done he dives into the mortgage box security data and um it has these partial claims and the partial claims if you've had one you are five to seven more times more likely to go into default again.
(1:07:33) So these things are not they're just that you keep going back to the till and in fact you've got whole rings of uh originators that know this and they tell investors hey you don't even have to pay your mortgage for 12 months like don't even so go get this mortgage go into early payment default you'll be able to get this partial claim and so I mean this is this is insanity and so what they did um many of us in the industry lobbied against this uh is they put guardrails on that you can only get one of these every 24 months people could go back you you could take out up to 30% of your unpaid principal balance.
(1:08:06) 30%. That is insanity. Well, now um you you can only do this every two months. You also have to pay trial payments to be eligible. Now, what is that? This is every workout. You have to pay at least three payments. So, they know it's skin in the game. This is something we understood back then. You have to have some skin. So, you have to make those three successful payments.
(1:08:28) um now starting in October. That was not even a requirement before. And then the other big thing that people don't get is if you have delinquent student loans, you will not be eligible for a workout. Now, Marty, I can tell you that every mortgage borrower out there is used to calling in and saying, "No problem.
(1:08:46) You're going to you'll get you they're hearing that you'll be getting some help. There's some kind of workout." We're just now starting to see people run out of all those options. Well, this accelerates that for FHA and pretty soon a lot of people that thought, "Okay, I'll be fine because they're going to work something out with me are going to be told you have no option because if you have delinquency loans, you will not be eligible.
(1:09:13) " Um, so this will all take time and the delinquency uh you have to wait 120 days to foreclose. You have to wait for them to miss all three trial payments, things like this. But we will start to see this have a massive impact. Well, we are going to see increasing foreclosures from here regardless, but we will see material foreclosures in Q2 of 2026. Yeah.
(1:09:32) And this is only residential, right? We're not even talking about commercial. I mean, we're not even that that's what's so crazy, right? And we see that every day. Oh, this went into special servicing. This went into foreclosure. And you're getting no bid auctions. Like, nobody's buying.
(1:09:48) So, I we they've done a lot of great extending and pretending. I don't know if you saw the show with Bill Morland and Jack Farley, but if you have not, highly recommend it. He goes through the bank balance sheets. It's it's bankreg data is his newsletter. And oh my, did he u teach young Jack some facts, but it's just on these modifications because they changed the way you have to report the modifications now. So all the books look better than they actually are.
(1:10:14) Um, so it's all these little tricks to make it look a little bit rosier for a little bit longer. Should I get him on I should probably get him on the show. Oh yes, he is a gem. I mean, he's a he's a credit nerd like me like I mean and he he went through it and that that was my job was watching credit, you know, and I watch people don't understand 2006 a lot of our prime borrowers looked just fine.
(1:10:39) By 2009 they did not because these factors of now you're not getting home price appreciation. Now you can't access for a refi the credit market anymore. It just changes everything, but it takes some time to really show up. Yeah. All right. Stay frosty out there, everybody. Stay aware. Uh, make sure you follow Melody cuz I I think again I'm joking right now, but and I think there there's a facade on the economy right now with uh government issued data. I mean, obviously the last jobs report looks like they're trying to clean it up at the BLS, but um what the
(1:11:18) financial pundits on CNBC and others will tell you, particularly as it pertains to the strength of the the middle class and the economy overall. I think if you just look at data particularly in housing it's becoming very obvious like again going back to the first chart the the chart only chart I showed in the beginning of the episode like qualitatively if people are searching help with mortgage uh people are struggling out there and absolutely I think we're getting a triple whammy and obviously this AI
(1:11:50) buildout is pushing up electricity prices in a lot of places I don't think that's another thing that is being swept under the rug by mainstream pundits and the administration is the average cost per kilowatt hour, price per kilowatt hour uh of electricity in major US cities is approaching 20 cents which is insane. And energy is the raw input of everything we do in the economy. Absolutely.
(1:12:16) It's happened to us here in Tennessee. I mean just shot up overnight. I mean and again yeah we didn't even really talk about that. The taxes, insurance, and your electricity bills. I mean, and this is another head headache for landlords, obviously. Um, so yeah, it's nuts. Yeah. Well, we should do this again at some point. Absolutely. Thank you so much.
(1:12:40) In a few months when or maybe in the beginning of next year, see where things are. Yeah. Where uh where can anybody so inclined find out more about your work and what you're doing? If I haven't depressed them to death, right? Uh M3_Melody um on ex Twitter. M3 Melody Substack and M3 Melody YouTube. Awesome. Well, Melody, thank you for joining us today and thank you for the incredible work.
(1:13:04) And um like I said, hopefully we do this again at some point next year. Hopefully. Absolutely. And thank you for having me. It's been my pleasure. All right. Peace and love, freaks. Okay. Thank you for listening to this episode of TFTC. If you've made it this far, I imagine you got some value out of the episode. If so, please share it far and wide with your friends and family. We're looking to get the word out there.
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