WEBVTT - Lab 029: The Roof is on Fire! 0:00:00.280 --> 0:00:02.559 So we asked y'all on Twitter if you were tired 0:00:02.560 --> 0:00:05.720 of hearing about the coronavirus, and some of y'all said yes, 0:00:06.480 --> 0:00:08.360 and some of y'all said no. 0:00:09.080 --> 0:00:10.959 We're going to talk a little bit about coronavirus, but 0:00:11.400 --> 0:00:12.320 not directly. 0:00:12.560 --> 0:00:15.520 I mean, honestly, no matter what we talk about, it's 0:00:15.560 --> 0:00:21.080 impossible to escape this pandemic that's going on all around us. 0:00:21.200 --> 0:00:23.759 Like that is our backdrop. We can't not. 0:00:23.800 --> 0:00:26.000 Talk about the pandemic, but we can talk about things 0:00:26.040 --> 0:00:28.440 that are kind of like Corona adjacent. 0:00:28.960 --> 0:00:32.159 If the health crisis and the economic crisis run enough 0:00:32.200 --> 0:00:35.720 for you. We're also facing a housing crisis and that's 0:00:35.760 --> 0:00:40.400 a result of COVID nineteen, of this pandemic. I'm TT 0:00:40.680 --> 0:01:06.720 and I'm Zachiah and from Spotify. This is Dope Labs. 0:01:08.360 --> 0:01:11.479 So I was watching on Twitter where some folks were 0:01:11.480 --> 0:01:16.280 protesting in New Orleans and they were physically blocking a 0:01:16.400 --> 0:01:20.399 landlord from submitting eviction papers for one of the tenants. 0:01:20.920 --> 0:01:21.960 I just can't believe this. 0:01:22.080 --> 0:01:25.160 Every day I wake up and there's a new headline, 0:01:25.200 --> 0:01:28.560 there's something else that the pandemic is affecting, And I'm 0:01:28.640 --> 0:01:29.759 just like, how. 0:01:29.680 --> 0:01:32.319 Much more can we take this? Is crazy. 0:01:32.920 --> 0:01:36.319 One of the latest headlines I saw was that by 0:01:36.360 --> 0:01:40.080 the end of September or October, we're expecting almost forty 0:01:40.080 --> 0:01:45.600 million Americans to be evicted or be in danger of eviction. 0:01:46.160 --> 0:01:49.280 That is a huge chunk of people. And I feel 0:01:49.320 --> 0:01:51.360 like we aren't talking about this enough. 0:01:51.760 --> 0:01:53.240 It's definitely not getting enough light. 0:01:53.680 --> 0:01:56.320 Yeah, I mean, especially with the election season coming upon us, 0:01:56.360 --> 0:01:58.480 we need to know what we need to be asking 0:01:58.520 --> 0:01:59.800 these politicians for. 0:02:00.280 --> 0:02:03.080 Yes, what's the plan. Let's get into the recitation. 0:02:05.880 --> 0:02:06.880 So what do we know? 0:02:07.480 --> 0:02:09.839 I mean, we know that the coronavirus spread has put 0:02:09.840 --> 0:02:12.920 folks in a tough situation. People are losing their jobs, 0:02:13.320 --> 0:02:14.840 so they don't have a lot of money to pay 0:02:14.880 --> 0:02:15.959 their rent or mortgage. 0:02:16.120 --> 0:02:18.000 I think another thing that we know is that the 0:02:18.120 --> 0:02:21.960 unemployment rate is really really high right now, like it 0:02:22.040 --> 0:02:25.480 reached record levels. I don't know if you remember back 0:02:25.520 --> 0:02:28.880 a few months ago, there was that long car line 0:02:29.440 --> 0:02:32.120 of people just trying to get food. 0:02:32.800 --> 0:02:35.640 Yeah, food banks. People were lining up at food banks, 0:02:35.639 --> 0:02:37.400 and the food banks were running out of food and 0:02:37.440 --> 0:02:39.680 there were just so many people lined up and it. 0:02:39.720 --> 0:02:44.359 Was like miles of cars. And it's because people were 0:02:44.400 --> 0:02:48.000 losing their jobs and didn't have a way to make money, 0:02:48.040 --> 0:02:49.960 so that everybody was lining up trying to get some 0:02:50.000 --> 0:02:50.640 type of help. 0:02:50.800 --> 0:02:52.520 I think the other thing that we know is, even 0:02:52.639 --> 0:02:55.880 pre Corona, the United States suffered from a housing deficit. 0:02:55.960 --> 0:02:59.440 So there are many states where there are more families 0:02:59.520 --> 0:03:02.840 in need of housing than there are available housing units. 0:03:02.919 --> 0:03:03.359 Wow. 0:03:03.480 --> 0:03:05.639 And so when you take those things together. 0:03:05.760 --> 0:03:06.960 This isn't a new problem. 0:03:07.080 --> 0:03:10.000 This is just a problem magnified, right. 0:03:10.040 --> 0:03:12.320 And I also feel like we know that this is 0:03:12.520 --> 0:03:17.320 not over. We're not getting out of this whole situation 0:03:17.600 --> 0:03:22.320 with social distancing and quarantining and all that. For a while, 0:03:22.360 --> 0:03:24.680 it looks like, yeah, so what do we want to know? 0:03:24.880 --> 0:03:26.840 Well, I think we want to know how this housing 0:03:26.840 --> 0:03:28.760 crisis came about. How do we get to the point 0:03:28.760 --> 0:03:31.840 where forty million people are in jeopardy? 0:03:32.200 --> 0:03:32.440 Right? 0:03:32.639 --> 0:03:36.160 I want to know specific things that went down, like 0:03:36.280 --> 0:03:38.640 a timeline to get us to where we are right now. 0:03:38.880 --> 0:03:41.320 And I know it's in some way tied to the recession. 0:03:41.320 --> 0:03:44.000 And we've had a housing recession, you know, we've had 0:03:44.040 --> 0:03:47.200 that type of market collapse in the past. Is this 0:03:47.280 --> 0:03:49.600 the same as that? And if we know it's the same, 0:03:49.720 --> 0:03:51.040 when is it going to be over? How can we 0:03:51.080 --> 0:03:52.480 fix it or is it different? 0:03:52.920 --> 0:03:56.320 And I want to know these forty million people. Who 0:03:56.400 --> 0:03:59.400 are they? Who is most likely to be in that 0:03:59.440 --> 0:03:59.960 forty million? 0:04:00.440 --> 0:04:02.960 And if you are housing insecure or in danger of 0:04:03.080 --> 0:04:06.960 losing your home, what are your options. Let's get some answers. 0:04:07.040 --> 0:04:08.280 Let's jump into the dissection. 0:04:08.520 --> 0:04:10.920 Our guest for this lab is Michael O'Neil. 0:04:11.160 --> 0:04:14.840 My name is Michael Neil. I am a senior research 0:04:14.880 --> 0:04:18.480 associate in the Housing Finance Policy Center here at the 0:04:18.600 --> 0:04:19.359 Urban Institute. 0:04:19.520 --> 0:04:23.440 Michael's career in economics, finance, and policy has spanned the 0:04:23.520 --> 0:04:27.719 last twenty years, and he's worked on Wall Street, Capitol Hill, 0:04:27.920 --> 0:04:31.599 and the Federal Reserve. More recently, his focus has moved 0:04:31.600 --> 0:04:34.360 to housing and he spent time at the National Association 0:04:34.440 --> 0:04:37.880 of home Builders and Fannie May. He's the perfect expert 0:04:38.000 --> 0:04:39.240 for this episode. 0:04:39.440 --> 0:04:41.839 Michael's day to day is really a mixture of a 0:04:41.839 --> 0:04:45.560 lot of different things. There's engagement with press and media, 0:04:45.920 --> 0:04:48.200 so he's doing interviews just like this one, where he 0:04:48.240 --> 0:04:51.960 tries to communicate economic concepts in ways that are easy 0:04:52.000 --> 0:04:55.440 for people to understand. He's also doing a lot of 0:04:55.560 --> 0:05:00.280 data analysis where he's running statistical programs, checking results and 0:05:00.360 --> 0:05:03.400 reporting those results. But there's a third piece, and that 0:05:03.560 --> 0:05:05.680 part of his job is what we wanted to focus 0:05:05.720 --> 0:05:06.600 on today. 0:05:06.400 --> 0:05:10.279 Which is how do you engage with people on the 0:05:10.320 --> 0:05:13.599 ground who are actually making the economic decisions. And I 0:05:13.600 --> 0:05:15.520 think that's a key part of this that you know, 0:05:15.520 --> 0:05:18.359 whether you're talking to homebuilders, or you're talking to home buyers, 0:05:18.480 --> 0:05:21.320 or you're talking to anyone who's making any kind of 0:05:21.720 --> 0:05:24.560 decision on how they're going to allocate their resources, you 0:05:24.600 --> 0:05:26.799 know that has implications for the economy. 0:05:26.920 --> 0:05:30.359 We're all trying to make better, more informed decisions to 0:05:30.560 --> 0:05:34.520 navigate our current crisis, right and that starts with a 0:05:34.560 --> 0:05:37.880 good foundational understanding of what's going on. So let's just 0:05:37.960 --> 0:05:41.840 start with the basics. Economics is really just understanding how 0:05:41.920 --> 0:05:45.120 resources are dispersed and used. 0:05:45.720 --> 0:05:47.919 And when you think about those resources, there are a 0:05:47.920 --> 0:05:54.720 lot of different sectors of the economy housing, financial markets, energy, agriculture. 0:05:54.920 --> 0:05:57.440 But for today's lab like we said, we're going to 0:05:57.520 --> 0:05:59.120 focus only on housing. 0:05:59.400 --> 0:06:01.880 Let's just boom out and take a bird's eye view 0:06:02.080 --> 0:06:03.960 of what's happening right now. 0:06:04.240 --> 0:06:06.479 So we're in the middle of a pandemic and folks 0:06:06.560 --> 0:06:10.360 are losing their homes. The economy is suffering, and that 0:06:10.520 --> 0:06:13.320 means that people don't have the means to pay for housing. 0:06:13.920 --> 0:06:18.120 These estimates of housing insecurity are changing month to month. 0:06:18.160 --> 0:06:20.680 They're just going up and up. In June, it was 0:06:20.800 --> 0:06:23.719 estimated that anywhere from nineteen to twenty three million people 0:06:24.320 --> 0:06:28.080 could be evicted. In August, it was just changed to 0:06:28.240 --> 0:06:31.160 thirty to forty million. That is a big jump. 0:06:31.080 --> 0:06:33.440 Huge jump in just a couple of months. 0:06:33.520 --> 0:06:37.039 And if that estimate is right, that's about ten percent 0:06:37.040 --> 0:06:37.800 of Americans. 0:06:37.839 --> 0:06:41.680 And the Aspen Institute predicts that one in five Americans 0:06:41.680 --> 0:06:44.919 that are renting their homes are at risk of eviction 0:06:45.160 --> 0:06:49.120 by the end of September. Now that we understand this, 0:06:49.960 --> 0:06:53.120 who is affected the most? So we know that the 0:06:53.160 --> 0:06:56.679 rental market is disproportionately impacted by this. 0:06:56.720 --> 0:07:00.720 In part because COVID's impact on the word labor market 0:07:01.160 --> 0:07:05.960 was disproportionately impacted Renters, people who work in industries like 0:07:06.040 --> 0:07:10.480 accommodation services, like the retail sector that all that typically 0:07:10.560 --> 0:07:13.440 tend to be renters as opposed to being homeowners. 0:07:13.480 --> 0:07:15.880 And even if you aren't renting, it doesn't mean that 0:07:15.880 --> 0:07:17.160 you're totally in the clear. 0:07:17.280 --> 0:07:19.840 On the homeowner side. There's some evidence to suggest that 0:07:20.240 --> 0:07:24.760 it's those with lower credit scores, those with higher debt 0:07:24.800 --> 0:07:28.240 to income ratios, those with kind of more modest credit 0:07:28.280 --> 0:07:31.600 profiles who are more likely to be impacted, in part 0:07:31.640 --> 0:07:35.760 because they may work in uh IN in those industries 0:07:35.760 --> 0:07:36.720 that were hardest. 0:07:36.440 --> 0:07:38.920 Had and Michael points out that there are two other 0:07:38.960 --> 0:07:40.680 groups of people that have been affected. 0:07:41.080 --> 0:07:45.720 Second, certainly lower income people, given the industries that have 0:07:45.760 --> 0:07:51.760 been disproportionally impacted. Number three, people of color, African Americans. 0:07:51.840 --> 0:07:55.960 Hispanics have been disproportionately impacted for African for African Americans, 0:07:55.960 --> 0:07:59.520 both in terms of their health as well as their economics. 0:07:59.640 --> 0:08:02.760 So let's try to understand how COVID is wreaking so 0:08:02.880 --> 0:08:06.880 much havoc on the economy and the housing market Specifically. 0:08:07.560 --> 0:08:11.040 History is the great teacher and it can also give 0:08:11.120 --> 0:08:11.920 us some context. 0:08:12.280 --> 0:08:14.040 So let's turn back the clock to two thousand and 0:08:14.040 --> 0:08:15.160 eight and a Great recession. 0:08:15.440 --> 0:08:17.640 And if you're listening to this, you were probably alive 0:08:17.720 --> 0:08:22.240 during the Great Recession, and remember how awful it was. 0:08:22.480 --> 0:08:27.200 A recession is defined as a significant decline in economic activity. 0:08:26.760 --> 0:08:29.560 And a recession can be triggered by a lot of 0:08:29.600 --> 0:08:35.640 different things. A financial crisis, an economic bubble bursting, large 0:08:35.679 --> 0:08:39.840 scale natural disaster or even a pandemic. 0:08:40.160 --> 0:08:42.240 In the Great Recession, which was from two thousand and 0:08:42.280 --> 0:08:44.720 seven to two thousand and nine, real GDP. 0:08:44.800 --> 0:08:47.920 That's gross domestic product, and that is a number that 0:08:48.200 --> 0:08:50.720 determines the economic health of a country. 0:08:50.880 --> 0:08:53.560 It fell four point three percent from its peak in 0:08:53.559 --> 0:08:56.319 two thousand and seven. This was the largest decline in 0:08:56.360 --> 0:09:00.000 the post war era. The unemployment rate, which was five 0:09:00.080 --> 0:09:03.360 percent in December two thousand and seven, peaked at ten 0:09:03.440 --> 0:09:05.480 percent in October two thousand and nine. 0:09:05.600 --> 0:09:08.040 For some people, there was a sense after the Great 0:09:08.080 --> 0:09:11.959 Recession that that was roughly about as bad as things 0:09:12.000 --> 0:09:12.640 could ever get. 0:09:12.800 --> 0:09:14.319 But that's not true. 0:09:14.480 --> 0:09:17.800 This recession has eclipsed that. When we look at what 0:09:17.840 --> 0:09:22.840 we call the macroeconomic variables, things like GDP, unemployment, the 0:09:22.920 --> 0:09:26.800 unemployment rate you know, peaking to fifteen percent GDP declining 0:09:26.880 --> 0:09:31.960 on an annuary basis by thirty three percent, just numbers 0:09:32.000 --> 0:09:34.040 that are incredible. 0:09:34.120 --> 0:09:34.880 Do y'all hear that. 0:09:35.720 --> 0:09:38.920 If you were alive during the Great Recession and you 0:09:39.000 --> 0:09:43.280 remember how crazy that was, this is a lot worse. 0:09:43.800 --> 0:09:47.200 And this is also different in terms of why it happened. 0:09:47.760 --> 0:09:50.720 In two thousand and eight, it was irresponsible lending, and 0:09:50.760 --> 0:09:52.880 it was triggered by the housing bubble burst in two 0:09:52.880 --> 0:09:53.520 thousand and five. 0:09:54.000 --> 0:09:56.040 This time it's a little different. 0:09:56.280 --> 0:10:01.480 This is still motivated by a health crisis, very different, 0:10:01.520 --> 0:10:03.360 I think from the Great Recession. 0:10:03.080 --> 0:10:06.600 And Michael says that this recession hit like a natural 0:10:06.640 --> 0:10:10.960 disaster as opposed to people exploiting the housing market, and 0:10:11.000 --> 0:10:13.480 that means that there were implications for what kind of 0:10:13.559 --> 0:10:14.920 policy was prescribed. 0:10:15.080 --> 0:10:19.640 And in a world in which the risk really reflects 0:10:19.679 --> 0:10:22.520 something that happened through no fault of my own, then 0:10:22.600 --> 0:10:25.280 that's where we really need to think seriously about the 0:10:25.320 --> 0:10:29.800 degree to which this crisis actually echoes the Great Recession, 0:10:30.120 --> 0:10:33.360 because the policy response, at least on the mortgage side, 0:10:33.760 --> 0:10:37.880 seems to be somewhat similar, and yet the source of 0:10:37.920 --> 0:10:40.480 the impact appears to be somewhat different. 0:10:40.679 --> 0:10:44.079 So, knowing that, let's put all of this in context, 0:10:44.200 --> 0:10:46.720 let's map it right on the timeline, starting from the 0:10:46.760 --> 0:10:47.960 beginning of twenty twenty. 0:10:48.160 --> 0:10:50.320 All I know is that I was minding my business, 0:10:51.080 --> 0:10:53.400 enjoying the new year, and then all of a sudden, 0:10:54.040 --> 0:10:56.280 twenty twenty turned into the worst year. 0:10:56.120 --> 0:10:59.560 Of all time. By the end of February. 0:10:59.320 --> 0:11:02.880 Michael laid out what's happening with housing in stages, and 0:11:02.960 --> 0:11:05.240 the first three stages can pretty much be summed up 0:11:05.240 --> 0:11:09.480 as good, bad, then worse. Let's start with the good. 0:11:09.760 --> 0:11:15.920 The immediate implication of COVID nineteen was in some ways 0:11:16.000 --> 0:11:20.400 actually positive for housing activity. We actually saw mortgage applications 0:11:20.400 --> 0:11:26.040 for purchases and refrising that's refinancing actually spike in that 0:11:26.200 --> 0:11:28.120 January early February period. 0:11:28.320 --> 0:11:31.880 At the beginning of twenty twenty, unemployment was at historic lows, 0:11:32.160 --> 0:11:35.679 thanks Obama. But markets react to what's going on, and 0:11:36.600 --> 0:11:40.320 it seemed like coronavirus might be a problem, and if 0:11:40.360 --> 0:11:43.600 the economy took a hit, they didn't know how bigger 0:11:43.640 --> 0:11:44.400 small it would be. 0:11:44.640 --> 0:11:48.120 So mortgage interest rates dropped because we believe the economy 0:11:48.120 --> 0:11:51.280 could still hang in there. So houses became more affordable, 0:11:51.520 --> 0:11:56.040 construction was cheaper, and people's tendency to refinance so take 0:11:56.080 --> 0:11:58.240 their loan back to get a lower rate and end 0:11:58.280 --> 0:12:01.080 up paying less each month, that tendency increased. 0:12:01.320 --> 0:12:04.520 But then when it became clear that COVID nineteen was 0:12:04.559 --> 0:12:08.400 going to have a much more a much deeper impact 0:12:08.400 --> 0:12:12.960 on the economy, as shelter and place orders were put in, 0:12:13.080 --> 0:12:16.319 and again I definitely want to reiterate that they are 0:12:16.400 --> 0:12:20.520 definitely key for protecting the health of the public. It's 0:12:20.559 --> 0:12:23.920 a tradeoff. But as all of those were put in, 0:12:24.280 --> 0:12:28.480 then you had a situation in which as businesses closed, 0:12:28.960 --> 0:12:32.440 as people were laid off and they had less income, 0:12:32.720 --> 0:12:35.120 we saw that. We certainly saw this decline in what 0:12:35.160 --> 0:12:36.560 we call aggregate. 0:12:36.120 --> 0:12:40.680 Demand, and aggregate demand is just like it sounds, just 0:12:40.720 --> 0:12:45.560 demand for the entire economy. So now we're about in 0:12:45.920 --> 0:12:49.800 February March, and we've still got lower interest rates, but 0:12:49.840 --> 0:12:52.600 we also have higher unemployment rates. 0:12:52.760 --> 0:12:55.480 But what was also happening is that as the interest 0:12:55.520 --> 0:12:58.480 rates are down and the unemployment rates started going up, 0:12:59.200 --> 0:13:03.040 we were also seeing housing prices continue to increase despite 0:13:03.120 --> 0:13:06.040 applications to buy a home beginning to decline. 0:13:06.400 --> 0:13:09.920 So less people were trying to get a home, but 0:13:10.400 --> 0:13:12.880 the prices for houses are going up. 0:13:13.120 --> 0:13:14.960 That doesn't make sense. That goes against everything a lot 0:13:15.000 --> 0:13:20.640 about demand you have supplied. There is no demand drop. 0:13:20.480 --> 0:13:24.440 The price exactly, these houses should be free ninety nine. 0:13:25.960 --> 0:13:29.280 So some people whose houses were still increasing in value 0:13:29.720 --> 0:13:32.480 but who were seeing a lower mortgage rate were able 0:13:32.520 --> 0:13:35.560 to refinance and get a lower rate or a shorter 0:13:35.760 --> 0:13:37.120 term on their mortgage. 0:13:37.760 --> 0:13:40.800 But then as we move on into what Michael calls 0:13:40.880 --> 0:13:44.320 the third phase of COVID related housing trends. This is 0:13:44.320 --> 0:13:47.400 about March, April or May, it became clear that many 0:13:47.440 --> 0:13:49.800 people were not going to be able to pay their mortgage. 0:13:50.280 --> 0:13:52.680 You only had to look at the unemployment rate continuing 0:13:52.720 --> 0:13:55.960 to rise in order to understand that mortgages were at risk. 0:13:56.559 --> 0:13:59.880 Historically, your ability to pay your mortgage is largely to 0:14:00.200 --> 0:14:02.360 to whether or not you have a job, and so 0:14:02.480 --> 0:14:05.440 historically what we see is that the mortgage delinquency rate 0:14:05.720 --> 0:14:07.160 will track the unemployment rate. 0:14:07.400 --> 0:14:11.280 The unemployment rate in April of this year twenty twenty 0:14:11.840 --> 0:14:14.280 got up to fourteen point seven percent. 0:14:14.880 --> 0:14:16.720 That has never happened before. 0:14:16.800 --> 0:14:19.080 So as the unemployment rate was rising, we started to 0:14:19.080 --> 0:14:21.840 see more people not being able to make their mortgage payments, 0:14:22.520 --> 0:14:25.040 which had serious implications for the mortgage market. 0:14:25.320 --> 0:14:29.160 And there you have it, good, bad, and then worse. 0:14:29.800 --> 0:14:33.200 And then came a fourth stage where, for various reasons, 0:14:33.360 --> 0:14:36.880 some states started to open up again. This led to 0:14:36.960 --> 0:14:38.880 a decrease in the unemployment rate. 0:14:38.920 --> 0:14:43.160 As well as actually a recovery in purchase applications, suggesting 0:14:43.200 --> 0:14:46.600 that demand to buy a home was actually beginning to recover, 0:14:47.720 --> 0:14:51.560 and that really I think culminated with the strong home 0:14:51.640 --> 0:14:55.120 sales numbers that we saw that we saw in June, 0:14:55.680 --> 0:14:58.240 where new and existing home sales really rose by something 0:14:58.920 --> 0:15:03.200 on a north of two twenty percent. But where we 0:15:03.240 --> 0:15:07.400 are now is indications again COVID being at the center 0:15:07.480 --> 0:15:11.720 of this. Where we are now is indications that perhaps 0:15:12.480 --> 0:15:15.560 we are not recovering to the same degree that we 0:15:16.920 --> 0:15:20.280 originally fought, particularly when states were beginning to roll back 0:15:20.320 --> 0:15:21.560 their shelter and place orders. 0:15:21.600 --> 0:15:23.640 So that brings us to present day. What emoji would 0:15:23.680 --> 0:15:28.480 you assign to present day twenty twenty housing the vomit 0:15:28.520 --> 0:15:29.280 emoji for me. 0:15:30.640 --> 0:15:35.280 I don't even know, Like the trash can trash trash can. 0:15:35.560 --> 0:15:38.880 Yeah, And so now there is a very real risk 0:15:39.040 --> 0:15:42.880 that a lot of on what we experienced in February, March, 0:15:42.920 --> 0:15:44.280 and April could come back. 0:15:44.400 --> 0:15:46.440 Let's take a quick break and when we get back, 0:15:46.440 --> 0:16:03.600 we're going to jump into the path to housing security. 0:16:05.720 --> 0:16:06.840 We're back, and. 0:16:07.160 --> 0:16:10.720 After everything that we talked about in the first half 0:16:10.760 --> 0:16:15.080 of this lab refinance and interest rates, mortgage rates, all 0:16:15.080 --> 0:16:19.560 these things like that, now we need to push all 0:16:19.600 --> 0:16:21.760 of that to the side and get to the people 0:16:21.960 --> 0:16:24.760 that are affected by all of this. So we're gonna 0:16:24.760 --> 0:16:27.360 speak broadly about the different types of people that are 0:16:27.400 --> 0:16:30.000 involved in the housing equation, just so that you can 0:16:30.160 --> 0:16:31.840 understand all the different roles. 0:16:32.400 --> 0:16:35.040 Let's start with the renters. So people that are renting 0:16:35.080 --> 0:16:37.600 may be in a lower economic group, so earning less 0:16:37.600 --> 0:16:41.440 than homeowners and just have less to start with, Michael says. 0:16:41.480 --> 0:16:44.000 They also may be in industries that are hardest hit, 0:16:44.520 --> 0:16:49.120 like accommodation services and the retail sector. This jeopardizes their 0:16:49.120 --> 0:16:53.400 income either way, the rent is due, and unless there 0:16:53.400 --> 0:16:57.240 are policies to provide income assistance or prevent evictions, they're 0:16:57.240 --> 0:16:58.680 at risk of losing their homes. 0:16:58.840 --> 0:17:02.520 And then you have homeowners. Homeowners and property owners also 0:17:02.640 --> 0:17:04.640 may be in the group of folks that have lost 0:17:04.640 --> 0:17:07.640 their jobs or were furloughed and are unable to pay 0:17:07.640 --> 0:17:11.159 their mortgage. And an owner of a property is responsible 0:17:11.160 --> 0:17:14.000 for paying the mortgages, even if they're tenants. The runners 0:17:14.040 --> 0:17:17.119 we just talked about are unable to pay, so the 0:17:17.280 --> 0:17:19.000 issue starts to compound. 0:17:19.400 --> 0:17:23.880 Then there's the lenders. Lenders are banks and financial institutions 0:17:23.880 --> 0:17:27.120 that lend the money to borrowers to purchase a home. 0:17:27.560 --> 0:17:29.320 When we think about lenders. They come in a couple 0:17:29.320 --> 0:17:32.080 different categories. Sometimes your bank can be your lender. So 0:17:32.640 --> 0:17:35.520 if you bank with Wells Fargo, Bank of America City, 0:17:35.520 --> 0:17:38.040 they all have like a mortgage branch, they can be 0:17:38.080 --> 0:17:42.560 mortgage lenders. There are also some online lenders, so Quickened 0:17:42.560 --> 0:17:46.240 Loans is an online lender. I just read about Guild Mortgage. 0:17:46.320 --> 0:17:49.119 That's an online lender. Lenders are required to funnel the 0:17:49.160 --> 0:17:53.720 mortgage payment from the borrower back to the investors securing 0:17:53.760 --> 0:17:54.400 the loan. 0:17:54.400 --> 0:17:57.320 And that leads us to the investors that are securing 0:17:57.320 --> 0:18:00.239 the loans, and a mortgage investor is the party that 0:18:00.280 --> 0:18:03.639 purchases the mortgages from the lenders. In most cases, the 0:18:03.720 --> 0:18:08.119 investors are actual government entities like Fanny May and Freddie 0:18:08.160 --> 0:18:12.040 Mac or government sponsored enterprises like FAJA or the VA, 0:18:12.560 --> 0:18:14.879 and they purchase your home loans, so your lender is 0:18:14.920 --> 0:18:18.400 able to continue selling new home loans, and those investors 0:18:18.760 --> 0:18:21.479 want their money, and this is why we need a 0:18:21.560 --> 0:18:23.480 life raft for everyone. 0:18:23.840 --> 0:18:27.200 The policy prescription should then take into account the fact 0:18:27.200 --> 0:18:30.760 that people may not be paying their mortgages or may 0:18:30.800 --> 0:18:33.920 not be able to pay their rent through no fault 0:18:33.920 --> 0:18:34.280 of their own. 0:18:34.400 --> 0:18:37.560 So there were already some efforts. Back in March, the 0:18:37.680 --> 0:18:40.800 Cares Act was passed, and this included an additional six 0:18:40.880 --> 0:18:44.680 hundred dollars in unemployment benefits and a one hundred twenty 0:18:44.720 --> 0:18:48.359 day moratorium on evictions. This means you can't evict someone 0:18:48.359 --> 0:18:51.680 who's unable to pay their rent for one hundred twenty days. 0:18:51.560 --> 0:18:55.000 And that relief only applied to federally backed mortgages, so 0:18:55.119 --> 0:18:58.320 mortgages from lenders that are funded by the government like 0:18:58.480 --> 0:19:01.000 Fannie May, Freddie Mac, and the FAJ. 0:19:01.400 --> 0:19:04.359 While that's a great program, the Urban Institute says that 0:19:04.440 --> 0:19:07.320 only accounts for about twenty eight percent of renters. 0:19:07.600 --> 0:19:12.240 The moratorium on evictions expired July twenty fourth, and the 0:19:12.240 --> 0:19:15.960 six hundred dollars additional stimulus benefit payments stopped on July 0:19:16.080 --> 0:19:19.720 thirty first, so this leaves a lot more people unable 0:19:19.760 --> 0:19:21.400 to pay their rent or mortgage. 0:19:21.600 --> 0:19:24.960 On August eighth, Trump signed for executive orders, one of 0:19:25.000 --> 0:19:29.080 which was billed as a federal eviction ban, but it's 0:19:29.119 --> 0:19:34.320 not technically a ban. It doesn't even extend the moratorium 0:19:34.400 --> 0:19:40.240 from before. Instead, it allows agencies to consider eviction protection 0:19:40.800 --> 0:19:43.760 and it allows them to look for sources of funding 0:19:43.800 --> 0:19:48.200 to assist people that are renting, but it doesn't mandate 0:19:48.280 --> 0:19:49.200 that they do anything. 0:19:49.640 --> 0:19:52.919 So they can help you, but they don't have to 0:19:52.960 --> 0:19:53.280 help you. 0:19:53.840 --> 0:19:55.600 Another part of the care is act that we didn't 0:19:55.680 --> 0:19:56.960 mention is forbearance. 0:19:57.200 --> 0:19:59.800 One of the things that I think that the data 0:20:00.119 --> 0:20:04.960 is clear on is that forbearance has certainly helped homeowners, 0:20:05.000 --> 0:20:08.399 particularly the most vulnerable homeowners, remain in their homes. 0:20:08.640 --> 0:20:11.040 And this basically allows you to push off your payments 0:20:11.119 --> 0:20:14.040 until a later date when you will hopefully be in 0:20:14.080 --> 0:20:15.520 a better financial position. 0:20:15.680 --> 0:20:19.359 Forbearance has been key to helping people to maintain their 0:20:19.400 --> 0:20:22.520 homes even when they can't make their mortgage payment. But 0:20:22.600 --> 0:20:27.520 on the renter side, forbearance is also important because somebody 0:20:27.600 --> 0:20:33.480 owns the building and so property owners also get forbearance, 0:20:33.520 --> 0:20:35.640 which is going to be important for them because they 0:20:35.680 --> 0:20:39.239 take the income that renters pay and turn around and 0:20:39.280 --> 0:20:42.120 pay whatever mortgage that they have on the property. 0:20:42.240 --> 0:20:45.480 So allowing homeowners to go into forbearance is the best 0:20:45.480 --> 0:20:48.760 way to ensure that the market remains somewhat stable. 0:20:48.880 --> 0:20:53.040 But the other side of the coin is that forbearance. 0:20:53.320 --> 0:20:58.440 While forbearance gives relief to borrowers, it does not give 0:20:59.320 --> 0:21:01.640 relief to the mortgage holders. 0:21:01.280 --> 0:21:04.359 And that's because the mortgage holders are still on the 0:21:04.400 --> 0:21:08.399 hook to move those mortgage payments from borrower to investor. 0:21:08.960 --> 0:21:11.760 So you know, there's this chain, there's the money chain. 0:21:11.960 --> 0:21:14.600 Your money has to go from borrower to your mortgage 0:21:14.640 --> 0:21:17.639 servicer to the lender, and then the lender has to 0:21:17.640 --> 0:21:19.840 turn it over to the investor. Now, sometimes a lender 0:21:19.840 --> 0:21:21.760 and the servicer are the same, usually if you have 0:21:21.800 --> 0:21:25.760 a bank backed mortgage. But either way, as a borrower, 0:21:25.800 --> 0:21:28.360 you have to pay. And this has affected a lot 0:21:28.359 --> 0:21:30.399 of smaller lenders who are now on the hook to 0:21:30.440 --> 0:21:34.080 deliver four to six months of mortgage payments to investors. 0:21:34.480 --> 0:21:37.879 So I mean, hearing all this, you think, oh, forbearons, 0:21:37.920 --> 0:21:40.879 that's great, But there is another side to it, another 0:21:40.960 --> 0:21:43.960 side that can negatively affect people who want to take 0:21:44.000 --> 0:21:47.800 advantage of the housing market right now. So if people 0:21:47.800 --> 0:21:50.640 buy a house and then immediately lose their job, then 0:21:50.680 --> 0:21:53.400 request for barans, which is the right thing to do. 0:21:54.280 --> 0:21:57.520