[Music] It's a good World good World this is how the next foreclosure Crisis happens welcome back to real Estate mindset I have Melody Wright with Us today to go over basically all of Today's data in with regards to Foreclosure the process of foreclosure And we're going to compare that to what Was happening during the GFC I've been Hearing more and more videos about how There was millions of foreclosures that Hit the market when the reality was is Yes there was millions of people that Were struggling but those homes didn't Necessarily turn to inventory and so Guys before I begin don't forget to go To Melody wri's YouTube channel Melody Wright she has some wonderful videos She's very heavy in data and balance and Perspective and she is a survivor of the Great financial crisis just like me and Don't forget guys she is a writer very Beautiful writing go to her substack Melody right substack especially if you Want to support her and I going around Metro areas but very very good stuff Here kind of want to begin Melody you Know with the first question which is How you doing today I'm doing well Travis how are you doing I'm doing Really well I'm doing really well so um Appreciate you being here Melody I'm
Looking forward to our road trip we're About to go on very excited about that But you know first question I you know We're GNA paint a picture for the Viewers we'll try to do this as quickly As possible to really good a good Context for what's going on now and how A foreclosure crisis would develop but Can you talk about you know to the Viewers since you are behind the scenes Dealing with this stuff personally you Know what would you say you know is the Most accurate Foreclosure data source where can we get Foreclosure Info yeah so you know this is a good Question and a much harder question to Answer because you know I would I would Say Black Knight today today for what we Have today has the best dat because they Have 80% of all servicing the problem is They don't tell you who they have and Who they don't have and so it can be Very misleading like for instance if you Look at something like inside mortgage Finance which is um a you know it's a Hefty subscription you have to pay and You can see folks on there like FCI um that's a servicer that Services Private notes um non-qm or non-qualified Mortgage and they have over a 34% Delinquency is that in Black Knight's Data we don't know and so that's that's The problem they're missing 20% and that
20% could be very important because They're missing some of the largest Servicers but in terms of best data they Have some they have Mo you know the most Comprehensive and then there's you know Adam Atom I like them because they they pull From County records Black Knight doesn't Do that they're just relying on um Mortgage data and so you know that's Also the problem because and and Something you know Travis you and I Maybe while we're on the road we can Maybe do is look at the atom numbers Versus Black Knight because you know not Everybody has a mortgage and the one Thing that we saw is these in quotation Mark all cash sales that we know were Leveraged elsewhere um and so when I'm Looking at a city specifically I'll Often also use realy track re a lty uh t R a c for number of Foreclosures um and then you know There's some really good paid services Like um property radar and I'm not They're not a sponsor or anything uh but You can find a whole bunch of great Foreclosure data and you know I think That's probably something now that this Is actually now we're actually seeing Default Travis you know for the longest Time it just was a nothing Burger as we Know but now that we're seeing it we Probably want to try and tie some of
These sources because I guarantee you That even today because black Knight's Only talking about mortgages they're uh Del their foreclosure information is Going to be um not comprehensive as Comprehensive as what's actually getting Filed out there and the other thing I Noticed re recently because I just Recently got access to some of the Source data for Black Knight is that When you look at that delinquency rate They actually exclude Foreclosures why would they do that That's interesting so it's 3690 so they include in their Delinquency rate that you see in that Mortgage monitor that you and I we talk About um but they're excluding their Foreclosures in the delinquency rate so Right now if you added the foreclosures Back in they reported something like a 3.44 for April but if you add those Foreclosures back in it's more of a 4.4% unbelievable I you know I didn't Realize that the delinquency rate that They're calculating was not including Foreclosures and I'm assuming Melody It's also not including the people that Are still in the covid forbearance Programs which is 300 12,000 I'm Assuming that's also not included in the Default rate they say they do that they In they include those as delinquent but They're not reported to credit as
Delinquent obviously when they're in Forbearance okay well not obviously People may not know that but and so but Yeah the the forbearances should be in There okay so I mean it's fair to say That black knight is got a big big chunk Of the pie as far as what has happened With foreclosures what's happening now Maybe they don't have the full 100% but Up to about 80% at least of the data uh So they're fairly accurate but not a Perfectly accurate not 100% accurate um And you know I want to bring us to the Next thing Melody and I'm going to Replace my picture with this data from Black Knight now you and I already went Over this I just want to kind of go over This with the viewer and I want to talk About essentially the you know fiveyear Period and I'm going to circle that Which is basically from here Here to here so 2008 to 2012 and I really want to talk about This data right here because this is During the GFC this is during basically The Foreclosure crisis and uh I kind of Want to talk about if we can Melody 2010 So I'll C you know kind of put a star Right there now I've been hearing again A lot of bulls said three million homes Hit the market 2010 and it it flooded the house market With the inventory but when we add all Of this together uh first of all you
Know we can see here that the total Foreclosure starts so when we just look At this here this is foreclosure starts And I want to get your definition there Was LE slightly over a million Foreclosure starts during that 5year Period but also what's really Fascinating just so fascinating is the Homes out of the millions of people that Had foreclosure filings you know there Was only roughly 375,000 home homes that were sold that's It and so again I want to point out to The viewers let me zoom in here okay so Here's the foreclosures right here so 2.3 and 2010 but there was only starts There was only 285,000 starts with sales Being 79,000 Melody can you help us Understand you know I know this is a Little complicated but what is the Difference between what they're Reporting as a foreclosure not Necessarily a filing they're just saying Foreclosure versus a start and and why Is there a huge gap between those two Numbers yeah so a lot was going on back Then including the states that came in And you know like New Jersey was on hold I think for almost five years I can't Remember exactly or three something like That I mean it was a crazy time and so People would get referred to foreclosure But they would be on hold uh because of The State uh would say no you know
There's foreclosure moratorium um as Well as you had the orders that really Started um late 2010 into 2011 where Servicers even of the states had were Not on hold servicers were not to Allowed to proceed and they also had to Continue to review borrowers for loss Mitigation you know we called it the Circle of hell because no matter what You could have the same borrower get About to finish the foreclosure process Uh they'd send in an application and you Would have to review them again and back Then we were doing full underwriting They don't do that anymore for some of These mods and so we would have to stop The process and when you stop the Process in many states you have to you Have to restart all over again once you Pause that process as well as their Statue of limitation so it's a lot of Words but ultimately there was so much On hold back then and so you see that Huge number that's people that were in Foreclosure but what was happening is They were being evaluated by the big Five over and over over again for loss Mitigation even though because the FED Forced them to even if the borrowers Couldn't Qualify and just the state holds and Then you look at what a foreclosure Start is that's going to be that first Legal filing is what we refer to
Industry but if you're in a non-judicial State that's going to be that notice of Default filed with County records if You're in a Judicial state that's going To be the complaint uh the complaint and Then your completions are the actual Completed uh foreclosure sales and and What you're pointing out Travis I think Is a really good point because people Say that the only way you're going to Get a price correction is if uh you know You have a for foreclosure tsunami well What we're seeing here um it it wasn't Necessarily that all these foreclosures Were hitting the market what you're see Instead is that there was an Affordability crisis due to people in Distress and you know consumer distress And not being able to pay their mortgage And so you know demand just was not There and as you and I were just Chatting prices started coming down in January of 2007 yes and and I just and I calculated Those numbers so you know melan and I I Looked and during the biggest period of Price decline during the GFC say from 2008 say to 2010 so 28 I mean you know 08 09010 you know there was only you Know roughly a little over 200,000 Foreclosed homes that were sold in that Threeyear period of time when we had the Highest price decline so during the Price decline of the GFC a little over
200,000 homes were sold as forclosure And and that brings me to my next Question you know Melody you know don't Isn't it possible and and you alluded to This that the bigger issue with the Foreclosure crisis during the GFC was Consumer purchasing power was destroyed Because remember yes eight 8 million People had a foreclose your filing there Was probably 10 11 million people that Had a 30-day late payment on their Credit 30-day late payment to destroy Someone purchasing power so what if it's Crazy the reality is we never had Millions of homes that turned into Foreclosed homes in during that period Of time the real issue here was America Got slammed and they got slammed you Know for I'm gonna just say the job Market unemployment now I have this next Question all right this is a little Complicated with the premise that during The GFC according to Black Knight which Doesn't have the entire Picture there was about 373,000 homes Sold during the GFC as a foreclosure Right now Melody and let me pull this up For the viewers and I and I want your Opinion on this and maybe they'll extend And pretend and extend but right now First of all we already had 9 million Americans went into four Barons by the Way uh and we kind of brought that Forward but right now we have about
320,000 homes that are still in covid Forbearance and these are people that Have already had low rates principal Reduction payment reduction I mean Everything was thrown at them and they Still can't get caught up so isn't it Possible that these 320,000 families you Know can Feed that foreclosure inventory you know At a similar Paces the GFC because again If the real issue here was during the GFC consumers purchasing power I Mean then the 300,000 foreclosures may Not even be you know the real turning Factor here what is your opinion on the 320,000 families that are currently in Covid forbearance that cannot get out of It I think that those borrowers the 320,000 that are still in forbearance They have probably the most Runway what I'm most because they haven't taken the Payment deferral yet once they get out Of the forbearance they'll be able to do The deferral it's like a fresh start but Yes down the line these folks are going To be in trouble what I'm more concerned So I just finished delinquency reviews For my client books and as I I knew it I Could feel it um that little seasonal Toxin bonus catchup has just dissipated Completely and I am seeing the highest 60 plus that I have seen since 2020 in My client books this is a big deal guys
And so I'm more concerned actually Travis for all those people that exited Forbearance you know those what did you Say 9 million or whatever it was y that Have already taken the payment deferral Or they did a 40-year mod or if they Were FHA VA they did the partial claim And then the mod um that that those are The people that I'm watching default Right now and and I put out something Yesterday on X Twitter about VA finally Um approving their loss mitigation Option where they're going to reduce you Know um them down to a 2.5% modification And and the fact is people are like oh My gosh but the reality is people can't Even afford that and that's what we're Starting to see I mean property taxes And insurance have increased Astronomically for new buyers you know Those property taxes for new buyers are Just insane and when that loan was Originated they looked at the last Year's property taxes and even though The lender probably said hey these could Go up nobody was expecting if the taxes Were a th last year and then next year Your taxes are 15,000 people were not Expecting that and so I I honestly yes In in six to nine months 12 months those That are still in forbearance they will Enter into some other workout that they That probably won't keep them afloat Either and by that time likely you know
We're going to have some additional Workout Solutions um but I I think I Want everyone to realize the percentage Of all cash sales means that a lot of These are actually uh you know Foreclosures are going going to happen Outside of the mortgage industry and the Counties with delinquent taxes are going To be the ones this time that I think Are going to be crushed by the Foreclosure wave and that's why the Difference between Black Knight and Adam Is so important because Adam is actually Pulling off of public record where and That's going to get your mortgage assets And then your assets that weren't Mortgaged um where in your county taking That property to foreclosure Uh property taxes failure to pay so my Point is that we've got we we just had GFC style workout programs that's what The last two years were and and we Appropriately kicked the can uh we are Now there are no options left uh for Many of these borrowers and so by I Would say by June of 25 we are going to Have a material a material default Population unless they're you know the Government comes in and does a debt Jubilee or some something like that Because even these modification programs You can look at all the studies on Hamp Uh they did not help the the people they Promised to help you know they promised
To help something like eight million People and it was more like I believe Three million there's some great fed Papers on It yeah and honestly you know back to What you were saying about the the Property taxes and the homeowners Insurance and how the new homeowners are Really paying that that I would kind of You know point out Melody too but the Old homeowners are also feeling that and They may be the biggest like at risk Right like they because they're Surprised they're just mining their Business and now their property taxes Just tripled right there's reports now Where people are being priced out of Their house meaning like they have They're forced to sell because of Property taxes uh alone and so like Especially these people on fixed income Now obviously a lot of homeowners can File their Homestead there are some Counties that have a cap on the assessed Value but there's also people that they Still don't know that a homestead exists Melody it's really sad I I see this all The time on MLS they just don't file uh their their Homestead or they're not uh during their Protest so that is hurting and then also What's interesting you pointed out with Attom you know you know it is important To use both because I could see how
Looking at the public records is super Helpful but it's difficult when when you Deal with non-disclosure States like Texas that's been one of my frustration Moving to Texas from California like California I could go into title records And I could see people's interest rates Their taxes when they purchased all of That and so yeah having various data Providers is very important and Melody If I can you know you've been through a Lot of process in regards to foreclosure You've went through GFC process as well So you know loan modification is fairly New uh I think it's important the Viewers understand that there was Moratorium during the GFC as well those Fore closers were not inventory the Bigger issue was probably the purchasing Power uh being Slaughter for for Americans can you tell the viewers Melody in your Expertise what can we learn from the Past well you know what can we learn From the past I think what we can learn From the past what I hope people are Learning right now is pay attention so I I would say what you just said about People not knowing about the homestead Exemption not knowing they can go and You know uh kind of actually argue Against those taxes and get them reduced I I think that's that's important Because there was a big article in the W
Stre yesterday or the day before on Exactly this topic that you know I've Been talking about since October of 2022 um of property taxes and insurance Increasing and how people who are living On fixed incomes of like 2,000 you know Social Security benefits own their home And they're in Jeopardy of losing you Know their home and I was also reading Some Lending Tree studied today about 41% of homeowners uh that home they own Their home today uh they they uh they Exist below the poverty line when it Comes to their salar so you know what Don't get overleveraged that's that's What we can learn uh it might be too Late for many but for those that have Gotten here there are so many state Programs to go out there uh to save Yourself if you are in this situation um So I think you know in many Ways this is those government programs That make everything so expensive They're also out there though and Helpful to people people that can't pay Their taxes there's there's government Assistance out for there out there as Well um but you know honestly what I Learn most Travis is I cannot trust Anything in the media I cannot trust What I'm being told um I and you know Right now we are being told the economy Is doing great and that is just absolute Crap that is not true uh you know and
People are like you and I say this People are probably sick of it but we've Lost 1.8 million jobs in the last four Months like you know uh seniors we've Got homeless populations you know the Biggest increases are for 55 plus we've Got you know record um attendance at Food banks like the economy is not great The econom is great for the top 1% and And you know maybe the top 10% but the Top 10% is also starting to fill it so You know what I learned is I cannot Trust a single expert out there and that Is why you know you and I why I started My journey why you started your journey Why we're doing these boots on the Ground uh visits because we know that What we're seeing in front of our eyes You know and what we see with Lil Trav The Drone um is completely you Know it's in contradiction to what Everyone is saying out there and so that I think is the biggest Lesson I love it I mean so basically Just to reiterate that you know pay Attention and don't trust the media and Also I think what in all fairness Melody Too because you know we got to look at Both sides of the coin there's also People on our sides of the coin that are Warning people but like they're doing it For bad intentions right there's some Type of financial incentive so you know What I'm trying to say guys is don't
Stay stuck on anyone's narrative no One's going to know what to do what's The right thing to do better than you Are and no one's going to care about Your investment including me and Melody Like you because we're not you we want You to do well but you care more and so In that you know I say just pay Attention continue to re-budget you know Be patient understand that what's going On right now is not normal it's going on Right now because things are broken they Got broken through lockdowns we know That inflation money Printing and so it Takes time and so we have to be patience And patience is a virtue and so if I if I can Melody we kind of just close this Out here and you've already said some Great insights but can you just close on You know maybe just some parting words To the consumer that's on the sideline Just frustrated like oh my God I missed My opportunity I'm never going to own a Home again I should give up and just go Have fun and go to the Taylor Swift Concert that's coming into town next Weekend don't do it guys don't do it Like we are about to in my opinion and I Hope to God I'm actually wrong like I Really do but in my opinion we're about To enter some of the worst econom the Worst Economic Times of my lifetime and I went through the GFC and I was around Uh I was very I was a baby but I was
Around for you know inflation um so this Is this is going to be bad and you are Going to wish more than anything that You had not you know destroyed your Purchasing power because there are going To be opportunities and so if you don't Go to that Taylor Swift concert today And you put that in the bank and you are You know money market fund or a treasury And you just stay consistent you will Have an opportunity in the next couple Years I firmly I really do believe that And if and if it doesn't happen then There's probably going to be civil war Because you just cannot have this level Of inequality it just people will not Stand for it um and and they're not Going to stand for it when you know free Money is be being given to immigrants While you know our our folks are Starving I mean in these and in homeless Shelters Etc I mean so they're they're Just going to come and you know and I Know immigration is politically Sensitive but we have to we have to it's Happened like we we have to accept Accept that these people are here these Government programs are happening and so I just believe that this is going to get More and more contingent we're going to Hear more and more about it and it's Going to be one of the top issues for The election so you know I just don't See how this path we're on of of
Unaffordability is sustainable and so Please please don't take on new debt Please don't this is the time when if You're debt free you're going to be Doing so much better a credit card Delinquencies just hit all-time highs You know those folks those people that Maybe use their credit card to to buy That Taylor Swift purchase they're going To destroy or concert ticket they're Going to destroy their purchasing power They're going to destroy their ability To get a mortgage in two years when the Time is Right yeah I mean so you're I don't know How long they are your 2hour Taylor Swift concert or uh you know a home you Could retire in be millionaire Taylor Swift two hours retire comfortably you Know it's up to you I think that's a Great words Melody and you know you guys Don't forget to go to her Channel go to Her substack show her some love she took Her time to you know Enlighten us share Her insights or perspective she's very Busy Melody thank you I'm going to get Us out of here now obviously guys if You're out there investing in real Estate you guys already know what we Want to say which is slow your rooll and We hope you win
