Name: WARNING: Something is going deeply wrong in Housing Market
Uploaded: 2026-03-18T18:04:02.000Z
Duration: 11 min 7 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

There is something weird and strange is happening in the housing market.

Adverbs of degree

President Donald Trump just signed executive orders to make it much easier for you to be able to buy a house.

Basic passive voice

In theory, this is supposed to make it much easier to get a mortgage, and

secondly, it's supposed to bring mortgage rates down, which is the main reason that will make it easier for you to buy a house.

The only problem is that this executive decision can potentially lead to to a 2008 financial crisis to repeat again in the United States.

So the first decision by Donald Trump was that to soften regulations for community banks.

Before the bank will offer you a mortgage, the bank is required by law to do a lot of background checks.

It must look at the amount of debt that you have at your income and many other financial metrics so that this loan is going to be provided only to people who can afford that mortgage.

But with this law, it is going to be a lot easier because the banks no longer have to do all of these background checks and will be able to offer you the mortgage now.

Now the valuations are the most important part of the mortgage.

So when you're getting a house and you're getting a mortgage, that mortgage is considered a very safe investment because this mortgage is being backed by a house.

So let's say for example, that the price of the house is $500,000 and your mortgage is $500,000.

Now this is a very safe investment or a very safe debt because if you default on that loan, then the bank can sell the house for $500,000 and close your mortgage.

But now with this decision, a human no longer has to go and approve the housing valuation, but

And finally, Freddie Mac and Fannie Mae have $200 billion in total right now.

And that money will be spent to buy mortgage backed securities to bring mortgage rates down.

So mortgage backed securities are one of the most important assets we have in the market.

Because whenever you go and get yourself a house with a mortgage, that mortgage is turned into a security that we call a mortgage backed security.

So a security that is being backed by a mortgage and then it is sold to investors.

At first it might seem like it is the bank that is offering you the mortgage, but

in reality, yes, the bank might offer you the mortgage, but

it's doing with the intention to, to sell that mortgage to some kind of other investor.

The bank is interested because it's not going to take the risks for the next 30 years.

And the investors on the other side just park this Money in a very safe investment that they're backed by real estate.

So whenever you make your mortgage payments, it is the investors on the other side that is receiving your interest payments.

Now, to understand how this can potentially lead to another 2008 financial crisis, you have to understand what really caused the 2008 crash.

What happened is that there was a housing bubble.

But how is it possible that in the housing market, which are the most safest investments in the world, can we possibly have a bubble?

And that's because the housing market is turned into mortgage backed securities, just like I explained right now.

So the housing market is no longer just a housing market.

It is one of the main places where investors park their money because investors feel confident that that these securities and investments are being backed by houses.

Imagine if you are huge investors with a lot of money.

If you gonna go and take that money and start buying houses, it is a headache for you.

It is really difficult to manage so many houses.

Just go and ask somebody who has been in real estate.

He will tell you that the real estate business is brutal.

You need to have an entire team to do that.

But what if you're an investor who simply wants to make money out of the housing market without actually getting into the housing market?

And that's why we have mortgage backed securities where all of these mortgages will be turned into a security, just like a US government bond and just sold to investors.

So if you're paying for example, 7% on your mortgage, then the bank or the investments on the other side that will be receiving that 7%, so the investor is happy, you are happy, and

the bank is happy that brokered the deal between you.

What happened in 2008 is that a lot of people could actually get mortgages without these background checks.

So the mortgages will be offered to somebody who cannot possibly afford that mortgage because the person might not have a job, maybe the person was drowning in debt, or maybe simply because the person was not financially responsible.

Wasn't bank required required to do all of these background checks?

Well, we have softened the regulations so much that most banks did not actually care about the bank ground checks because the banks allowed them to avoid the bank ground checks.

And remember, the bank is not going to keep that mortgage.

All they wanted is to close the deal as soon as possible so that the bank will actually get its commission.

So with this law, that will make it a lot Easier for community banks to offer mortgages without the background checks.

It is literally the first step, step on the same direction.

Now the second problem is that what caused the 2008 financial crisis are incorrect appraisals.

So when you go and get yourself a house, or you get yourself a mortgage to buy that house, the mortgage will be approved based on the valuation of the house.

So if the value of the house is $300,000, you cannot possibly get a mortgage for $500,000 because the bank is taking a risk.

If you are going to default and the house will be sold for $300,000, the question is, who is going to reimburse the bank for another $200,000.

So we need an independent person that is going to appraise and value the house.

So before 2008, you could basically hire somebody that will basically tell you the valuation that you want to hear and somehow they will justify that valuation.

But in 2008, when the financial crisis happened, the government has put regulations in place that in order to have the right valuation, there should be an actual person that will check the house and will give you a more accurate valuation so that all these mortgages will be backed by houses that really represent their value.

But now with this law, AI is going to do the valuations.

And if there is a way to manipulate the AI valuations and people will be able to get much bigger mortgages compared to the real value of their houses.

And this might actually lead to the exact same consequences.

And finally, Freddie Mac and Fannie Mac couldn't actually back up the mortgages.

So the question that comes into mind is that why do investors even trust these mortgage backed securities to begin with?

The vast majority of the mass of the mortgage backed securities are being backed by two government backed corporations which, which is Freddie Mac and Fannie Mae.

They were specifically created to ensure that if somebody defaults on the mortgages, then these two corporations are going to step in and will reimburse them.

And that's why the risks with these mortgage backed securities are so low.

And that's why you are getting a much lower interest rate on your mortgage than for example on a credit card debt.

But between 2000 and 2008 financial crisis, these two corporations actually backed way more mortgages than they can possibly afford.

Which means that if people start defaulting on these mortgages, these two corporations simply don't have the money to reimburse to the investors.

Which means that investors will suddenly start dumping all of the mortgage backed securities, driving the prices of these securities to the bottom which caused the 2008 financial crisis.

So after the 2008 financial crisis, the government came up with a set of rules that says that now these two corporations from now onwards have to be a lot more careful.

So they started accumulating a lot of cash 2008 so that if something happens, these two government backed companies started stockpiling a lot of cash just in case if there is going to be another crisis.

They have this emergency fund that they can actually save the housing market.

But now President Trump is like, yes, you have $200 billion worth of cash.

Don't keep that as an emergency fund, but

use it right now and buy the mortgage backed securities, create an artificial demand to lower down the mortgage rates.

Now, at first it will lower down slightly mortgage rates, but

it's not going to be a really huge decrease so that you can actually get a mortgage for 4% or 4.5%.

It might be a slow drop in mortgage rates, probably by 0.1 or 0.2% in the short run.

And it will go back to the exact same level a few months later.

Since now they will be spending the $200 billion they stockpile since 2008.

It means that if there is a crisis, they don't have the money to save the housing market.

And now put yourself in the shoes of an investor.

If you know that Fannie Mae and Freddie Mac don't have the cash to save their mortgage backed securities.

Will you trust more the mortgage backed securities or less?

Which is why if there is going to be even a small crisis in the market, you're more likely to sell your mortgage backed securities, which could cause another crash in the market.

So if you zoom out, what really caused the 2008 financial CRIS regulations so that the market turned into a bubble.

After the 2008, we introduced a lot of regulations to prevent such a crisis.

But now, because there is a housing crisis in the United States, which means that most people cannot possibly buy a house, especially young people, we are reducing the regulations again, which is pretty much leading to the exact same scenario that caused the 2008 financial crisis.

Does that mean that there is going to be a housing crash tomorrow?

But if this trend is going to continue and we're going to keep continuing softening the regulations in the housing market, ultimately it is going to lead to the exact same crisis because we're basically repeating the exact same loop.

Buying a house is definitely one of the best investments that you can possibly make because it's not just an investment but rather it offers you security, it offers you peace of mind.