Foreclosure Pressure Is Building Beneath the Market

The correct number by the way publishes 34 trillion in equity. Therefore we can't have a crash. Now, one of my favorite authors is Mark Twain. And one of my favorite Twain quotes is we got lies, we got damn lies, and then we got statistics. Everybody tells the story from their own perspective and for their own agenda. I don't have one, I don't care anymore. So yes, there is technically 34 trillion in equity. The problem is over 14 trillion of that is in the hands of senior homeowners. We'll have little to no mortgages. The other problem is where the remaining equity is. That leaves us somewhere around 20 billion, depending on whose numbers you use, and whose values you use to create this equity by the way. And that's all over the place. So the majority of that great equity that's going to prevent a crash or correction, and I'm not calling for a crash this time by the way. I'm calling for a slow steady burn because it was a different, the pipelines are different. But most of that equity is pre-COVID purchaser. It's the one who purchased after. There are a lot of trouble. They don't have that equity. This is why short sales are so easy to find. It is so easy to target. So you don't have to knock 100 doors. You're going to knock five till you find somebody. And here's the thing, they need help. I've given away some secrets I shouldn't hear. Welcome to the Det. Det. podcast where we deliver the definitive prescription for navigating distressed real-estate debt. I'm your host and America's most qualified debt doctor, Bill Bynell. I spent my career investing in diagnosing and reviving thousands of distressed real-estate situations. The debt doctor prescribes proprietary remedies to help you identify, acquire and monetize undervalued real estate assets. Each episode gives you insider access to the strategy's top cohorts use to transform market volatility into double digit returns. If you enjoy what you hear today, hit the follow button. Subscribe so you don't miss an episode. This episode of The Det Doctor. Here I am with a true legend this morning. I am so honored to have my friend Mike Ryan with me. Thanks for waking up early to talk with the debt doctor, Mike. Thank you for having me, Bill. It's an absolute pleasure. And now that you've made my ego for the day, I'm going to feel good all day. It is true. You are a legend in the world of RIO. You sold over 25,000 RIOs, running brokerages, where you're doing thousands per year. And then I met you when you had already transitioned in recent years to building trainings and being a thought leader in the industry. You founded NRBA, the National RIO, is it? Are you a broker's association? Is that what it sounds like? She founded that back in '98. Holy smokes before I was even born. Yeah, give me a break. No. Yeah, 25,000. That's where I stopped counting. Is I figured at that point? Yeah. That's where I stopped. And I retired after the last cycle, bored out of my mind, so I keep taking on these other projects. The NRBA is still running for fun because those people have been my family for like 30 years. I missed them. And it gives me something to do. Then I got dragged into this other project because the crisis coming up, Mike with that, retirement just doesn't work well for me. Yeah, on the same way. I love to work. You've got all coming out for God's sake. You can't sit still either. Don't you have a little coming out? That's right. I've got a new book coming out in April in the third week of April called the storm. And a lot of what we're going to talk about today actually had there's some overlays and some parallels to what you're seeing. I think you and I are very contrary and minded guys. We're always looking for the cracks. We're looking for where things don't work. And I think, you know, that's why I enjoy listening to you and enjoy talking with you all the time because, you know, we're always looking the other direction of everyone else. Would you would agree with that? I don't know for so much looking the other direction. I'm just the point in my life. I don't give a damn what I say. And I'm just going to call it what it is because I don't have to make anybody happy anymore. So now unfortunately that usually puts me in the minority and look going the other direction. But it is what it is. And you know, I don't have an agenda. You know what my problem is? Anybody who speaks on this real estate industry, I don't blame them. It's their job. But they all have an agenda either to push their corporate line or to push a certain perspective that's beneficial to their company. I get that. That's their job. I don't have to say this is how it is. Yeah, storm. Oh, we've got a storm coming. That's getting worse by the minute. Last year I was freaked out. I don't even want to tell you what I am now. Well, as a guy that runs the National Aario Broker's Association for 28 years or whatever it is. And that's a time of opportunity for people in the default space. But you're 100% right. I think that this, let's start with this presentation you made a few weeks ago in Palm Springs at an ADP. Yeah. And you really brought up some very bold statements. But based on really legitimate facts, like you have a prediction of somewhere between 4.8 and 6.3 million foreclosures in the residential side just over the next five years. No, I mean, no, not really correct. Is that what? Oh, okay. So I'm not only distressed sales of what point or other around the lenders have already started to wise up because I'm not only training agents. I'm also doing training on the lender side because they don't have staff who's done this in 15 years and most of them want to left. So I'm actually training short sales and fraud prevention and recovery improvement for some of the lenders and services out there as well because they, they staff just hasn't been free. So I'm actually on both sides of this. That's kind of how I got dragged in. I got dragged in this from the lender side. The reason I'm doing the agent training is because half the short sales got screwed up due to stupid agents who didn't know what they were doing. And the lenders can't afford it. It's not going to be a government bailout. It is going to be a mess. There's no back stops in places time. A lot of the NPLs have been sold with the insurance stripped. They don't have a choice. So back to your original question, I'm talking total distressed sales. And unless God pulls off a miracle, this is happening. I mean, there's just walking through how those numbers, how you came up with those numbers. You know, you hear things and you know, I'm a big, we talk about this a lot. I'm a big believer in the world of fallacies that we as a society start, you know, we have this stinking thinking or this lemming thinking where, you know, you kind of buy into a thought that, you know, like for instance, in the early 2000s, there was this belief that even Alan Greenspan went before Congress and said there's no indication ever that there could have, there could be a decline on residential real estate on a national level. And that was like in 2003 or 2004. I was the only one screaming my head off. Guys, we got a problem. I do hear one of the questions. I deal with these numbers every day. That's my job. Our board of market trends, who's got what? Where it's going in the default and stress space. All I do every day. So I'm the one screaming my head off and everybody's telling me I'm wrong. Right. And that's where that's where that's where it starts because I think the fallacy thinking in residential real estate is, which I hear all the time is, res is fine. There's 30 trillion of equity in the market. You know, even if there is an issue, you know, the people will be able to sell and blah, blah, blah, blah. Where does that go wrong and take us to these? That's one of my favorites. Let's get into that one. The correct number, by the way, publishes 34 trillion in equity. Therefore, we can't have a crash. And one of my favorite Twain quotes is, we got lies. We got damn lies. I know we got statistics. Okay. So 34 trillion, and keep in mind, everybody tells the story from their own perspective and for their own agenda. I don't have one. I don't care anymore. Okay. I go straight to my boat. You're not worried about life. All right. The problem is over 14 trillion of that is in the hands of senior homeowners who have little to no mortgages. Okay. So there's half of that gone. That leaves us somewhere around 20 billion, depending on whose numbers you use and whose values you use to create this equity by the way. The problem is 80% of all of that. more of that equity. This varies a little by market is held by people who purchased before 2020, before COVID. Yeah, they got a ton of equity because prices boomed right after during COVID. The people who bought in 22, 23, 24, and 25, I don't know how to put this other than the screwed. They don't have enough equity. I'm calling for a slow steady burn because it's different. The pipelines are different. They're in a lot of trouble. They don't have equity. Not enough to sell themselves out of the jams they're read. And the distress is getting ridiculous. When you have one out of eight FHA loans is delinquent right now, and you're going to tell me there's no problem. Sure, let's go with that. There are numbers. FHA's reserve fund is up around 11% the highest I've ever seen it. Okay, why do you need an 11% reserve fund? Okay, if there's no problem coming, somebody explain that one to me. And also keep in mind, it's not like you have to cover the full loss on a $4,000 allowance. You'll pay the loss difference. You know, after you sell it recapture gets reconvailed. Let's not even do that. That's a two hour or a deal. So really, you got like a four to five to one coverage of that 11%. You know, kind of like cap reserves, you know. Right. Okay. So there's, yeah, there's some problems. The equity one is my favorite personally, because when you look at it is, and those same people have no equity are the same ones that are suffering massive payment shock. These people mostly younger. Okay, although the average purchase age now is like 40. It's jumped. So I didn't want to be that young to you that young too, but let's not talk about tonight. That's right. So what's the full of the kids that they are? Problem is most of them bought under FHAVA, Homeable, HomeReady, one of the GSE programs, three to five percent down. And at top of that, they were working with limited funds and no reserves, which means and every any agent will tell you this, you pack the deal. Price is 400. You're righted up at 412, packing, couple, some, some money for closing costs. So in reality, there's no equity the day they close that house. They're over financing slight. It's the only way you can get first time buyers in nowadays. We've all done that. And in a normal market, they be fine eventually. This isn't a normal market. So you look at that, the basic is your equity. I'm going to be a couple of things of the equity life, because this one just cracks me up. So let's start with that group. Okay. So there they had no equity begin with. All of the studies, and I've gone to all the data companies and said, has anybody broken this out? Talk to Adam about this. They said, we have the data, but nobody's done the analytics on it. And I'm like, I don't feel like spending 250 grand to run those analytics by my data. I think I'll let somebody else do it. Here's my problem. So when they talk about equity, they don't factor in cost of sale. That's real estate commission title insurance, inspection fees, transfer taxes. Cost of sale is 8 to 10 percent. So you get these boroughs that effectively have no equity. And then, and they need to sell because they're in distress. So we'll get into the distress. And they don't have another 30, 40 grand to come out of pocket to get rid of that house. They don't have it. That's just one part of the equation. You saw the presentation. There's like 12 pieces to this puzzle. And we can argue for against any one of them. But when you start putting them all together, you really can't anymore. So they're very tight. Then you have to deal with the payment shock issue. So a lot of these people were qualified just to get into a damn house. They were qualified at the max ratios. I mean, 35, maybe forget about 41 on the DTI. Some of these people were getting pushed into 50% DTIs. Okay. That's tough. Now, if you could, if you could kind of make it at that point, few years go by, you know, your job, your wages go up, you get a raise here and there, most key on couples used to be okay. The problem is the T.I. in the state of the same. We've got property taxes up 30, 40, 50% in some areas. Sure, it's cost for a lot of these people to double that P.I. T.I. where they were sent at 50%. It's now 65 and 70. Okay. Because wage growth hasn't kept up. So you got people out there right now using 60 to 70% of the household income just for housing cost. Nobody can tell me that is sustainable. It is not. And it's showing up in the liquid season. We've been saying this for a while. You're right. My people, they'll be excited as hell. Okay. They're going to be busier than they know what to do with. It's already starting. All right. It's been kept relatively quiet. But that's the reality. So we got payment shock and no equity. That is a recipe for disaster. So most of these people cannot sell their way out. And I'll give you another number that's really a fallacy, if you will. It's tactically true, but that doesn't make it correct. So the other thing is they're reporting that the number of seriously underwater homeowners is only about 1.2 million. So it's not bad. It's only about a million homeowners who are under water. That's what people are reading. The definition of seriously under water is 25% negative equity. So that means you owe 400. Your house is worth 300. Okay. We've got to have a million people at that. Wow. Hey, what's a lot then. Yeah. But that's not even the problem. Those numbers do not include cost of sale, which is another eight to as much as 14% in the market. Because 80% of homes in some markets require concessions to sell. These people 25% they're not they're 35% under water. And then how many are zero to 25% underwater, which means that they're still 10 to 35. Zero is underwater, even is underwater. So we're about four million already. Wow. And that's and honestly, I think that is an incredibly conservative number because you can't get the right data on it. Pents who values it have a loads of reported. There may be seconds on these houses or HELOX or judgments against them. The other thing is the FHA partial claims. People got four and five loan mods under the last administration. Okay. Back those days are over. There was a lot of government pressure on that incentive. But what a lot of these people don't understand and this is where the real message, especially on the FHAs and some of the others. So they did a four barrens in a loan mod and say the guy was 20,000 behind on payments, right? They said, don't worry. Okay. We're going to just four bar that and put it off to the side over here. Zero interest, zero payments. Here's your new payment on your principle that you had before. Yeah. And a lot of these bars on that's fiscated and read this. They didn't realize that that money was placed as a second on their home. There's a second sitting on the home. They don't even know about because there were no payments and no interest so they didn't understand the paperwork. Okay. So we haven't even talked about that yet. Right. How many of those do you think are out there by the way? Any stats on that? I cannot find any and the fact that if you have find any, that's the bigger concern that I have. Yeah. That's very interesting. And that's something and just to clarify that because I don't want to step over, that's a very interesting point. When, you know, I got into this business in 2008 and we were buying underwater mortgages all day long with private equity and we were one of the few in the business that would get a borrower performing for six months and then after six months once it was a seasoned re-performing loan, we would forgive the underwater balance and bring that borrower to about a 95% of the value of the house. And it was a real win-win because it gave the borrower a little bit of equity at when the values were low. So those people today are in a great shape. And this is back from 2008 and we did this for, you know, 10 years after. My question is what we paying for those notes back? Right. I was getting a great deal on it. It was still a win for me. No doubt. The point is, yeah, go with this because this gets a great, because even then we were one of the few in the business and we did, you know, I don't know, a billion dollars worth of these over 10 years. We were, and that's a very small number in our world. We were one of the few that would do that, that forgiveness. I often see these repur, I've seen over the years these repurforming loans just like what you put it out where the bank or the servicer or the private equity firm that bought the loan or that acquired the loan through a failure of a bank or whatever it was, went through these modifications where they created a, they, they carved off a portion of the loan, made it 0% interest and sitting as a second. And that's what you're pointing to there that there are these, there's this additional debt owed on probably millions of properties. I don't know. I don't know. I'm afraid even guests anymore, but I don't think you may not be wrong. Let's put it that way. You have people with the multiple loan mods. Yeah. Okay. And then, and obviously, and you, well, and then that's different than the loan mods that people have experienced in the last five, six years. Correct. Where that's true. But he has to come down the road. That goes back to where the equity concentration is. That's free COVID. These people have strong equity positions. Then they COVID, they got trouble. They had a couple loan mods in there. We don't know how much debt is actually on those properties. So we don't know if that's true. correct there either. And how much of that has been eroded by this? Yeah, you know, and you really hit the nail on the head with the payment chalk thing. That's one of the things that I point to in the book, my book, the storm. I'm not, I don't make the bold prediction. I my focus on real estate is more on the CRE side because all of commercial is payment shock affected by the rise in rates, the rise in taxes and the rise of insurance costs. There are places in in this country you can't even get insurance on commercial properties already. But it really does play into something when you make a very good point on the residential side. It is when someone's sitting at a 50, I don't even remember where it became a normal that that like I grew up saying you know you just been a third of your income on your housing. So that you know for them, for people to be at 50, 60, 70 percent. And then the insurance shock is real. It's the at the same time that the market slowed down. The data has now just come into play in the last five, six years where we've had these, where we have insurance companies looking at the actuarials and saying, wow, we have to double insurance. We have to leave the state of Florida. We have to leave the state of California. You know, we are now going to charge people in Carolina like they live in Florida. I mean, that's what's going on all over the country. Nobody accounted for that. You know, the originators never did their models. They always thought it was relatively stable. They have an index for it. Yep. 100 percent. Yeah, a lot of things are different. But those loans weren't meant to be originated at 60, 70 percent DTI. That's just where they ended up. Yeah. And it's just absolutely insane. And these people are struggling. You know, credit card debt is at an all-time high credit card delinquencies arising. But the problem is people aren't finance. I mean, last time around, you know, we have a joke in our industry like how many jet skis we're at the house? Right here in the crash. No, you have no idea how many houses we foreclosed on that there were jet skis sitting in the driveway. It made a joke. Right. Or brand new cars. I mean, I saw that all the time. I would pull up to a little townhouse that was 100,000 underwater in Boca. And there'd be an escalade of boat, you know, a Mercedes. And they can't, they're not making their house payments. They're living for three. Now, that's the problem. But jet skis became the joke because then people were using their equity. They had equity. But they used it like an ATM to find its a lifestyle. Very different reasons for what's happening now is to what happened then. You know, they're serving parallels. But no, it's more even just life necessity. That's what I'm saying. When you see people in the grocery store paying for groceries with credit cards, they're financing their daily needs. You've got that kind of housing payment. Yeah, that's what gets really scary. And the numbers aren't lying. They're there now. This is happening. So, so let's, you ground zero. You think the, the number one break on the residential side is FHA, right? That's there's 11% or something 1112. Well, it's the highest default rate. If you want to segment loan groups out, it's right behind it. However, thank God they did this. They did just pass some legislation for or create new guidelines for veterans who are behind and they do get another loan mod chance, which thank God, they, you know, they should be taking care of veterans. And if you served and you listen, thank you. So that will kind of ease that. But yeah, their default rate is pretty much just as high. Overall, the fault rate when you look at all the GSE loans and everything else is about 4%. But see, I have a problem with these numbers too. Yeah, because of the, we've had five years of servicers having carte blanche to modify anyone on their needs, right? It's worse than that. This is what I don't know the answer to. Okay. And I can talk to 10 people experts in the industry. They're all going to have 10 different answers on this. The problem is the NPL sales, non-performing loans have been sold. Okay. And frankly, most people over the last couple years have overpaid for them. I don't mean to be rude to anybody. But there's way too much dumb money jumped into the, they'll industry big time. Okay. I have a story to tell you after this interview. I'm about. Yeah. My problem is this. Okay. Where are we getting these delinquency and default numbers from? And this is what concerns me that nobody can give me the screen answer to. Private market lacks transparency. Correct. Because what happens is like fanning Fred even selling off not performing loans for ages. That's why their portfolio looks so good. When you sell the full of crap, yeah, the rest looks better, right? They've all been doing this. The problem is they're selling to a lot of non-reporting entities. You know, remember, Gregory is a servicer. They've been mostly specially servicing. They didn't report it. That's right. We're non-reporting. So there's a couple of the ones out there. If we say half the loans have been sold over here and not being reported, so that changes this except the problem is the half that was sold was the crap. Right. Okay. So only counting half the market. Maybe it's the good half. That's the problem. We know the issue exists, but there's no way to quantify it. I'm not going to come out here and say, and it's x this or x that because I can't get the data. So whatever numbers we have, it's getting fed. It's actually worse. Yeah. Just done the way it structured it. And that's kind of my concern. It's where I'm getting everybody ready and trying to get this stuff done. So it's interesting to hear you that you're training lenders on the short sale aspect because and you mentioned at the beginning when I said 5 million foreclosure use at 5 million distress sales and you clarified that because there are many ways there are some of those people with that actually do have equity that will sell and not want to sell, but will be forced to sell maybe quicker, take less money, whatever it is or that is the problem with that is it assumes people are logical and they're not they're mostly actually the houses. Yeah. The houses I've taken back from like guys, you had four years here, you could have walked with some money and started over. They stick their head in the sand, they don't answer their phones, they don't talk to you when you come to the door. If anybody gets anything out of this and all, if you're in trouble fooling behind, talk to your lender, they don't want your house, they want to work with you. All right. On the lender side, some people who know me know I do this and do a lot of forensic work now, I just have my little hobby projects. What people don't realize is last year the short sale wave was a total disaster in certain respects. You had agents who didn't know how to do them and half room failed, dual tracking was still permitted. So the agents screwed up the short sale and took forever to start paperwork and the time they got it in, the lender already had a closure. Okay. We can't technically do that anymore under dual tracking rules, but you kind of can. Who's kidding how fence how you regulated. Right. Okay. But that was the biggest problem. All right. But you had different backstops in place than you don't have those now. The lenders have to look at short sales. The other thing that people don't like to talk about and I'll give you a great example why and I don't know if this number is true, but I believe it. So remember a couple years ago when Deed and mortgage fraud started popping up and people were stealing people's deeds and houses. Once that made the news and the news started talking about it, what do you think happened to Deed and mortgage fraud? It went through the roof because they told all the criminals how easy this was. I didn't realize that. The media you said, look, should I go rob a 7-11 and risk three to five? Okay. For a hundred bucks or should I steal somebody's deed and cashed out for two hundred grand and maybe get two years in club fed? It's, you know, I've not tried to think like a criminal, but it's kind of my job. But I look for this stuff. I got to talk to you about how I find itself. The amount of short sale fraud that occurred last time and the amount of money left on the table was absolutely insane. And it's incredibly easy to do. And I tell you some examples. No. For the same reason, the lenders' course is private, because in order to teach them how to spot short sale fraud and how it's done, I got to teach them how it's done. So my course for the lenders is basically a halftool. It's the only way you look at the body. So that course is staying private and I'm teaching just to the law submit people on their side. But I've already got four or five who set up to train with because the amount of money that was stolen through short sale fraud was just amazing. And what was caught was maybe the tip of the iceberg. I can probably name it dozen cases where people went to jail for it, but that was such a small little amount because it's very hard to prove. Proven financial crimes is difficult enough as it is in a court. And then how many hunders or how many servicers wanted to admit to their investors that this happened. Okay. You know, that's just human nature. Everybody's doing their jobs. So yeah, so you, Gisius, that's kind of where this came from. That's part one of it. So I am training on that side. Part two was will you go out and train the agents? We need agents that know how to do this and understand timelines. So they started with me because I know this stuff, but B, are you brokeers? No timelines. So they came to us as a group because my people, you know, 12 o'clock on Tuesday means 11.59. Moving like when they get around to it. That doesn't work and they don't know the paperwork. They don't know the forms. They don't know the rules. Oh, yeah, I said, I'm in a short sale. I'm still waiting two months later. I would just send them. Oh, I sent them an offer. All right, how about the hardship letter? How about you have it the six other things they need to approve that? So they asked me to kind of do that. And one was actually starting to create their own course. And somebody mentioned my name is, you know, here he has that stuff. That's kind of how I got involved. So I'm trading on both sides. And on the broker side, it's good. I think that you've created a association or a certificate basically for brokers that can say I'm a certified short sale specialist. Well, we trade marks certified short sale expert because I think specialist is owned by somebody else. I don't know. There are so many programs out there. I mean, there's one out there right now that makes you a short sale expert in 90 minutes. I couldn't teach you how to do one form in 90 minutes. My course is probably equivalent of about four college credits. You can't teach somebody short sales in 90 minutes. But I want to get into that because here's here's how it actually came about. See, the problem is the lenders want to do coordinated sales again. Right, they're going to have to. The time lines you're going into a declining market. Okay, and there's two other real interesting factors in here. Why the losses are going to be more severe. And maybe I'm showing my age and I don't need to denigrate the younger generation. But guys, when it comes to using tools and stuff, you guys are useless. Okay, sorry. Okay, here's the thing. So when somebody is this broke and they can't pay the mortgage or anything else, they stop maintaining their house. Now, our generation, if we're forced at leak, we go find a pair of pliers. A lot of these people can't use a pair of pliers. I'm exaggerating the point obviously, but the problem is what we're seeing is a lot more deferred maintenance than we saw last cycle to for people at work. Because they can't fix anything themselves, nor can they afford to pay somebody. Got to help them afford a plumber and HVAC guy at this point. I should have sent my kids to college. I should have sent them to HVAC school. Honestly. So that kind of, you know, since AI is taking away all the intellectual and jobs, then you do probably need to become a manual labor. We're all going to work for Claude someday. Maybe, but for God's sake, somebody's looking at this wrong. There's no shame and hard work. I'm fixing my own stuff for a house. It's like therapy. My point is that generation that both these houses, first of all, that first time buyers tend to buy older homes, we haven't got the new construction issue yet. That's even more fun. What do you prepare? Well, yeah. I want to come back to the before we go to that time, I want to talk one more question on the short sale world. Because for someone who, there are probably some brokers that are listening here, or myself included, who've been around long enough to know, have gone through another cycle back in 2008. And short sales were, you know, there was a lot of fraud. There was a, but they were very, very relevant tool back then. However, my experience with short sales was that it was lots of paperwork. And it was, you know, you had to know what you were doing. Yes. How is the expectation of lenders change if at all when it comes to the new, the new era of short sales? It's a lot easier. Most of the forms are pretty much standardized. And if they're not standardized, they're all similar. Now, you do have to know the different rules for different types of loans, like what relocation assistance is permitted, how judgments are handled. There are different rules. I covered it on the course, cased by pace with all the different loan types, because they have different rules on them. But the beautiful thing is the forms are relatively standard. It's wonderful. And it's cut, copy, paste for God's sakes. We have 60 different forms in the library. Everything you need, cut, copy, paste, hardship, letter, financial statement. Everything you need is already laid out. Got it. You know, permission letter to speak. And the letter to have here, it's, we've made it so much simpler, but the lenders, they've also automated their systems. You know, you've got the major platforms. I'll use the pointers example. They probably have more short sales than anybody. Okay, their platform is automated. Everything's uploaded. Communication is electronic. And the lenders, we got to get into the coordinated sales because that's what they figured out. You're going into a declining market. This is what's going on in the deferred maintenance. So we've got a market that's declining. We know that for a fact. Okay. So if I take your house back today, or I take it back three years from now, forget my lost income and costs, I'm going to sell it for less. Not just on the market. Then because that generation that's, that's the link right now, they're not real handy. There's more deferred maintenance. We're seeing more deferred maintenance on properties that we've seen before and the stuff coming in. Okay, these people just, generation, they didn't take wood shop like we did. They didn't take electrical in school. They can't fix minor things. Okay, I mean, granted they got YouTube. But still, that's right. They can just follow YouTube. I know. So the point is, you know, they choose not to. The point being, it's not the thing. You know, you're walking away from a property. You're not really now. But it's worse this time is what we're seeing. Yeah. It's very interesting. Oh, from a run this perspective. And here's where this came about. Because you asked about the director earlier, Joe, and you got to just have the reason for this. So they want to do a coordinated sale. That is a lender initiated short sale. That's where I call you up, Bill. And say, Hey, Bill, look, I cannot do another loan with mod with you. You're five months behind. I got it for close. I don't have a choice. I want to work with you. If you really do a short sale and they'll explain what that is, we will help you move. You put the house up in the market. We'll work with you on the numbers. And we'll even help you move into a new property. Like FHA allows 3000. You know, fanning Freddy loans, by the way, purely a discretion to the service. So you can see much higher numbers. But do I take my hair cut now and lose 20 grand? 20 percent or three years from now between deferred maintenance, caring, and cluster. I lose 45 percent. They figured this out. Because you know, and there's no government can, this is not going to be, I'm not going to say 100 percent. There'll be no government bailout. I'm sure it's not betting on one with this administration. Okay, they don't have a choice. So the coordinated sale, it's just a short sale initiated by the lender. But see they had another problem. This is what it had to fix. So we're not only at the training and certifying the agents, the certification was so I could provide a directory. Because here's a problem the lenders have. If I call you up there and talk to you and you go, "Oh, my sisters are real, I'll use her." "Well, your sister's a moron Bill, sorry." The dealer's going to go through. I know I've got less than 50/50 shot of it happening. I need you with somebody who knows how to do this and knows the paperwork and understands the timelines. But I can't say Bill, you got to use Mike. You can't steer that way. I can't even say you got to use Mike Todd or John. I can't steer. I mean, some of the hedge funds can kind of get away with it because they're not regulated by that, but most of them can't. Because these be firms that did that, but not Frank changed everything. If you go door knocking for a lender as a realtor, now you're a debt collector and have to be licensed. Back of the day, we think they can send us out. They can't anymore. So they can't recommend an innovative agent. But you know what they can recommend? A directory. They can say, "Look Bill, this is a different type of transaction. You need a special type of realtor who knows this stuff. Okay, it's skilled in this or a professional. I don't want to use the term realtor because I don't, but I can send you to a directory. Say, "Look, you're free to use whoever you want, Bill. But if you want this to go, you need somebody to know what to do. There's a directory of the people are especially trained for this and can help you. Choose whoever you want." So that's where the whole directory came from and the sort of issue came from. I had to solve that problem. I have to short sales. I'm not going to go. And everybody knows it. I don't mean to be so hard on realtors. It's just when you have 75 percent of them sold maybe one or two houses last year. And 70 percent is something sold none. How in the hell are they going to have enough experience to do this? They can even sell a regular house and now they're going to do a short sale. And you still have to explain to the buyer why they're signing certain disclosures, why there's arms-like forms. By the way, if you don't know how this works, don't worry about it. We have all the forms in the library in the course and it tells you exactly how to use them. So I had to make the streamline for everybody. So that's where it really came from. Get us a broker network that knows how to do this and then find a way where we can get them to the borrower. It's really, I think you know, you always seem to be on the cutting edge. And I think you're on the right track with the short sale thing. I think it's a much better solution for the next generation of just the link when borrower that's sitting in an upside down situation. It's better for their credit if they do a short sale versus Dean Liu or certainly better than if they are foreclosed or file bankruptcy. Short sale. Yeah, so it's really the next best option to what's in any one of the millions of folks that are upside down or in distress right now. So I think that it's good. It's part of the, you know, it fits well with the win-win, I think. It's a limited reset. They need a chance to reset their lives. Right. Let's talk about the new homes. That's kind of one of my favorite. Yeah. And this is one of the things we do with the short sale course. I've got a whole marketing module. It's actually a whole library. You could target them. I don't want to, if I'm a real estate agent, okay. I don't want to cold call 100 houses and maybe find one who'll talk to me. But if I know how to search and target, I can get one out of eight who I know is in trouble. By targeting the right market. Well, new construction is kind of funny too. And God, builders are going to kill me for this. I don't care what anybody says unless you're in a rapidly rising market, a new home is only new once. That's right. Okay, you pay a premium for new construction. Everything's brand new and shiny. You have to pick your carpet colors. But the mini, it's just like a car. The mini you drive a new car off the lot, it's a used car. Okay, and it depreciates the first year. So does a new home. So the people who bought like 22, they're probably okay. They're probably even deleted that. How much does it appreciate? And before it runs. comes back up and even out that varies by market. But the other hidden problem in here is you had so many lender builder buy downs. The building arms down, you know, they do three ones, two ones, four, whatever. So these people started like teaser rates of four and five percent and the arms were for three years. Now they're at six and a half with the rates coming up and I have news for you. I don't think the Fed could lower rates if they wanted to right now. And you've got the third element there with new construction, which is the builders are selling homes cheaper today than they were to the people three years ago on top of them. They were going all fairness to that. The homes are slightly smaller for affordability issues to sell them. So you've actually had a slight decline in the size of homes that builders are building now. So that kind of washes out the summer spec. But if you take a house and you go to three years ago, brand new, maybe it's a 10 percent premium, market hasn't going up. Aftermarket to the country went down last year. Last month alone, the average house went down half a one percent. That's like $8,000 in equity. The average home when they're lost last month. This is happening. Okay. You target a try. I'm giving away some secrets I shouldn't hear. But from a broker and agent perspective, I look at a track that was built in 23 and I run that track that I see how many were done FHAs or how many were done this. I know most of those people are in trouble. Okay. So you don't have to knock a hundred doors. You've got to knock five till you find somebody. It's like no way. It's a target rich environment. Everything's identifiable. And by the way, most agents already have access to this information. They don't even use a scribe. They think read your MLS tax records and a few other online sites. Man, you could laser focus these people. And here's the thing. They need help without getting political. I don't want to go to the political, but you say there's not going to be another bailout. Well, that's true. We like we'd like to think that, but we live in a bailout country where we socialize our losses and privatize our course. And so what do you say to municipalities, states, federal government, what to do, what to stop doing to manage what's what's coming and to prevent. I don't know if we can prevent a repeat of, I mean, we're not going to have a 2008 situation, but it's going to be like you said, a slow burn, a long road of declines and millions of real estate homes and real millions of deals they have to get reprised. We're just talking about residential today. You know, the commercial, the entire commercial industry, if they're if they're leveraged is in the same problem, if they're highly leveraged. In some cases, they were especially with the private lending out there. It's a $2 trillion industry. And I've heard default rates of anywhere between 90 and 40% of some of these folks's portfolios. Yep. That's just and again, you'll backstop. I mean, can this become a system? Is this going to become systemic? What can we be doing? What can the leadership be doing? If anything, maybe there's nothing to do in the way it's going to take the guys like you and I that have been in the trenches to go out and work these loans for and and and solve this mess. I mean, any you want my really honest answer on this? I do. I don't think they can do a damn thing. The train is left the station. I think you're right. I'm really good about politicians and I hate them all equally. This problem appears to create. It's been building up and building up. And no, I don't think there's anything anybody can do to stop this. You may see some temporary relief measures. I doubt at the federal level because you can't get them degree on anything. They can't pay our TSA and people forgot to say it's going to get me through an airport. So I'm not counting on them to get together and fix this. I think you will see some states do some sort of moratorium issue if it gets really bad except the states that are politically inclined to do that aren't really the ones that have this problem because housing has been so restricted there to begin with. I mean, we get into a whole lot of the conversation here. But let's put it this way. My concern, there are going to be short sales everywhere and you need to know how to do these. Okay, that's a given. It's just great money. Okay. And this sort of is talked about delisting. Delisting. Where in the hell did that word come from? 40 years. I didn't see that. That's people taking their homes off the market because they couldn't sell them for their price. It's in a record eye. So much so they came up with a name for it. Right. So back to, oh, we need four million housing units. No, there's plenty of housing units. Just nobody can afford the damn things. We let's really look at some of the problems here. And if we add all these housing units, then the supply increases demand, curves, shifts, prices come down and the people who have equity, lose equity and they're unhappy. There is no political win here for anybody. That's why I don't think what's going to happen. The area that's of most concerned is what you call the smile zone. And that's if you took a map, and I got to remember I'm backwards on your screen probably. And if I went from California to California, I read the, I'm actually starting more in Nevada. So let's say Vegas, Data Through Phoenix, Prost to Mexico, Texas, Louisiana, Alabama, Mississippi, dip down to Florida, they came up to the Carolinas. I'd say that's probably 70% of the severe problems. That's what's known as a smile zone because it looks like a smile when you map. And is that because of the run up so quick? Is that because of the insurance problem? Is that because of, I guess it's the convergence of all of them. Well, while we're on the plugs, let's talk a couple plugs. You spoke about the short sell expert. There will be links in all of the everywhere that this podcast goes. There'll be links to your contact to the short sell expert program. You've got an NBA coming up in a few weeks. You know, like what's, I mean, you've got a pretty busy couple months. Yeah, I mean, so much for being retired if you're taking things on. And now I'm just not good at sitting still. I mean, I do this every week for the NRBA members, all the numbers, which clients who has what, where the RIO is, what clients have this. So you need to talk to, you know, we do this every week. But you have got a lot more going on right now. We'll say a couple of things. The lenders training that I'm doing, I'm not charging for that. That's just good will in my part. But you have to be a bank. You have to be a bank or a, or a, or a hedge fund or an equity. Anybody who's dealing with NPLs and mortgage delicacies, clean up. If you're large enough, you know, you're my friend because they do have a lot of friends at the industry. I'll probably fly in for a day and teach it takes about six hours. If not, I will do it by webinar for your staff and break it out. It's like two hours a week because it's, you can't pull your staff out for six hours in one day. Nobody can. It's crucial for your life. I'm going to have you do it for me if possible. And, uh, and my AIs. I'm not, not your AI. I'm not one because the thing about teaching lenders is how short sale fraud occurs. It's like a how to commit short sale fraud. So for any of the lenders of services, you have loans more than happy to teach it by a webinar for your, for your staff. Just remember I'm your friend and use the NRBA members or my short sale people. That's a lots of promotion for me. So I've already written that course. That's about six hours because it really takes that long to explain how this works and how it's done and what the preventative practices are. And thank God technology. We can use a lot of technology now that we didn't have last cycle. A lot of tools we didn't have to spy. Yeah, it's really a shame that with this technology, I would say, you know, just like when the internet came out in the 90s and I was in college, I thought to myself, this is great because finally we're going to have a source of truth. Awesome. And the boy was I wrong. And when I look at today, the way the technology's even gotten better, it's there are so many people who would rather spend time developing a long con or scamming people. And some of it is easy. Some of it's pretty sophisticated too. I mean, you know, if, if the people just put their mind towards good as opposed to stealing, it we could be a much better planet. And we could advance in a really positive way. It boggles my mind, the amount of fraud. And it's just getting worse and worse. It is. And somebody's going to be so good and so creative because I'm the one looking for this stuff. Yeah. And this is going to sound terrible. But sometime I look at this and I go, that's how they that's and I'm like respect. I mean, I mean, I almost got to go damn, that was, that was impressive. And it's sad when you look at it that way, but you know, you see so much. It takes a lot to impress me at this point. I know it's so funny. And you can like put your head down in that. I guess people get it through. I just don't get it. I've had some con artists over the years. And I just really, I mean, something that's like a screw loose. It's like they, you know, smart people, some of them and, you know, and they just, I just don't understand. Well, that's a good way to wrap up with a little ode to con men. Last, like bold predictions. I mean, I know you're the man that's willing to give bold predictions. What do you think the next 12 months looks like? Slow steady burn cycle just beginning. Closure filings jumped up. We're running about 40,000 a month. That's filings of it. Odes, actual foreclosures haven't caught up yet because there's always about an 18, 24 month lag. So that's about 5,000. But that'll increase back up to that other number probably within 12 months. I know my people are getting busy as hell already. They've already started. The short sales, the lenders and the services and the note, the investors are gonna drive this. 'Cause they're gonna look at their losses and say, I lose 20-hour, 50-later. Okay, plus three years of grief. Plus media risk, plus legal risk. Okay, I mean, there's something, I'm not gonna say it on the show, Coach Public, 'cause it's one of the best scams ever. Not best, but most effective. That's borrowers due to banks, 'cause I wanna talk about it here. But that one's becoming a little more common. And it's just getting the hell out of the investors because there's no way to win that one when they pull it. So that's some of the things I'm teaching them to look for. Well, I wanna be careful what I say. But slow study burn building up. The spring market that everybody's been predicting, that isn't happening, guys. It hasn't showed up. Rates just jumped. There is no spring market. Got news for you. Okay, the only areas that tend to be holding relatively well are certain markets and then the high end luxury homes and certain markets. All right, 'cause those people will buy anyway. Well, there's millions of multi-millionaires out in the country. I mean, it's unfortunate that the vast majority of Americans can probably can't survive a major medical or some kind of major financial problem that arises or. Majority of Americans can't cover $1,000 emergency. That's right. I mean, it's that bad. They're that tight. They're already stressed. The big thing with the younger generation, the first-come homebary is that I know in trouble and having to do shorts is the stress is killing them. They're not having a life and they want out. They are not dealing with the stress well. They want out of the stressful situation. I saw one study that said 75% regretted buying a home. I don't know how factual that is. But it's believable. Yeah, they want. And I'm seeing it a lot with the younger generation I meet that are that have bought recently. It's just not worth it. It's, you know, they got it. They got guided by either a mortgage broker, a real estate broker to go buy something at a 50 DTI or something like that because everyone stretches and that's what that's human nature. And now they're sitting there, you know, embarrassed and like not knowing what to deal with. No, it's like the whole college thing. Spend 200 grand to get a $50,000 a year job and $200,000 in debt. Okay, I'm sorry. But. Yeah, well that's. It's not logical anymore. That does not make sense anymore. It'll be very interesting to see, you know, because I'm gonna be a grandfather for the first time. Congratulations. Thank you. And I think now like how do you educate and raise a kid in the new world? Really, everything, all the information they need is available to them in their hand. And so now you have to figure out, you know, and now it's about social interaction, but also, you know, most jobs are not necessary. I mean, there's manual labor jobs, you know, teach our kids to become manual laborers. But. Oh, let's change that to skilled labor. - Skill labor. - Okay. And AI is not gonna repair certain things, okay? Let's change the skill labor. Manual, no. - Yeah. - That's, okay, skilled labor in the issue. And that's where we're gonna be short, you know, we're joking about this the other day, and we all grew up watching with Jetsons, right? - Right. - And they have robots for everything. And all George's is push buttons and think. That was so wrong. The AI is gonna push buttons and think, and we're gonna be out being playing robot doing the work. That's scary. That's a good bold prediction, and I agree 100%. Well, Mike, thanks for joining me on the debt doctor, and I'll see you in Vegas in a few weeks. - Yeah, we'll be out the conference. So you take care. - That's a wrap of today's episode of "Dead Doctor." I enjoy bringing this content to you each and every week, and I really appreciate you tuning in. Remember to follow us so you get notified whenever new episodes release. If you haven't already done so, please share one of your favorite episodes with a friend, family, or colleagues. And if you don't mind, leave us a positive review on Apple's Spotify or whatever your favorite listening platform might be. Until next time, thank you for investing your time with us on the debt doctor.