Homeowners’ Financial Solutions for 2021 and Beyond

Photo by Olya Kobruseva from Pexels

By Rick Tobin

Between 2006 and 2014 during the depths of the Credit Crisis, there were 10 million Americans who lost their home to foreclosure over this 8-year span. Within just a few months in 2020 (March to May), we’ve seen almost 50% of that 10 million foreclosure number with at least 4.7 million mortgages delinquencies. For most Americans, the vast majority of their family’s overall net worth is tied directly to the equity in their home rather than in any stocks or other investments.

The good news is that national existing home sales climbed an all-time record +20.7% month-over-month increase between May and June 2020 partly due to fixed mortgage rates repeatedly reaching all-time record lows. In spite of record unemployment claims filings, home prices are still at or near all-time record highs in most major metropolitan regions.


Photo by Burak K from Pexels

In spite of one of the most chaotic years ever in world history, national home equity grew $1 trillion in value due to the combination of historic all-time low 30-year fixed rates and unusually low home listing inventory. For example, there were 1.42 million existing homes on the market nationwide at the end of October 2020, which was a 19.8% drop compared with one year earlier. Some analysts claim that the median home price nationwide increased by a 16% year-over-year growth during the same October 2019 to October 2020 time range. In many metropolitan regions, listed homes are selling within one to two weeks.

The primary difference between now and the last negative economic time period is that more homeowners today have much more equity in their homes than back in the 2008 to 2012 years. As such, any distressed homeowners who need to sell should be able to do it rather quickly due to the strong buyer demand and record low mortgage rates.

Homeowners, Tenants, and the CARES Act

Back on March 27, 2020, the CARES (Coronavirus Aid, Relief, and Economic Security Act) was passed by Congress as a response to the worsening US and global economy due to the fallout from the ongoing virus pandemic designation. Subsequent to the passage of the CARES Act, governors in states like California and elsewhere signed mandates or legal orders that attempted to prohibit lenders from foreclosure on delinquent homeowners and landlords from evicting tenants through the end of December 2020 or January 2021 (dates subject to change).


Photo by Joshua Miranda from Pexels

Additionally, the CDC (Center for Disease Control) issued their own guidelines that referenced the possibility of civil fines and/or criminal prosecutions for any landlord who attempted to evict a delinquent tenant before the end of December 2020 partly due to claims that it may increase potential health risks for the general public. In US history, this may be the very first time that the CDC has claimed authority to directly affect landlords and tenants. In recent times, these foreclosure or eviction moratoriums have been extended to January 2021 or beyond. At a later date, these moratoriums may continue to be extended, but few people are fairly certain at this point.

Risks and Financial Opportunities

Let’s take a look below at the potential risks, market changes, and financial solutions for homeowners, landlords, tenants, and real estate professionals due to Covid-19’s impact on the economy:

* Adverse Market Fees: As of December 1st, 2020, the largest secondary market investors, Fannie Mae and Freddie Mac, are scheduled to assess a 0.50% “adverse market fee” to at least all refinance (and possibly purchase) loans that are designated as “conforming” fixed mortgage rates. Generally, these are some of the lowest 30-year and 15-year fixed mortgage rates in the nation for the most creditworthy borrowers with usually very solid FICO credit scores. This market fee adjustment may increase the overall 30-year fixed rate by anywhere between .125% and .25%, depending upon the lender.

* Non-conforming mortgage loans: Borrowers may consider easier qualifying non-conforming loans that aren’t purchased in the secondary markets by Fannie or Freddie which include: FHA (FICO credit score allowances in the 500 range), VA, Non-QM (Qualified Mortgage), and Private Money that may allow much higher debt-to-income ratio allowances and/or no formal income documentation requirements such as with Stated Income products (bank statements or profit and loss statements in lieu of W2s or tax returns).

* Forbearance agreements: The lender agrees to postpone or delay their foreclosure actions with the delinquent borrower. Sometimes, these foreclosure postponements may last months or years.


Image by Gerd Altmann from Pixabay

* Deferment: The lender agrees with the borrower’s request to delay or defer their delinquent payments until a later date. In some cases, the late payments and penalties are added years later when the loan may become all due and payable.

* Loan modification: The lender or mortgage loan service company agrees to reduce the existing interest rate and/or monthly payment amount so that the mortgage is more affordable as a way to avoid foreclosure.

* Loan repayment plan: Both the lender and borrower mutually agree to add unpaid delinquent payments and late fees to the existing mortgage which may slightly increase their monthly payments or increase the loan term to give the borrower more time.

* Reinstatement: After the borrower and lender agree to modify the monthly payments to avoid foreclosure, the loan is removed from foreclosure status and reinstated in “good standing.”

* Seller-financed sales: If the homeowner needs a quick sale to a new buyer who can effectively take over his monthly mortgage payments and give the seller some much needed cash, the seller may consider creating some type of wraparound mortgage {i.e., contract for deed or all-inclusive trust deed (AITD)} or “subject-to” property transfer in which the buyer receives the deed to the property that is “subject-to” the existing mortgage still secured by the property.

* Short sale: If and when the mortgage debt is greater than the current market value for the property (aka “upside-down” mortgage), the homeowner may consider contacting an experienced local Realtor who can help negotiate a discounted mortgage payoff with the lender when they find a qualified new buyer.


Image by Tumisu from Pixabay

* “Cash for Keys”: During the depths of the last major national foreclosure crisis between 2009 and 2013 especially, lenders were offering delinquent homeowners upwards of several thousand to $25,000 + to vacate the home while not damaging it or removing appliances. Quite often, the homeowner hadn’t made a mortgage payment for months or years up until this “Cash for Keys” offer. For many lenders, this cash payment to struggling homeowners was considered more affordable for the lender than fighting the homeowner for months or years longer.

* Bankruptcy: For homeowners who are days or weeks away from losing their home at the final lender auction sale, they may consider filing Chapter 7 (complete liquidation of most debts) or Chapter 13 bankruptcy (a longer term workout payment plan) either on their own with online companies for just a few hundred dollars or with the assistance of an experienced bankruptcy attorney. The bankruptcy filing could delay the foreclosure auction date by weeks, months, or longer. Please seek quality legal assistance first.

* Foreclosures: Please note that the typical foreclosure date timeline is close to four months from the start to finish. In California (a trust deed or non-judicial foreclosure state), the lender may first issue some warning letters to the delinquent mortgage borrower up to several months.
The lender will then file a Notice of Default to start the foreclosure process. Ninety (90) days later, the lender will file a Notice of Trustee’s Sale while advertising one day a week in a local legal newspaper for three consecutive weeks. If the loan hasn’t been cured or paid with some new installment or workout plan, the lender could hold the final Trustee’s Sale (or auction) approximately 120 days (4 months) after the Notice of Default was filed.

In other states that are considered judicial foreclosure states, the foreclosure timelines may be similar or much longer, depending upon the caseload for nearby local courtrooms.

Focus on Opportunities, Not Obstacles


It’s your ongoing perceptions of these negative financial, health, and overall national and global situations that may best determine whether you succeed or not. “Truth” is just your personal perspectives based upon life experiences. In the well-known Five Stages Of Grief description about emotional reactions to traumatic and painful experiences which was first written by Elizabeth Kübler-Ross and David Kessler about the fear of death, the five stages are described as:

● Denial
● Anger
● Bargaining
● Depression
● Acceptance

The faster that you get through the first four states of grief, the faster that you will get to the “Acceptance” stage and your focusing on the potential opportunities and solutions.

What we tend to focus on in life is usually what we end up with later because our minds are like giant magnets, for better or worse. Please keep your eyes on your personal goals because the solutions will appear sooner rather than later if you’re willing to focus with 20/20-like perfect vision. For many real estate investors, they will find incredible buying opportunities in 2021 and beyond if they keep a positive mindset.


Rick Tobin

Rick Tobin has a diversified background in both the real estate and securities fields for the past 30+ years. He has held seven (7) different real estate and securities brokerage licenses to date, and is a graduate of the University of Southern California. Rick has an extensive background in the financing of residential and commercial properties around the U.S with debt, equity, and mezzanine money. His funding sources have included banks, life insurance companies, REITs (Real Estate Investment Trusts), equity funds, and foreign money sources. You can visit Rick Tobin at for more details.


Top Industry Leaders, Plus Up-and-Coming Experts GO LIVE, Sept 12th and 13th

For Immediate Release

Realty411 Hosts Fourth Live Virtual Weekend Investor Expo for Hundreds of Guests

  • Nearly 2,000 investors have registered for a Realty411 Virtual Expo, since the pandemic halted their four planned in-person conferences.
  • Investors have RSVP’ed to Realty411‘s Virtual Expos from around the nation, representing 40 states so far; Plus, guests from eight countries have also attended.
  • Hundreds of guests are united online, in real-time, learning from some of the nation’s leading real-estate investment experts.
  • Realty411, a leader in mass media for the REI industry since 2007, once again leads the way in online information, as an early adapter.
  • Post-expo: Hundreds of additional investors are impacted by Realty411 Virtual Expos with free recorded video access.

Time-Tested Experts Reveal The Secrets of Their Personal Success in Real-Time — Live Chat is Available for Guests to Ask Tough Questions!

Realty411, the longest-running real estate investor magazine reaching new and seasoned investors nationally and globally, is hosting their Fall Virtual Weekend Investor Expo on Saturday, September 12th and Sunday, September 13th.

The complementary weekend online event features non-stop learning with some of the country’s most renowned real estate investors and industry leaders.

Beginning at 9 am PST (Pacific Standard Time), Realty411 will host a non-stop online interactive expo, and once again, top industry speakers, both veteran as well as burgeoning super-stars, will spill their secrets (and shortcuts) for the ultimate success in life as a real estate investor.

“The success of our last three events has been amazing, even greater than I had imagined they would be,” Linda Pliagas, the publisher says, adding, “I’m particularly excited about this upcoming expo because many of the presenting educators are people I have been personally known for over a decade — some even longer than that.”

Realty411 is proud of the long-lasting professional relationships they’ve developed, with some of the most renowned names in the REI industry, all for the benefit of their investor network. 

In fact, some of the confirmed educators scheduled for this amazing online event are leading experts in their respective fields, including: 

  • Kent Kinzer, marketing director of Equity Trust, A family-owned, Ohio-based company, Equity Trust is an industry-leading custodian of alternative assets in tax-advantaged accounts. Their 45-year track record of excellence is unmatched in the industry;
  • Merrill Chandler, founder of Credit Sense, is a legend in the credit restoration industry who has led the transformation of the personal and business borrowing space. Learn how to get so fundable!
  • Dutch Mendenhall, founder of Tax Auction Investors, is a former professional athlete who now runs a company that mentors thousands of students across the country. Dutch’s specialty is tax sales. He runs three investment funds that have amassed over $7 million in properties, and $3 million in profit over the last 12 months;
  • Hector Padilla, known as “The Chairman”, this legendary rags-to-riches So Cal investor has personally closed over $90M in real estate. Hector has also invested well over $300,000 on his REI education over many years. He has been trained by some of the most respected “Masters of Real Estate” in the industry;
  • Bill Walsh®, this powerhouse is considered one of America’s top mentors. Mr. Walsh is the CEO/Founder of Business Coaching/Venture Capital firm Powerteam International. He hosts and speaks at events all over the world. His passion is to empower entrepreneurs and business owners to create massive success;
  • Hannah Kesler, operations manager with The Money Multiplier, a family-owned business that teaches investors how they can start leveraging their purchases to build wealth faster. Hannah is passionate about sharing her family’s knowledge to empower Millennials to take control of their financial future early on;
  • Jay Butler, is managing director of Asset Protection Services of America. He holds a Bachelor’s Degree of Fine Arts (BFA) from Boston University. Jay builds his relationships through consistent attention to detail and reliable support. He has traveled extensively throughout the United States (having visited 49 of the 50 states), explored 36 nations worldwide, and has lived in a total of seven countries throughout North America, Central America, the Middle East, North Africa and Europe;
  • Dave Grimm, founder of End 2 End Results and other companies, he has helped raise tens of millions of dollars from national and accredited investor for many real estate syndication deals. Currently, he is focused on the science behind social media for company growth.
  • Seti Gersbherg, MBA, founder of REI Blade, will once again assist as an emcee at this expo. REI Blade is a revolutionary new software that helps private lenders focus on what they do best: Raise money.
  • Cliff Gager, veteran real estate expert, Cliff has been in the real estate business since 1992, starting in the residential mortgage lending world as a loan officer for a national mortgage company. Cliff teaches real world strategies that really work. Write down your toughest questions for Cliff — bring it on!
  • Kathy Kennenbrook, known as the “Marketing Magic Lady”, she has developed a direct-mail system that drives in motivated sellers by the herds! Kathy holds a degree in accounting and co-authored the book, “Walking With the Wise Real Estate Investor”, which also includes real experts Donald Trump, Suze Orman and Ron LeGrand.
  • Dr. Teresa Martin, Esq., director of the only official National REIA chapter in Manhattan, New York. Dr. Martin has helped thousands of personal investors, particularly women and people of color, gain the confidence and know-how to take charge of their finances.
  • Linda Pliagas, publisher of the longest and most-recognized real-estate media brands in the industry, Realty411 and REI Wealth, Linda is also an accredited investor and journalist. She has been on a mission to help investors since 2007 with the release of her first Realty411 issue.
  • The early-bird and most motivated of students will also receive “Achieve”, a complimentary e-book by Sunil Tulsiani, founder of Canada’s largest REI group, Private Investment Club.


Undoubtedly, this is one special virtual event that seasoned, as well as burgeoning investors, must make time for.

Hundreds of investors from around the nation have already attended Realty411 Virtual Expos in the past, and hundreds once again are expected — all live and in a real-time, so investors can engage like never before.

For further information and to reserve your complimentary ticket, please CLICK HERE.


One of the reasons why this event is so speculator is due to the time-tested knowledge that investors will gather simply by spending their time at this weekend bonanza.

“We know how to make millions in this business,” the publisher says proudly, and she explains: “As a landlord for the past 25 years, in and out of California, I’ve personally gone through the triumphs and tragedies of long-term real estate holding. Luckily, the pivotal learning lessons I’ve dealt with can now help me spread knowledge and support.”

Many of the the dozens of speakers who have already been featured on Realty411‘s Virtual Weekend Expos are known internationally, as some have spoken at numerous worldwide events before the COVID-19 pandemic obliterated in-person business networking gatherings.

So far, Realty411′s Virtual Expos have each attracted between 500 to 550 RSVPs for each event; plus hundreds of investors have joined in live and have interacted in real-time.

Nearly 50% of the guests who registered for the last virtual expo showed up, which is the highest ratio so far in Realty411′s 13-year history of hosting complimentary events for their readers.

Online guests who have checked in so far include investors from nearly 40 states across the United States, as well as over eight countries that have been documented, including: Netherlands, Germany, Canada, Australia, Mexico, Costa Rica, Hong Kong, and India.

In total, close to 2,000 people have now registered for a Realty411 Virtual Investor Expo so far since the COVID-19 pandemic hit.

Investors are urged to attend the complimentary live Fall Virtual Expo as video of this event will only be made available to paid Realty411 members.




Breaking News: This Week’s Historic Stock Surge Calms Investors

By Stephanie Mojica

After weeks of bad news, there is plenty of good news for real estate investors and realtors alike. On Wednesday, March 25, U.S. President Donald J. Trump as well as Senate and Congressional leaders reached an agreement on a $2 trillion stimulus package to hopefully stave off any recession due to the myriad problems caused by COVID-19.

economy-3972328_1280The day before, Dow had its best day since 1933, according to The Los Angeles Times. Dow’s index increased by 11.4%.

Standard & Poor leaped 9.4%, which was the third-best day for gains since the 1940s. Because Standard & Poor is particularly important for 401(k)s, which impact an estimated 50% of American workers, according to CNBC.

Nasdaq jumped 8.1% as well.

According to Forbes, the unprecedented stimulus package will do the following:

• send $1,200 checks to most Americans;
• increase unemployment insurance benefits;
• set up a $500 billion loan program for small businesses in trouble;
• provide $130 billion for hospitals;
• inject $150 billion into state and local stimulus funds;
• loan $50 billion to affected airlines; and
• create a $500 billion fund for industries, cities, and states.

wall-street-4847634_1280Yesterday’s latest statement from President Trump indicates he set Easter as an optimistic date for businesses to resume to full operation. These positive signs from Wall Street and the executive branch are increasing investor confidence in both the stock and real estate markets.

20946395 - paper house on financial business chart

U.S. Market Plunges, Realty411 Experts: “Recession On the Way…”

by Stephanie Mojica

The Federal Reserve slashed its benchmark interest rate to nearly zero on Sunday, March 15, sending real estate investors and the world at large into even more panic over the very real financial threats of the coronavirus aka COVID-19.

This of course drew the overall question of, is the United States now in a recession?

The opinions of experts interviewed by Realty411 on Monday, March 16, varied. However, the opinions all held one common thread — the economy of the United States and the world at large is in danger.

Gena Lofton, a Los Angeles-based investor, speaker, and author, said that she believes a recession officially began this first quarter of 2020, even before the interest rates were slashed.

“It’s highly likely that we will have low to no economic growth for the next two quarters, which is the definition of a recession,” Lofton said.

However, she noted that there are two more important questions for concerned parties to ask:

·      When will it end?

·      Will it be a “depression” or a recession?

“The answers to the above questions are dependent upon the severity (i.e., the depth) [of this economic downturn]; the length (i.e., the number of quarters); and the of fatalities as a result of the coronavirus — all of which will result in financial disasters for a large part of society,” Lofton said.

“It is highly probable that this will spill into 2021, as the money supply and supply chains have been broken for too long. For example, when an economy is chocked for this long without air (money) it is nearly impossible for it NOT to have a recession.

“The example I like to use is it’s like holding your breath underwater, if one does that for too long, they will either die or be unable to function when they do get air.”

According to Lofton, it is important for all investors and other concerned parties to deeply understand four factors:

·      the money supply;

·      the credit/bond market;

·      supply chains; and

·      economics in general

Bruce Norris, president of the Riverside, Calif.-based Norris Group and an active investor, hard money lender, and real estate educator with over 35 years of experience, said a recession is on its way.

“I think it’s [the Federal Reserve’s decision is] a reaction to realizing there’s a U.S. recession coming for sure,” Norris said. “A global one is likely as well.”

In response to a question about how serious COVID-19 is to the global economy in general, Norris said: “It’s [COVID-19 is] the biggest Black Swan event of our lifetime.”

According to Norris, the current situation is worse than the stock market crashes of 1987 and 2008 — but it could be of a shorter duration.

However, “depending on how high unemployment goes, this could impact renters’ ability to make rent,” Norris added.

Lloyd Segal, director of LAREIC (Los Angeles Real Estate Investor Club) — the largest real estate investing group in Los Angeles — also said a recession is on its way. However, he urged people not to panic.

“The best way to protect your real estate portfolio is not to sell!” Segal said. “No panic selling. Hold off on any activity for the next six months until the market stabilizes.

Sam Sadat, founder of Sam’s Real Estate Club in Los Angeles, Calif., feels that the recession for the economy is a recession, but not specifically for real estate investors. “As long as rates stay this low, we will have buyers.”

While panic selling is to be avoided, Sadat says this economic hurdle is the perfect time to re-adjust your portfolio and sell off the not-so-good properties to focus on the long-term winners.

“Save your money and get as much access to capital as you can. Look for bargains and invest in long term small multi-units,” Sadat adds.

It’s important for Realty411 readers to be aware that fortunes can be lost or made during economic turmoil, such as recessions.

“I’m sharing with my members and students that whenever the market goes through sudden upheavals, prices inevitably tumble,” says Segal, adding: “It happened after 9/11 and after SARS, H1N1, and Ebola. But it takes months, not weeks. So, get ready — but be judicious. There will be incredible opportunities in the coming months!”

Sadat says that right now noise will be coming at us from all sides, especially political hype during an election year. With this in mind, he emphasizes a holistic approach: “Keep to the center, sharpen your skills, and observe with maximum awareness of the moment. This too shall pass, and we will be just fine.”

Check back for more updates on this developing story.


This Is What Will Really Cause The Next Housing Crash…

By Fuquan Bilal

Whether you believe we are already in a correction or not, here’s the one thing that may really be responsible for tipping the housing market over the edge.

It’s sellers asking too much.

Who’s to Blame for the Housing Crash?

There were lots of people, groups and organizations blamed for the housing bubble and crash in 2006-2008.

crisis-2061342_1280At first they tried to blame investors and house flippers. At least until the government needed them to take on all the distressed properties, and actually loosened lending regulations to sell and finance more houses to investors.

Appraisers, too, were blamed for overinflating values, often in collusion with banks. Banks were committing all types of fraud. And then forced insurance and foreclosure fraud really put the icing on the cake.

To top it off, interest rates through 2006 were on the rise, which really stalled the market. Especially in tandem with cutting back on lending and ending easy to get loans. Something which the government has just done again with the FHA, after years of subprime type lending.

All of the things are happening again now. However, probably most significantly of all, is that property owners ran into problems when they owed too much, cash flow started slowing, and people stopped buying because prices just didn’t make sense anymore. The only people they made sense for were speculative flippers, and eventually they hit a ceiling too.

Uninformed & Unrealistic Sellers

All you have to do is hop on to Zillow or for a few minutes, and you’ll see plenty of examples of owners and agents listing for as much as double as the value estimates right alongside their asking prices. Often this is right next to a graph clearly showing a recent steep dive in that property’s value. One property in Florida shows it was recently bought for $21,000, is valued around $70,000, but the seller is asking $124,000 for it. There are plenty of other public listings out there that you can see have been vacant and listed for a year. The sellers have barely budged in lowering their asking prices.

chart-1585601_1280For easy math, take a house that may be worth $100,000, but the seller and realtor have been demanding $120,000. After a year, they finally fold and reduce the price to $100,000. Only now it may only be worth $70,000. So it sits on the market for another year. Finally, out of desperation they lower the price to $70,000, but now no one wants to pay more than $35,000 for it, because of the market and economy. They are completely stuck. They may have put in more than the property is now worth just to hold it all that time. They may owe more than anyone is willing to pay right now. They are financially tapped out and frustrated. It gets foreclosed on, and they lose everything.

There are probably several hundred thousand sellers in this situation right now, at least. Millions if you count all phases of the journey we just outlined.

shopping-1724299_1280It could easily be avoided by pricing right. Of course, in a few years this same property will probably be worth $150,000 or more, and could be generating $1,000 a month in rents in the meantime. Most just won’t be able to manage through it though.

So, we’re ending up with a lot of new deal flow coming through. Again, we’ll see local governments and banks flush with distressed mortgage notes and REOs for qualified funds to acquire at discounts. We’re also seeing investors selling off portfolios of hundreds of units to cash out.

It’s a shame that some sellers will have to go through this journey. Yet, there is great opportunity for investors who have the connections to acquire right priced assets and know how to manage them.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund


Fuquan Bilal

Fuquan Bilal founded NNG in 2012 with the principal mission of capitalizing on the growing supply of mortgage notes in the interbank marketplace. Mr .Bilal utilizes his 17 years of residential and commercial real estate success to identify real estate opportunities and capitalize on them. To date, he has successfully managed three private mortgage note funds that primarily invest in singlefamily performing and non­performing mortgage notes. His financial acumen and proprietary set of investment criteria enable him to purchase underperforming real estate assets at a deep discount of face and market values, thereby increasing the value of the assets. This, coupled with his ability to maximize the use of leverage, enables him to build strong, secured portfolios with solid passive income flows.


Interest Rate and Home Price Swings

By Rick Tobin

Historically, the #1 reason why home prices generally rise, remain flat, or fall is directly related to the latest 30-year fixed mortgage rates. This is true because the vast majority of home buyers need third-party funds from banks, credit unions, or mortgage professionals to purchase and sell their homes to new buyers who also usually need bank financing to cash the seller out.

Over the past 10 years, a very high percentage of mortgage loans used to acquire residential (one-to-four unit) properties have originated, directly or indirectly, from some form of government-owned, -backed, or -insured money, such as FHA (Federal Housing Administration), VA (U.S. Department of Veterans Affairs), USDA (U.S. Department of Agriculture for more rural properties), Fannie Mae, Ginnie Mac, and Freddie Mac in both the primary and secondary markets. Most of these same government-assisted mortgage programs allow buyers to purchase properties with as little as no money down to just 3.5% down payments. Many times, the seller and family members can credit the most or all of the closing costs or down payment requirements so that the buyer really has no money invested in the property.

To the buyer, the most important part of the purchase deal is related to qualifying for a very low 30-year fixed mortgage rate and an affordable monthly payment. When the interest rates are too high, then fewer buyers can qualify for properties. During these higher rate time periods, home prices typically stay neutral or fall in price as seen during past periods of deflation like back in the mid-1970s. As such, almost all “boom” (positive) or “bust” (negative) housing cycles are directly related to low or high rates of interest, so they tend to correlate or go hand-in-hand with one another.

Interest Rate History: 1971 – 2018

Between 1971 and 2018, 30-year fixed-rate mortgages have ranged between a low of 3.31% in 2012 to a high of 18.63% in 1981. Fixed-rate mortgages are still hovering near historical lows at present and in recent years. An estimated 60%+ of mortgage holders are paying fixed-rates on their residential owner-occupied properties somewhere within the 3.00% and 4.90% rate ranges as of 2015, per data released by Freddie Mac.

During this same 47-year timespan (1971 – 2018), the average 30-year fixed-rate mortgage was near 8.08%. This rate is almost double the average 30-year fixed-rate mortgage loan between 2010 and 2019. Because the ease of qualification and the affordability of mortgage loans is typically the most important factor behind a booming or busting housing market, the more recent 3% to 5% rate ranges over the past 10 years has helped fuel a stronger housing market with rapid appreciation rates as well.

Most often, owner-occupants are using some type of a government-backed or insured mortgage loan and / or secondary market investor to purchase their properties. These loans include FHA, VA, Fannie Mae, and Freddie Mac. The typical down payment ranges used to purchase these properties are very likely to average somewhere within the 0% to 3.5% down payment range. Many times, the seller provides a credit towards most of the closing costs and / or another family member assists with the down payment as a gift of some sort.

If so, a very high percentage of owner-occupied home buyers have purchased their homes with little to no money down out of their own pocket prior to qualifying for tax-deductible mortgage payments that were less than a nearby apartment to lease. Additionally, these same homeowners have boosted their overall net worth after the vast majority of residential properties have appreciated at significant annual percentage rates. In some cases, homes have double in value in less than five to seven years due to the combination of affordable mortgage loans, easier mortgage underwriting approval processes, and increasing demand for properties to purchase.

Source: Freddie Mac’s Primary Mortgage Market Survey (PMMS)

The Consumer Debt Anchor

With home mortgages, the primary collateral for the loan balance is the home itself. In the event of a future default, the lender can file a foreclosure notice and take the property back several months later. With automobile loans, the car dealership or current lender servicing the loan can repossess the car.

Homeowners often refinance their non-deductible consumer debt that generally have shorter terms, much higher interest rates, and no tax benefits most often into newer cash-out refinance mortgage loans that reduce their monthly debt obligations. While this can be wise for many property owners, it may be a bit risky for other property owners if they leverage their homes too much.

With credit cards, lenders don’t have any real collateral to protect their financial interests, which is why the interest rates can easily be double-digits about 10%, 20%, or 30% in annual rates and fees, regardless of any national usury laws that were meant to protect borrowers from being charged “unnecessarily and unfairly high rates and fees” as usury laws were originally designed to do when first drafted.

Zero Hedge has reported that 50% of Americans don’t have access to even $400 cash for an emergency situation. Some tenants pay upwards of 50% to 60% of their income on rent. A past 2017 study by Northwestern Mutual noted the following details in regard to the lack of cash and high credit card balances for upwards of 50% of young and older Americans today:

* 50% of Baby Boomers have basically no retirement savings.

* 50% of Americans (excluding mortgage balances) have outstanding debt balances (credit cards, etc.) of more than $25,000.

* The average American with debt has credit card balances of $37,000, and an annual income of just $30,000.

* Over 45% of consumers spend up to 50% of their monthly income on debt repayments that are typically near minimum monthly payments.

Rising Global Debt

According to a report released by IIF (Institute of International Finance) Global Debt Monitor, debt rose to a whopping $246 trillion in the 1st quarter of 2019. In just the first three months of 2019, global debt increased by a staggering $3 trillion dollar amount. The rate of global debt far outpaced the rate of economic growth in the same first quarter of 2019 as the total debt/GDP (Gross Domestic Product) ratio rose to 320%.

The same IIF Global Debt Monitor report for Q1 2019 noted that the debt by sector as a percentage of GDP as follows:

  • Households: 59.8%
  • Non-financial corporates: 91.4%
  • Government: 87.2%
  • Financial corporates: 80.8%

Rate Cuts and Negative Yields

As of 2019, there’s reportedly an estimated $13.64 trillion dollars worldwide that generates negative yields or returns for the investors who hold government or corporate bonds. This same $13.64 trillion dollar number represents approximately 25% of all sovereign or corporate bond debt worldwide.

On July 31, 2019, the Federal Reserve announced that they cut short-term rates 0.25% (a quarter point). Their new target range for its overnight lending rate is now somewhere within the 2% to 2.25% rate range. This is 25 basis points lower than their last Fed meeting decision reached on June 19th. This was the first rate cut since the start of the financial recession (or depression) in almost 11 years ago dating back to December 2008.

There are three additional Federal Reserve two-day meeting dates scheduled for 2019 that include:

  • September 17-18
  • October 29-30
  • December 10-11

It’s fairly likely that the Fed will cut rates one or more times at these remaining 2019 meeting dates. If so, short and long-term borrowing costs may move downward and become more affordable for consumers and homeowners. If this happens, then it may be a boost to the housing and financial markets for so long as the economy stabilizes in other sectors as well such as international trade, consumer spending and the retail sector, government deficit spending levels, and other economic factors or trends.

We shall see what happens between now and year-end in 2019 and beyond.


Rick Tobin

Rick Tobin has a diversified background in both the real estate and securities fields for the past 30+ years. He has held seven (7) different real estate and securities brokerage licenses to date, and is a graduate of the University of Southern California. Rick has an extensive background in the financing of residential and commercial properties around the U.S with debt, equity, and mezzanine money. His funding sources have included banks, life insurance companies, REITs (Real Estate Investment Trusts), equity funds, and foreign money sources. You can visit Rick Tobin at for more details.