Could resurgence of risky mortgages cause another financial crisis?

By FinancialsFOXBusiness

Are risky mortgages back?

The mortgage market may be opening up to riskier borrowers as GranitShares CEO Will Rhind, former Bush 43 chief speechwriter Bill McGurn, and Fox News contributor Jessica Tarlov discuss.

Financial experts are concerned that U.S. lenders are starting to sell increasingly risky mortgages.

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The Wall Street Journal reported the mortgage market is starting to reopen to more borrowers with weak credit.

Considering that just a decade ago home loans caused the worst financial crisis since the Great Depression, this news has many experts worried.

"This is something I've been worried about for a long time," GraniteShares CEO Will Rhind told FOX Business' "Cavuto: Coast To Coast." "You have a situation where yields have come so low, everybody's trying to stretch for some kind of yield which has pushed a huge amount of money in the private credit markets, which is sort of less visible than the public markets."

This is something I've been worried about for a long time.

GraniteShares CEO Will Rhind

Rhind said all of that contributes to banks looking for more ways to make money, which concerns him that another financial crisis could be on the horizon.

"We absolutely could have a repeat," Rhind said. "The only difference is ... the banks are more capitalized now than they were 10 years ago."

We absolutely could have a repeat.

GraniteShares CEO Will Rhind

However, the low-interest rates are creating a moral hazard, Rhind said.

"I don't have a problem with people buying houses, taking out mortgages, but we do have a system that artificially encourages that," former President George W. Bush chief speechwriter Bill McGurn told FOX Business.

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McGurn said America has mitigated that slightly with tax reforms by limiting the deductibility, but he's starting to wonder if people, especially in the lower end of the income scale, should be taking out a mortgage.

"I have a big issue with this homeownership thing as well because the law of unintended consequences, there's a lot of money that gets trapped up in the housing market when it could be used for other, more productive purposes," Rhind said. "It stifles entrepreneurship and other sorts of business activities."

There's a lot of money that gets trapped up in the housing market when it could be used for other, more productive purposes.

GraniteShares CEO Will Rhind

However, Fox News contributor Jessica Tarlov said what is complicated about the idea of homeownership is that it's tied directly to the American dream and is proof of a person's success. She believes the biggest argument against homeownership is the idea that you can pick up and move at any point if a good job comes available in another area, giving a person the flexibility to pivot easily.

"But flexibility is the antithesis of stability, and people crave stability in their lives," Tarlov said.

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Tarlov said there is nothing more stable than being able to point to your home and saying you own it.

What do you think?

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