This is a YouTube video titled "How does Silicon Valley Bank impact Mortgage Rates? #homeloans #homebuyer #svb #bank" containing a monologue or single-speaker explanation from March 14, 2023, discussing the financial troubles of Silicon Valley Bank, its impact on mortgage-backed securities, and the resulting effects on mortgage rates and the economy.
Silicon Valley bank, which is in the heart of Silicon Valley or the tech capital of the world, works with a lot of tech startup companies. In order for them to finance that, they bought a bunch of mortgage backed securities, which are mortgages after they close. But if they bought a bunch of mortgages at 4 and 5% rate of return the last couple years and now mortgages are supposed to be at 6 and 7%, they're underwater on those. But the good thing is you normally buy mortgages to hold them for a long time and over time that all balances out. The problem is we've all seen crypto values have gone down. So those tech startup companies, they need more capital. They were coming in to try to withdraw more money from the bank. Only option SDB had was to sell those mortgage backed securities, liquidate them, but they were underwater. So they sold them, lost 1.8 billion, and then they weren't able to fund the depositors. That's where the big issue came in. FDIC came in, seized it all. But the one good thing for mortgage rates is this is a bad thing for the economy, which means it's good for mortgage rates. Mortgage rates had a fantastic day. Tomorrow's CPI report comes in low, we could be off to the races.
