The Coming PMI Mortgage Debacle II
A Naybob of realty note, not reality, emails me:
Aren’t these “PMI woes” going to have a more direct affect on some insurance companies?
Sure thing... Berkshire Hathaway Q4 profit fell 18% on declining insurance rates. Warren Buffet:
"The party is over. It is a certainty that insurance industry profit margins, including ours, will fall significantly in 2008."
And thats just because insurance rates are down, when you pile in the writedowns on bad debt...
see AIG, record $11 billion writedown; over $5 billion Q4 loss; biggest for S&P company in years and in their 89 year history...
And Friday RADIAN, S&P lowered its counterparty credit and financial strength ratings on Radian Insurance Inc. ("RIINC") to 'A-' from 'AA-
With this laughable disclaimer statement:
"S&P's action does not affect the ratings of Radian Group or Radian Guaranty, Radian's principal mortgage insurance subsidiary.
We believe that RIINC has adequate claims paying resources to cover its losses and pay all policyholders even without the support of Radian Guaranty or Radian Group."
Just look at a chart of RDN to see the carnage, wonder how the stock holders feel?...
The Nattering One muses...to paraphrase others...and throw in my two cents...
You see my dear, what very few realize is that at this point, the junk,
collateralized debt obligation (CDO), asset backed security (ABS or ABCP), private label MBS, municipal bond (muni),
and even investment grade debt markets are all somewhere between impaired, dislocated and completely dysfunctional.
Translated for the layman... corporate and municipal finance are joining the mortgage bust. Can't say we didn't tell ya so...
The greater the credit market dislocation and broad based tightness of credit, the greater the bust becomes.
As we've commented before, its the multiplier effect working in reverse. It feeds on itself and creates a death sprial or liquidity trap (vortex).
The days of free flowing cheap debt for home buyers, state and local governments, leveraged buy out firms,
commercial real estate speculators, college students, risky auto buyers, and high risk credit card holders are over.
This thing is out of control... the term auction bond debacle just cost the Orlando airport $12 million in additional interest rate charges,
next week Kalifornia auctions $1.8 billion in bonds for infrastructure, good luck Arrghhnold!!!!
Just watch the weekly initial jobless claims, the monthly non farms payrolls, housing permits, new and existing home sales.
The worse they get, and they will, as the service sector rolls over, the lower prices will plunge...
because like I told you, this is the first leg down, the engine has stalled, the car is stopped, but the wheels haven't even come off it yet...
theres at least 2 more legs down on this tragical trainwreck of travesties, one involves ratings and the guarantors.
Another involves the mortgage guarantors solvency... front end points paid to FHA on the new jumbo loans will NOT cover the losses that FHA will suffer.
Many of the PMI insured jumbo loans FHLMC and FNMA will refi have already been in deliquency, but were never sent default notices...
Yeah, one of my old axioms comes to mind, "if you think nobody cares whether your dead or alive, just miss a car payment."
Unforgotten... In today's mortgage market, people missed six or more house payments, as the lenders just "forgot" to notify anyone including the borrowers. Why?
If the defaulted loans had been included in the statistics, the pressure on PMI providers and the gravity of the foreclosure situation might have caused panic.
In addition, the defaulted loans would not have been eligible under the six month pause (forbearance) and the GSE's higher loan limit refi programs...
Now these deadbeats can be swept under the rug by the banks and onto the GSE's ledgers as liar loans which will default within 24 months,
No safety net... As soon as you hear BK for any of the mentioned PMI providers, or mortgage guarantors, especially #1 MGIC,
the safety net for prices and mothballing in high ticket real estate areas is gone.... send a condolence card to anyone holding RE.
Because on this leg down, all the equity gains since 2002 and perhaps as far back as 1998 will get wiped out in short order...
just like a woman I heard about: 18 months ago she turned down a $359K offer on an stock 3+2 1500sf 2 car, pool, standard SFR in a nice hood...
now on the market for 10 months reduced all the way to $129K no traffic, no takers.
And that was a long term hold, which she should have sold at the peak, instead of holding on for greed and getting shorted.
Speaking of shorts, short FNMA & FHLMC, because like RE, there is no bottom in sight for these stocks...
as the GSE's are about to become the largest failures and bailouts in history.
And when the PMI co's go BK, and the safety net on jumbo market housing prices gets cut...
further shorting on the WWW lenders WaMu, Wachovia, Wells & Citibank will be in order, as they will be next to fall off the high wire in short order.
No pun intended. And if I sound like Cramer on CNBC talking about RE, oh well, at least that cheerleader and I agree on one thing.
Imagine the NAR tried to get Cramer fired for telling people the truth, now is not the time to buy because we are about to enter a deflationary spiral.
Aren’t these “PMI woes” going to have a more direct affect on some insurance companies?
Sure thing... Berkshire Hathaway Q4 profit fell 18% on declining insurance rates. Warren Buffet:
"The party is over. It is a certainty that insurance industry profit margins, including ours, will fall significantly in 2008."
And thats just because insurance rates are down, when you pile in the writedowns on bad debt...
see AIG, record $11 billion writedown; over $5 billion Q4 loss; biggest for S&P company in years and in their 89 year history...
And Friday RADIAN, S&P lowered its counterparty credit and financial strength ratings on Radian Insurance Inc. ("RIINC") to 'A-' from 'AA-
With this laughable disclaimer statement:
"S&P's action does not affect the ratings of Radian Group or Radian Guaranty, Radian's principal mortgage insurance subsidiary.
We believe that RIINC has adequate claims paying resources to cover its losses and pay all policyholders even without the support of Radian Guaranty or Radian Group."
Just look at a chart of RDN to see the carnage, wonder how the stock holders feel?...
The Nattering One muses...to paraphrase others...and throw in my two cents...
You see my dear, what very few realize is that at this point, the junk,
collateralized debt obligation (CDO), asset backed security (ABS or ABCP), private label MBS, municipal bond (muni),
and even investment grade debt markets are all somewhere between impaired, dislocated and completely dysfunctional.
Translated for the layman... corporate and municipal finance are joining the mortgage bust. Can't say we didn't tell ya so...
The greater the credit market dislocation and broad based tightness of credit, the greater the bust becomes.
As we've commented before, its the multiplier effect working in reverse. It feeds on itself and creates a death sprial or liquidity trap (vortex).
The days of free flowing cheap debt for home buyers, state and local governments, leveraged buy out firms,
commercial real estate speculators, college students, risky auto buyers, and high risk credit card holders are over.
This thing is out of control... the term auction bond debacle just cost the Orlando airport $12 million in additional interest rate charges,
next week Kalifornia auctions $1.8 billion in bonds for infrastructure, good luck Arrghhnold!!!!
Just watch the weekly initial jobless claims, the monthly non farms payrolls, housing permits, new and existing home sales.
The worse they get, and they will, as the service sector rolls over, the lower prices will plunge...
because like I told you, this is the first leg down, the engine has stalled, the car is stopped, but the wheels haven't even come off it yet...
theres at least 2 more legs down on this tragical trainwreck of travesties, one involves ratings and the guarantors.
Another involves the mortgage guarantors solvency... front end points paid to FHA on the new jumbo loans will NOT cover the losses that FHA will suffer.
Many of the PMI insured jumbo loans FHLMC and FNMA will refi have already been in deliquency, but were never sent default notices...
Yeah, one of my old axioms comes to mind, "if you think nobody cares whether your dead or alive, just miss a car payment."
Unforgotten... In today's mortgage market, people missed six or more house payments, as the lenders just "forgot" to notify anyone including the borrowers. Why?
If the defaulted loans had been included in the statistics, the pressure on PMI providers and the gravity of the foreclosure situation might have caused panic.
In addition, the defaulted loans would not have been eligible under the six month pause (forbearance) and the GSE's higher loan limit refi programs...
Now these deadbeats can be swept under the rug by the banks and onto the GSE's ledgers as liar loans which will default within 24 months,
No safety net... As soon as you hear BK for any of the mentioned PMI providers, or mortgage guarantors, especially #1 MGIC,
the safety net for prices and mothballing in high ticket real estate areas is gone.... send a condolence card to anyone holding RE.
Because on this leg down, all the equity gains since 2002 and perhaps as far back as 1998 will get wiped out in short order...
just like a woman I heard about: 18 months ago she turned down a $359K offer on an stock 3+2 1500sf 2 car, pool, standard SFR in a nice hood...
now on the market for 10 months reduced all the way to $129K no traffic, no takers.
And that was a long term hold, which she should have sold at the peak, instead of holding on for greed and getting shorted.
Speaking of shorts, short FNMA & FHLMC, because like RE, there is no bottom in sight for these stocks...
as the GSE's are about to become the largest failures and bailouts in history.
And when the PMI co's go BK, and the safety net on jumbo market housing prices gets cut...
further shorting on the WWW lenders WaMu, Wachovia, Wells & Citibank will be in order, as they will be next to fall off the high wire in short order.
No pun intended. And if I sound like Cramer on CNBC talking about RE, oh well, at least that cheerleader and I agree on one thing.
Imagine the NAR tried to get Cramer fired for telling people the truth, now is not the time to buy because we are about to enter a deflationary spiral.
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