The Coming PMI Mortgage Debacle
Oh, the PMI debacle we previously mentioned, whats that? That's your next BIG headline and "surprise".
According to MICA, Mortgage Insurance Companies of America web site,
in January 08 PMI defaults 68,950 vs Mar 07 42,362 for an increase of 62% in the last nine months.
There is $832,746.7 Million of PMI in force.
and that $833 Billion is what is artificially supporting real estate prices in the low down; jumbo(loans over 417K), ARM and high risk loan markets.
We've been wondering how large lenders like Wachovia, Wells, WaMu & Countrywide could afford to mothball or sit on
their ever growing piles of REO property in the jumbo markets.
What could cause someone to be so idiotically stubborn about price in a market that is falling.
With no bottom in sight, why would you not cut your losses as soon as possible? Why would you hang in and hold on?
Its easy, most of the loans taken were less than 20% down, requiring the borrower to pay PMI premiums.
When the defaults hit, the insurers pay off the debt, allowing the banks to ask for ridiculous prices on plunging properties.
As the banks loan has already been paid off by the insurer, what can be salvaged is pure bank profit
on top of the huge tax benefits from the non performing debt write downs.
Some frustrated sideline buyers are actually being stupid enough to pay the asking prices,
thinking that 10 or 20% off peak is a bargain, when the reality is much like in smaller bank and loan limit markets, 50 to 80% should be the going rate.
The stubborness on pricing and mothballing will only last until the number of defaults reaches critical mass.
Thats when more borrowers on higher balance loans stop paying premiums, lender claims mount, and...
the insurer's run out of money and can't honor the lenders claims, the jumbo market bough breaks and shock & awe reality pricing starts for the big banks.
Witness since loan originations have gone the way of the dodo, the PMI guarantors income stream from new bulk policies has all but dried up;
New bulk policies issued March 07 48K for $11 Billion; Jan 08 2K for $496 Million.
The Nattering One expects this occurance within the next 24 months,
which would coincide with an inventory workoff and real estate market bottom five years off peak or sometime in 2010 or 2011.
Even if the Fed cuts to 1% and the banks are willing to indiscriminately lend at 4% again....
theres not enough decent paying jobs (WalMart & McDonalds?) and home owner equity left to re-jump start the system.
The price slides and inventory workoff could last much, much longer. Only meaningful wage based inflation can generate the growth needed.
You think the emasculated economy is going to recover and corporate America is going to have a bunch of great paying jobs for people?
Stop the denial, grow up and get real. This has been the only incidence of a real estate boom that WAS NOT wage based driven.
This whole ponzi scheme was funded by cheap easy money with no consideration for risk premiums. Newflash, the lenders and the ATM refi spigot are now closed.
This could wind up like a slow death by paper cuts. Remember, Japan's post bubble deflationary cycle took 18 years and their still not out of the woods.
Here's your short list... Companies reporting to MICA include AIG United Guaranty, Genworth Mortgage Insurance Corporation, Mortgage Guaranty Insurance Corporation,
PMI Mortgage Insurance Co., Republic Mortgage Insurance Company and Triad Guaranty Insurance Corporation.
Look at the charts for AIG; Repulic (ORI) & Genworth (GNW) which have suffered,
then look at a stock chart on MGIC (MTG); PMI; and Triad (TGIC) which got caved...
given the reduction in fair market value, dwindling reserves & income streams, and the fact no one will touch their debt or lend to them...
they can't even honor their stockholders claims much less afford many more claims from the lenders.
According to MICA, Mortgage Insurance Companies of America web site,
in January 08 PMI defaults 68,950 vs Mar 07 42,362 for an increase of 62% in the last nine months.
There is $832,746.7 Million of PMI in force.
and that $833 Billion is what is artificially supporting real estate prices in the low down; jumbo(loans over 417K), ARM and high risk loan markets.
We've been wondering how large lenders like Wachovia, Wells, WaMu & Countrywide could afford to mothball or sit on
their ever growing piles of REO property in the jumbo markets.
What could cause someone to be so idiotically stubborn about price in a market that is falling.
With no bottom in sight, why would you not cut your losses as soon as possible? Why would you hang in and hold on?
Its easy, most of the loans taken were less than 20% down, requiring the borrower to pay PMI premiums.
When the defaults hit, the insurers pay off the debt, allowing the banks to ask for ridiculous prices on plunging properties.
As the banks loan has already been paid off by the insurer, what can be salvaged is pure bank profit
on top of the huge tax benefits from the non performing debt write downs.
Some frustrated sideline buyers are actually being stupid enough to pay the asking prices,
thinking that 10 or 20% off peak is a bargain, when the reality is much like in smaller bank and loan limit markets, 50 to 80% should be the going rate.
The stubborness on pricing and mothballing will only last until the number of defaults reaches critical mass.
Thats when more borrowers on higher balance loans stop paying premiums, lender claims mount, and...
the insurer's run out of money and can't honor the lenders claims, the jumbo market bough breaks and shock & awe reality pricing starts for the big banks.
Witness since loan originations have gone the way of the dodo, the PMI guarantors income stream from new bulk policies has all but dried up;
New bulk policies issued March 07 48K for $11 Billion; Jan 08 2K for $496 Million.
The Nattering One expects this occurance within the next 24 months,
which would coincide with an inventory workoff and real estate market bottom five years off peak or sometime in 2010 or 2011.
Even if the Fed cuts to 1% and the banks are willing to indiscriminately lend at 4% again....
theres not enough decent paying jobs (WalMart & McDonalds?) and home owner equity left to re-jump start the system.
The price slides and inventory workoff could last much, much longer. Only meaningful wage based inflation can generate the growth needed.
You think the emasculated economy is going to recover and corporate America is going to have a bunch of great paying jobs for people?
Stop the denial, grow up and get real. This has been the only incidence of a real estate boom that WAS NOT wage based driven.
This whole ponzi scheme was funded by cheap easy money with no consideration for risk premiums. Newflash, the lenders and the ATM refi spigot are now closed.
This could wind up like a slow death by paper cuts. Remember, Japan's post bubble deflationary cycle took 18 years and their still not out of the woods.
Here's your short list... Companies reporting to MICA include AIG United Guaranty, Genworth Mortgage Insurance Corporation, Mortgage Guaranty Insurance Corporation,
PMI Mortgage Insurance Co., Republic Mortgage Insurance Company and Triad Guaranty Insurance Corporation.
Look at the charts for AIG; Repulic (ORI) & Genworth (GNW) which have suffered,
then look at a stock chart on MGIC (MTG); PMI; and Triad (TGIC) which got caved...
given the reduction in fair market value, dwindling reserves & income streams, and the fact no one will touch their debt or lend to them...
they can't even honor their stockholders claims much less afford many more claims from the lenders.
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