FLASH* Mortage Insurance BOOM!

peaceandlove · 07-16-2009, 11:32 PM

*FLASH* Mortage Insurance BOOM!

Thursday, July 16. 2009
Posted by Karl Denninger

This is REALLY BIG folks: UPDATE 4-MGIC's restructuring plan sends shares soaring http://www.reuters.com/article/marke...0090716?rpc=44

NEW YORK, July 16 (Reuters) - Mortgage insurer MGIC Investment Corp reported a wider quarterly loss and said it will stop writing new business as losses mount in the battered housing sector, sending its shares down 14 percent in premarket trade.

You basically cannot finance a home purchase with more than 80% LTV (loan to value) without private mortgage insurance - that is, insurance that covers the lender if you default and they take a loss.

MGIC (NYSE: MTG) is the largest issuer in this area. They said they will be "trying" to capitalize a new company to write this business, but their continuing losses - which, by the way, they said they thought they had under control last year after repeated flirtations with going under outright - has apparently forced this decision.

There is absolutely no way to read this as anything but an outright disaster for the housing industry.

We need to force lending back to 80% maximum LTV (20% down payments in CASH) and 36% DTI (debt-to-income) ratios maximum, but the housing industry has continued to rely on and demand access to money on looser (that is, more leveraged) terms.

The problem is that there's no way to do that and turn a profit, as MGIC continues to show. Between them and PMI, the other "big" player in this space (due to report in August) they provide the backing for these high-LTV loans - backing that is now disappearing.

Let me be clear: this sort of lending needs to go away, but essentially the entire thesis behind those who claim that we're "bottoming" in the recession and the housing market depends on the availability of private mortgage insurance so these loans can be funded, securitized and financed, including but not limited to funding by Fannie and Freddie.

Put a fork in the calls for a bottom to housing folks - we're going back to sustainable lending whether the Realtors Guild and Housing Crooners like it or not.

With the death of the "housing has bottomed" call will come an end to those who claim that the economy has turned. It may take an hour, a day, a week or a few months before these folks realize they were wrong, but there's no way around the conclusion given this set of facts.

SOURCE: http://market-ticker.denninger.net/a...nce-BOOM!.html

peaceandlove · 07-17-2009, 12:01 AM

SOURCE: G. Edward Griffin's site: http://realityzone.stores.yahoo.net/currentperiod.html

US: Government-insured mortgage loans skyrocket as taxpayers are forced to guarantee marginal home loans. This is what created the melt-down in the first place, so expect more of the same in the future.
SF Business 2009 July 9 (Cached)

Thursday, July 9, 2009
Government-insured mortgages skyrocket
South Florida Business Journal

The number of mortgage loans insured by the U.S. government jumped to their highest share of total loan applications in nearly 20 years, according to a report by the Mortgage Bankers Association.

FHA and VA loan applications rose to 35.9 percent in June, up from 25.7 percent a month earlier and 27 percent a year earlier.

Since the MBA survey's inception in January 1990, the lowest recorded share was 5.8 percent in August 2005.

The government-insured share of applications to purchase homes last month was 38.6 percent, up from 27.8 percent one year ago. Those applications have averaged 36.6 percent to date, compared to an average of 21.8 percent during the same period last year. The low point was in August 2005 when it was 6.8 percent, the MBA reported.

"A primary reason government-insured loans have retained a high share of the purchase market is that these loans typically require lower down payments than conventional loans," Orawin Velz, MBA's associate VP of economic forecasting, said in a news release. "In addition, lending standards tend to be tighter for conventional loans, especially for loans that require private mortgage insurance."

Article: http://www.bizjournals.com/southflor...ml?jst=b_ln_hl

07-16-2009, 11:32 PM	#1
peaceandlove Avalon Senior Member Join Date: Sep 2008 Location: Turtle Island Posts: 2,776	*FLASH Mortage Insurance BOOM!** FLASH Mortage Insurance BOOM! Thursday, July 16. 2009 Posted by Karl Denninger This is REALLY BIG folks: UPDATE 4-MGIC's restructuring plan sends shares soaring http://www.reuters.com/article/marke...0090716?rpc=44 NEW YORK, July 16 (Reuters) - Mortgage insurer MGIC Investment Corp reported a wider quarterly loss and said it will stop writing new business as losses mount in the battered housing sector, sending its shares down 14 percent in premarket trade. You basically cannot finance a home purchase with more than 80% LTV (loan to value) without private mortgage insurance - that is, insurance that covers the lender if you default and they take a loss. MGIC (NYSE: MTG) is the largest issuer in this area. They said they will be "trying" to capitalize a new company to write this business, but their continuing losses - which, by the way, they said they thought they had under control last year after repeated flirtations with going under outright - has apparently forced this decision. There is absolutely no way to read this as anything but an outright disaster for the housing industry. We need to force lending back to 80% maximum LTV (20% down payments in CASH) and 36% DTI (debt-to-income) ratios maximum, but the housing industry has continued to rely on and demand access to money on looser (that is, more leveraged) terms. The problem is that there's no way to do that and turn a profit, as MGIC continues to show. Between them and PMI, the other "big" player in this space (due to report in August) they provide the backing for these high-LTV loans - backing that is now disappearing. Let me be clear: this sort of lending needs to go away, but essentially the entire thesis behind those who claim that we're "bottoming" in the recession and the housing market depends on the availability of private mortgage insurance so these loans can be funded, securitized and financed, including but not limited to funding by Fannie and Freddie. Put a fork in the calls for a bottom to housing folks - we're going back to sustainable lending whether the Realtors Guild and Housing Crooners like it or not. With the death of the "housing has bottomed" call will come an end to those who claim that the economy has turned. It may take an hour, a day, a week or a few months before these folks realize they were wrong, but there's no way around the conclusion given this set of facts. SOURCE: http://market-ticker.denninger.net/a...nce-BOOM!.html

07-17-2009, 12:01 AM	#2
peaceandlove Avalon Senior Member Join Date: Sep 2008 Location: Turtle Island Posts: 2,776	*Re: FLASH Mortage Insurance BOOM! SOURCE: G. Edward Griffin's site:** http://realityzone.stores.yahoo.net/currentperiod.html US: Government-insured mortgage loans skyrocket as taxpayers are forced to guarantee marginal home loans. This is what created the melt-down in the first place, so expect more of the same in the future. SF Business 2009 July 9 (Cached) Thursday, July 9, 2009 Government-insured mortgages skyrocket South Florida Business Journal The number of mortgage loans insured by the U.S. government jumped to their highest share of total loan applications in nearly 20 years, according to a report by the Mortgage Bankers Association. FHA and VA loan applications rose to 35.9 percent in June, up from 25.7 percent a month earlier and 27 percent a year earlier. Since the MBA survey's inception in January 1990, the lowest recorded share was 5.8 percent in August 2005. The government-insured share of applications to purchase homes last month was 38.6 percent, up from 27.8 percent one year ago. Those applications have averaged 36.6 percent to date, compared to an average of 21.8 percent during the same period last year. The low point was in August 2005 when it was 6.8 percent, the MBA reported. "A primary reason government-insured loans have retained a high share of the purchase market is that these loans typically require lower down payments than conventional loans," Orawin Velz, MBA's associate VP of economic forecasting, said in a news release. "In addition, lending standards tend to be tighter for conventional loans, especially for loans that require private mortgage insurance." Article: http://www.bizjournals.com/southflor...ml?jst=b_ln_hl