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Financial Difficulties for Private Mortgage Insurers
Posted on 2012 01 15 by hdnelson
An article in this week’s Barron’s highlights the problems in the private mortgage insurance industry. Typically private mortgage insurance was required for conventional loans when the borrower was making less than a 20% down payment. Borrowers make payment on their mortgage insurance premium as part of their house payment. During the credit crisis, private mortgage insurers such as MGIC, PMI, and Old Republic underwrote many thousands of sub prime and alt A loans. Upon default, the mortgage insurer has to pay losses up to about 25% of the value of the loan. With the huge number of subprime and alt-A mortgage defaults, these companies have seen staggering losses. Two insurers, PMI and Old Republic, have been ordered by state regulators to stop originating new insurance.They will just collect premiums and pay losses. Just another obstacle in reviving the US housing market. See more at http://online.barrons.com/article/SB50001424052748703535904577152831234907986.html
Rehypothecation
Posted on 2011 12 12 by hdnelson
This may provide some small insight into the complexities of global banking. In late October MF Global, one of a handful of broker/dealers for US Treasury securities, reported a shortfall in client funds, and subsequently went bankrupt. It’s CEO was Jon Corzine, was a former Governor of New Jersey, US Senator, and CEO of Goldman Sachs. Over $1billion in customer funds are still missing. This short article outlines how rehypothecation may have played a role. Hypothecation is where you pledge your asset (a house for instance) as collateral to get a loan. Hedge Funds and corporations do this too. Rehypothecation is where the bank pledges your asset as collateral to borrow money for its own use. http://www.calculatedriskblog.com/2011/12/mf-global-and-rehypothecation.html
FDIC Sues Former Executives of Westsound Bank
Posted on 2011 11 22 by hdnelson
The redemption of past errors in the banking industry apparently will continue to play out over a period of years. This lawsuit concerns the responsibilities of corporate officers for the 2006 failure of Westsound Bank of Bremerton. Based on the allegations, it’s surprising that this does not appear to be a criminal lawsuit. From the Seattle Times:
In its lawsuit, filed Friday in federal court in Seattle, the FDIC estimates Westsound’s failure will cost the deposit insurance fund $106.4 million. The lawsuit names Westsound’s former CEO, David K. Johnson; Brett Green, former executive vice president of sales and lending; and former board Chairman Louis Weir, as well as eight other former board members.
More at http://tinyurl.com/7fd83tl