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SaintJay

Us Housing - Banks, Insurers Feeling The Heat

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These two articles are from an insurance trade publication - Insurance Day.

It seems the housing problems in the US in respect of insurance and investments is turning nasty. However, this is likely to be a slow, drawn out nasty where only the lawyers benefit.

Mortgage Insurer has big losses

US mortgage insurer PMI Group... saw its 2010 net loss rise to $773.0m from $659.3m, as earned premiums fell 17.6% to $590m and were overwhelmed by $1.27bn in claims costs even though those costs were down 28%. Results at the California-based group also reflected a 34% decline in investment income to $78.2m and a $113.5m decline in the value of debt instruments against a year-earlier increase of $16.5m.

Insurer sues Bank over bad investments

ALLSTATE SUES JP MORGAN CHASE OVER MORTGAGE SECURITIES

Illinois-based p/c group Allstate has filed a lawsuit against JP Morgan Chase & Co in a New York state court on allegations that the bank committed fraud and negligent misrepresentation in the sale of $700m in mortgage-backed securities by supplying misleading information about the quality of the underlying loans. In the suit, Allstate says that it purchased pass-through certificates into the securities following JPMorgan's "material misrepresentations and omissions" about the securities' riskiness. Allstate said that the securities were backed by "a toxic mix of loans given to borrowers that could not afford the properties". The insurer said that recent reviews of loan files "reveal a pervasive lack of proper documentation, facially absurd (yet unchecked) claims about the borrower's purported income, and the routine disregard of purported underwriting guidelines". Allstate's accusations were echoed Wednesday by executives from MBIA and Assured Guaranty, two companies that insured mortgage-backed securities. Appearing before the New York State Assembly Committee on Insurance, MBIA chief executive Jay Brown and Assured Guaranty general counsel James Michener said that banks and other mortgage originators and aggregators committed insurance fraud by intentionally hiding details about loan quality. Mr Brown said that MBIA had paid $2.5bn in claims on mortgage-backed securities deals sponsored by Bank of America's Countrywide Financial unit, $1.3bn in claims on deals sponsored by Ally Bank, and $333m in deals backed by Credit Suisse. Assured Guaranty president and chief executive Dominic Frederico said that his company paid $2.8bn in claims on residential mortgage-backed securities through to the end of Q3, but had received only $390m in commitments from banks to repurchase bad loans. Banks were invited to send representatives to testify at the hearing, but none appeared.

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Allstate said that the securities were backed by "a toxic mix of loans given to borrowers that could not afford the properties". The insurer said that recent reviews of loan files "reveal a pervasive lack of proper documentation, facially absurd (yet unchecked) claims about the borrower's purported income, and the routine disregard of purported underwriting guidelines".

And it's taken them this long to work it out? What do these people get paid to do exactly. Didn't they kick a few tyres or lift a hood or two before agreeing to insure this stuff?

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  • 285 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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