August 11, 2007

Before the REIC spun out of control, you used to have to have private mortgage insurance if you didn't put 20% down. And now? Anarchy and collapse.

Another great "innovation" these past few years is the 80/10/10 piggyback, where you could borrow 100% of your home purchase, and avoid PMI.

What great thinking! Who needs stinking insurance! A relic of the past!

Tell that to the hedge funds, pension funds, foreign countries and everyone else that will get killed during the mortgage meltdown. With PMI in place, investors would have been protected against default.

No more.

World - you're on your own. We figured out a way to game the system and make you the bag holders. Countrywide, IndyMac, American Home Mortgage and the rest of the mortgage conmen on commission found a way to enrich themselves short term, and leave you holding the bag.

You ain't gettin' paid back. Now deal with it.


heehaw said...



Anonymous said...

They enriched themselves short term but put themselves out of business in the long run

Anonymous said...

The whole world now knows how irresponsible and fraudulant the US financial world is - from the Fed and Congress/Senate, and Wall Street and the bankers, down to the mom and pop lenders.

They know now that they should never ever believe a word we say when we get up on our high horse and talk about corruption of other governments/country's, as though everyone else is messed up but we are somehow "pure" and trustworthy.

We are crooks when it comes to money and now the whole world knows it.

We're liars like everyone else. The only difference is you trusted us more than them so we got to take more of your money.

Anyone would have to be nuts to invest in the US after this.

Anonymous said...

hang those f$%&$%s from the highest trees!

Anonymous said...

Very creative. Where do you GET those pics?

zoiks said...

Wow, Kieth, that is actually a good point. The transition has to some degree been cost-neutral from the borrower's point of view, especially now that PMI is deductible, but the cost of insurance has been now laid on the MBS investors, especially those buying the seconds, in the form of self-insurance. Problem is, an individual investor isn't always in the right position to self-insure against heavy losses.

Anonymous said...

Who wants to have "Skin in the game"?

Hey if David Beckhem can make a 1/4 Billion and not even play then I can get a 1/4 Million house without any effort too.

SPECTRE of Deflation said...

"World - you're on your own. We figured out a way to game the system and make you the bag holders. Countrywide, IndyMac, American Home Mortgage and the rest of the mortgage conmen on commission found a way to enrich themselves short term, and leave you holding the bag."

"You ain't gettin' paid back. Now deal with it."

I agree completely, and for those who think otherwise, look at the amounts injected into the EU markets as compared to the US.

It was the EU and Asia that bought all the shit we call AAA on down to the toxic waste level. It's not that Wall Street doesn't have some of the steaming pile of shit also, but we off loaded most of the fertilizer to the rest of the world.

We are all in this together. Who knows Kumbiya? All together now...

SPECTRE of Deflation said...

From The Big Picture Blog. FUGLY:

Federal Reserve
Thursday: $24 billion
Friday: $38 billion (tranches of $19 billion, $16 billion and $3 billion)

European Central Bank
Thursday: €94.84 billion ($130 billion)
Friday: €61.05 billion ($83.56 billion)

The Bank of Canada
Friday: 1.64 billion Canadian dollars ($1.55 billion).

Bank of Japan
Friday: one trillion yen ($8.39 billion)

Swiss National Bank
Friday: two to three billion Swiss francs ($1.68-$2.51 billion) [estimate]

The Reserve Bank of Australia
Friday: 4.95 billion Australian dollars (US$4.18 billion)

The Monetary Authority of Singapore
Friday: 1.5 billion Singapore dollars (US$986.1 million)

The authorities in Malaysia, the Philippines and Indonesia intervened in foreign-exchange markets to support their currencies against the U.S. dollar.

Anonymous said...

What makes you think these imploding mortgage brokers and hedge funds would have invested PMI money any more wisely than they invested everything else?

PMI sucks. You pay the lender for insurance that you won't default. Only in the f*cked up mortgage business is this scam allowed.

Lost Cause said...

PMI is just making the consumer pay to insure the losses of the bank. The banks should be paying their own insurance. Which they were doing by spreading the risk. Which didn't work quite the way they planned it.

Anonymous said...

your rate goes up on the seconds, so might not pay pmi but your rate is higher.

stuckinthecity said...

Can some one explain in detail why the 80/20 is so bad? Cramer made a shot at it says those people are screwed, but why exactly?

Guy Daley said...

Wait, wait, wait, wait. I'll admit I don't buy mortgages like I do groceries. When the hell did this happen? PMI is like paying Federal Income tax. You pay the damn thing until 20% of your mortgage is paid for then you have to petition the mortgage company to get rid of the shit. When did this change? and WHY?

I hope someone in the mortgage industry gets in here and tells me when you do and don't pay PMI. AND WHEN DID THE RULES CHANGE, WHY DID THEY CHANGE? Why didn't this ever hit the newspaper?

corvinus said...

Carrying a tiger piggyback is considerably safer.

Paul E. Math said...

I had thought that a higher rate of interest was charged on the 10/10 portions of those mortgages to compensate the lender for the higher risk of lending at a higher loan to value ratio.

The weird part that never really made sense is that the higher risk really applies to the entire 100%. If someone defaults they default on the whole damn thing.

Sure the 80% is safer than the 10/10 because of priority of claim on the asset securing the mortgage. But it seems to me it's not as safe as if someone had put 20% down themself.

The bottom line is that investors were paying for these things as though they were completely safe and sound. Seems like some of them are now getting a case of old-fashioned nostalgia for fiscally prudent practices.

Anonymous said...

PMI is a freaking scam.
When shopping for mortgage, I specifically told my lender that I WILL NOT pay PMI, so that they wouldn't even bother offering it.
Why would anyone pay some stupid "insurance" when they can accelerate their mortgage payments is beyond me.
I put 10 down and got 80/10. Paid the HELOC within 2 years and now only have whatever remains of 80. I would not be able to do any of it if I had to pay PMI of $250/mo...