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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: ild who wrote (25029)	1/20/2005 12:29:38 PM
From: Ramsey Su	Read Replies (1) of 110194

ild, the appraiser article is grossly exaggerated. There has always been pressure to manipulate appraisals but it is usually pretty petty stuff, 5% here and there max. It is the big projects, with acct firms doing "due diligence" who are the real crooks. oldtimers may remember the term daisy chain, when land is just flipped and financed and flipped and financed whichever way the client desires. RDN's report (as well as other MI company's) is very transparent. What we cannot see are the CURRENT FICO scores of the borrowers. These borrowers got themselves a 80+% LTV mortgage at the time this FICO score is recorded. Now they might have gone out and bought a car, some furniture, charged some improvements at Home Depot, or got one of those Helocs and their score may be much lower. You should also look at the loss severity. Say someone put 10% down on a house and MI covered to 80% LTV. If this borrower default and the house managed to sell, net of all costs at 85%, then the MI only lost 5%. Right now, that is around $28,000, not much changed from last year. If this real estate market slows down, look for this number to skyrocket.

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