many mortgage defaulters had insurance !

[ophiuchus]

if i'm not mistaken 20% down payment or less requires mandatory mortgage insurance. that would mean that many of the toxic default loans had to be covered. i hear no discourse concerning this. if it's true ,it's a whole other can of worms.

[Zarathustra]

Originally Posted by ophiuchus

if i'm not mistaken 20% down payment or less requires mandatory mortgage insurance. that would mean that many of the toxic default loans had to be covered. i hear no discourse concerning this. if it's true ,it's a whole other can of worms.

Many of the "creative" loan structures that you're referring to waived PMI. All the mortgage broker had to to was inflate the appraisal of the home to the point where the amount borrowed was under an already relaxed level requiring PMI.

[Rocky_Shorz]

Originally Posted by ophiuchus

if i'm not mistaken 20% down payment or less requires mandatory mortgage insurance. that would mean that many of the toxic default loans had to be covered.

Well, what I have seen firsthand, is the mortgage Insurance company will cover a certain amount of the loss, but the banks need to either hold the asset until the prices rise again, or accept it and take the rest of the loss to free up their money...

They are choosing the latter...

Is this going to change if they don't need to back bad loans? Who knows...