“Pre-crisis (likely 2006 or 2007), I recall that I received a private mortgage insurance report (on home prices) like the one below from IndyMac’s chief risk officer. My recollection was that it expressed concerns about housing prices in certain regions of the country. (I always felt the private MI companies would really have a strong handle on the direction of home prices, because they insure Fannie and Freddie mortgage amounts above 80% LTV, all the way up to or near 100% LTV, for various insurance fees.)…

…IndyMac’s Chief Risk Officer said to me, “What do you think we should do?” I said, “Well what are they doing? Are they pulling out of these markets and stopping writing insurance? She said, “no”. I said, “Are they reducing their insurance coverage limits to say a maximum of 90% LTV’s?” She said, “no”. I said, “Are they raising their insurance premiums to compensate for this risk they are saying is there?” She said, “no.”

I said, “These are the experts on high LTV mortgage risk and they will be hurt the most if housing prices decline and they aren’t doing anything to heed their own report?” She said, “no, it doesn’t seem like they are.” I then asked, “Are you aware of anyone else taking some action based on these concerns?”. She said, “no.”

I said, “Well, I don’t know. I don’t see how we can act unilaterally here, with no other evidence than this report, whose author took no action. Please alert me if you hear about any MI or anyone taking steps to address this concern.”

To my recollection, she never did.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Excerpt from a May 2015 Mortgage Industry Newsletter:

Speaking of state-level news, Arch MI has published its spring 2015 edition of the Housing and Mortgage Market Review. Highlights of the article include the latest results from the Arch MI Risk Index, ranking the overall risk of home price declines at 8%. The states with the highest risk of potential home price declines are North Dakota, Oklahoma and Texas largely in part to the high employment rates in the oil industry.  There is also a higher risk of falling home prices in Louisiana, Mississippi, New Mexico and Wyoming. North Dakota is also of concern due to the decline in oil prices which may negatively impact the rapid home price appreciation and population growth the state experienced from the boom in oil extraction the last few years. According to the December Case-Shiller index, home prices increased 4.7% YoY, whereas home prices increased 5.5% according to the FHFA December Purchase-Only Index. The fastest growth in home prices was evident in the West, Florida and Texas and mortgages past 90 days late or in foreclosure fell to 4.7% at the end of 2014. Mortgage originations for purchase loans were $150 billion in Q4 of 2014, which was 13% lower than the previous year and mortgage originations for refinances was $128 billion a 16% decline from a year earlier. Finally, the lowest levels of unemployment are in the farming and energy industries but unemployment levels remain high in the West, South and in Michigan.

Posted on May 12, 2015, in Postings. Bookmark the permalink. Leave a comment.

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