Insurance companies not paying on bad mortgage insurance

What a business model. Sign contracts to deliver a service and then balk when asked to follow through. Sure the rescission rates are at record highs but that sounds like a personal problem for the insurers who signed the deals with the banks. These two industries deserve each other. Well, as long as everyone else isn’t funding their fiasco, that is.

Mortgage insurers are rescinding (denying) claims, claiming themselves that the loans were fraudulent and misrepresented to them.

“The broker dealers, Bear Stearns, Countrywide even ResCap that was part of GM at the time, they used underwriting standards that were a little bit looser than what we see with the normal conforming market,” says Chris Whalen of Institutional Risk Analytics. “In those cases, the default rates are in double digits and there’s a lot more claims for what we call rescission or really putting back the loan to the originator by the insurer and saying, ‘Hey, this loan wasn’t kosher, and I shouldn’t have insured it in the first place.'”

An American in Paris, France. BA in History & Political Science from Ohio State. Provided consulting services to US software startups, launching new business overseas that have both IPO’d and sold to well-known global software companies. Currently launching a new cloud-based startup. Full bio here.

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