Mortgage Insurers May Reject As Much As $4 Billion in Claims

What a state of affairs

The recent Moody’s ResiLandscape issue points to the subprime crash “climbing” its way up the housing ladder by reviewing the credit performance of option ARM loans (which they say is crumbling faster than the subprime). The issue also chronicles the Obama’s Home Affordability Modification Program (HAMP) and how mortgage insurers are pushing back on claims.

The mortgage insurers’ shift caught my attention- the report said that U.S. mortgage insurers are likely to reject as much as $4 billion in claims by lenders over the coming years! That is an insane amount of money but the finger points back to the subprimes climbing up the housing ladder as mortgage insurers get more aggressive in putting responsibility for bad loans back on originators and away from themselves.

With imminently giant losses, insurers are “increasingly confident” they can hold banks accountable for the loans, James Eck and other Moody’s analysts said in the report. So as claims are rejected while the proverbial poo rolls downhill, a new chain of events are sure to occur as tensions rise. This should be an interesting ride indeed.