Marc's Mortgage Matter's

People born before 1946 were called The Silent generation.

People born between 1946 and 1964 are called The Baby Boomers.

People born between 1965 and 1979 are called Generation X.

And people born between 1980 and 2010 are called Generation Y.
Why do we call the last group Generation Y?
Y should I get a job?
Y should I leave home and find my own place?
Y should I get a car when I can borrow yours?
Y should I clean my room?
Y should I wash and iron my own clothes?
Y should I buy any food?

Lowering interest rates toward 0% was meant to:

• re-inflate the risk appetites of income-centric investors, lenders, and borrowers
• restore market liquidity for risky assets, whether financial or real
• thereby ignite economic growth.

However, none of the above has arguably recovered to pre-crisis conditions. Instead, the private sector has fled for safety, while governments have crowded it out to do the following:

• issued unaffordable new debt, exhausting future latitude for expansionary fiscal policy
• left no more room to cut nominal interest rates, as accommodative monetary policy.

We are now truly cornered. We are now all Japanese.

Thank you.

"I had amnesia once--or maybe twice." One's mental health is nothing to joke about, and long days can make folks pretty sleepy. We don't listen as attentively in the third hour of an endless meeting as we did during the first. Apparently while we sleep we go through a 90-minute period for the five stages of sleep, and researchers have found something similar during waking hours: moving from higher to lower alertness every 90 minutes. But we override the signals with sugar, coffee, and stress. Some employers have begun providing fitness facilities, energy-rich food, and even napping pods. See? The thought of a "napping pod" has taken your mind entirely off of the debt crisis! But before we talk debt...

One reader wrote, "As far as I can tell, from over 20 years of experience in this business, rejection of virtually all title claims by the insurer has been standard operating procedure. This is not a new phenomenon. In fact, a similarly jaded former Chairman of a small Midwestern thrift (long since deceased) once was heard to say that title insurance is "insuring pig iron underwater...with a rust exclusion". The economics of title insurance are vastly different from ordinary insurance with upwards of 80% of all premiums being paid to title agents merely for delivering the business. Only about 5% of all premium income is allocated to paying losses (the rest is administrative expense-such as lawyers to fight claims). The economics of casualty insurance, on the other hand, are reversed. There is rarely accountability between the purchaser of title insurance and the person making a claim (consider in many states the seller buys the insurance), but it's the buyer (or lender) who will have to pursue the claim. As a result, there is no need to have a good claims paying history since the buyers of their insurance never have to deal with a claim denial. In fact, if you think about it, if the title company does a proper search and knows the applicable law, the risk of loss should be zero. It is not as if a random occurrence like a tornado can hit your title and cause it to change. Title insurers are really just insuring their own negligence (and malfeasance) on the front end. Title losses were covered up by rising real estate values generally during the first half of the 2000's. Now, mortgage holders are seeking to hold title insurers liable for title losses whenever possible, many of which are really the result of fraud. Title claim volume has no doubt increased, so title insurers are just continuing their business model (of not paying claims easily) in more visible fashion."

And Brian Levy from Katten & Temple, LLP, wrote, "The title issue is quite similar to the mortgage repurchase discussions that have been occurring over the past few years. Mortgage losses drive repurchases much in the same way that fraud can drive up title claims and rising real estate values can mask the underlying liability for both. Nearly 50% of my current work is in defending mortgage originators from repurchase claims that range from legitimate fraud by the borrower to immaterial claims that the originator failed to verify the source of $50 of closing funds or failed to properly document something that was self-evident. One of the basic problems I face is that once a position is taken by an investor that a representation or warranty violation has occurred, there is no room for compromise; only a full repurchase will resolve the problem regardless of any connection between the violation and the loss. That is a recipe for litigation unless high level strategic negotiation can be implemented.

"Title insurance, however, is a bargained for risk transfer. Mortgage loan sale agreement rep and warrants, on the other hand, were never intended to be used to pass the entire risk of loss back to the originator except in extreme cases. In fact, true sale opinions demanded that be the case, lest sale agreements were viewed with the dreaded "recourse". Rather, the intent of the representation and warranties was to insure that a properly underwritten loan was delivered. The difference is subtle, but critical from a risk allocation standpoint. Case in point: stated income loans. How can investors that desired to purchase loans without income verification come back to originators for losses based on the fact that the income was inaccurate? Clearly, that risk transfer was not bargained for and, I would argue (and have in many instances), was specifically waived by the investor. Title insurers will likely take the position that many of the claims being brought today are really fraud issues for which they should have no liability (straw buyers, id theft etc.). So, they need to fight all claims to separate the wheat from the chaff. Likewise, the standoffs on repurchase issues generally are not resolved between investor and originator without escalation to a third party or legal counsel. Today, everyone is playing a game of "hot potato" by trying to pass losses to someone else, but there is a paucity of people with authority or skill to find a reasonable compromise and there is no generally accepted roadmap to follow to reach those resolutions. Nevertheless, I have found that with patience, clever and principled negotiation skills and a healthy dose of persistence that negotiated resolution of these disputes is possible both on the title front and the repurchase front." (Katten&Temple)