Not talking about underwater mortgages here, but water, as in underwater. Think Irene. The Atlantic Cities has an interesting piece on the impact of climate change on Manhattan. Food Water for thought (sorry).
No attempt to be alarmist here, but I do find the topic fascinating.
Manhattan could see a drastic uptick of so-called 100-year floods, or those with storm surges around 6.5 feet, according to a new MIT study. These mondo deluges could occur as often as every 3 to 20 years by the end of this century, blasting over the island’s seawalls into businesses and subways and causing the kind of mass evacuations last seen with Hurricane Irene.
If the storm-of-the-century happens every decade, then I think the 100-year naming methodology has to be rethought.
MIT postdoc Ning Lin, lead author of the study, says knowing the frequency of storm surges may help urban and coastal planners design seawalls and other protective structures.
Planning in advance is always a good thing.
New York City in Line for Dozens of ‘100-Year Floods’ Every Century [TheAtlantic Cities]
Climate Time Machine [NASA/CIT]
PMI Group Inc., the mortgage insurer that was ordered in August to stop writing policies, said a unit that sells such coverage was seized by Arizona authorities and will pay out claims at 50 percent starting tomorrow.
Private mortgage insurance provides additional protection to the lender when the borrower pays less than 20% down for a home. The industry was wildly profitable in the years leading up to the housing crash.
My worry is that this becomes another factor that tightens credit further and/or makes borrowing more expensive.
Posted by Jonathan J. Miller -Tuesday, September 13, 2011, 9:00 AM 2 Comments
Bloomberg Law’s Lee Pacchia interviews Randy Paar, partner at Kasowitz Benson Torres & Friedman LLP, talks about the market for flood insurance in the United States and business interruption insurance claims resulting from Hurricane Irene. I’m usually one of those people whose eyes glaze over when the topic of insurance is broached. This is not the case and this is an extremely informative interview.
This is an extremely timely interview given the flooding caused by Hurricane Irene along the Eastern coastline and especially inland. I don’t think many foresaw that there would be more flood damage caused by overfilled rivers and streams than from the ocean.
I wrote about flood insurance here on Matrix 6 years ago (42 years ago in blog/dog years). I’ve always marveled at the idea that the federal government was in the business of flood insurance at all. By keeping flood insurance premiums low, it has essentially encouraged more development in high risk areas and charge the same premiums for people who repeatedly file claims and those who don’t.
The program comes up for periodic renewal and FEMA is running out of money to fund it. Hurricane Katrina back in 2005 and the unusually high incidence of natural disasters in 2011 have drained their funds. If Congress does not provide funding, mortgage lending, 90% of which goes through Fannie Mae and Freddie Mac, may stop guaranteeing or purchasing mortgage paper from banks te housing market may stall in many regions.
Posted by Jonathan Miller -Sunday, February 21, 2010, 5:30 PM Comments Off
Since appraisal management companies are now responsible for the super majority of appraisals being ordered through lenders for mortgage purposes due to HVCC and AMCs are not a regulate institutions, the consumer is exposed more than ever to the potential for low quality appraisals, continuing to undermine the public trust in the appraisal profession. I suspect trend this has the potential to push errors and omissions insurance rates higher and provide more exposure to the mortgage lending system.
I firmly believe that 5-7 years from now we will be looking back to today’s AMC trend and will be saying: “if we only did something about it.”
Admittedly I know very little about surety bonds and this is no sales pitch or a solution to the AMC problem. I am more interested in understanding ways to protect the consumer against negligence and instill confidence in the appraisal process. To require AMCs to pay for surety bonds in order to operate in a state sounds like it provides an easier way for consumers to go after AMCs for negligence. Feedback or suggestions welcome.
The obligee – the party who is the recipient of an obligation,
The principal – the primary party who will be performing the contractual obligation,
The surety – who assures the obligee that the principal can perform the task
I was contacted by Jay Buerck of SuretyBonds.com who wrote provided the following post on surety bonds and appraisal management companies. He indicated that 6 states brought about new AMC legislation last year and it is expected to grow in the coming years. His article is simply trying to make everyone aware of this fact.
States nationwide are introducing tougher oversight and regulation of appraisal management companies. The push is part of a growing effort to bring more consumer protection and transparency to the home-purchasing process.
In all, six states: Arkansas, California, Nevada, Louisiana, Utah and New Mexico ó ushered in new AMC legislation in 2009. Industry officials expect another 15 to 20 states to consider adopting similar measures this year.
Appraisal management companies are becoming increasingly important because of sweeping changes to regulations for home valuations nationwide. The stricter regulations are geared toward boosting consumer safety and stabilizing the housing market.
“There is a significant belief out there that mortgage fraud played a significant role in the meltdown in the housing market, and any unregulated entity that is out there presents the possibility for mortgage fraud to creep back into the system,” Scott DiBiasio, manager of state and industry affairs for the Washington, D.C.-based Appraisal Institute, a global association of real estate appraisers, told Insurance Journal this winter. “I think legislators recognized that this was a gaping loophole that needed to be corrected.”
Taking consumer protection a step further, Arkansas became the first state to add a surety bond requirement to its appraisal management statutes. The new legislation requires that AMCs post a $20,000 surety bond with the stateÃs real estate appraiser board.
Surety bonds are essentially three-party agreements that ensure businesses or people follow all applicable laws and contracts. A surety bond also provides consumers and tax payers who are harmed by the business with an avenue of financial recourse.
Most of the new AMC legislation requires companies to make sure their appraisals are in line with the Uniform Standards of Professional Appraisal Practice. TheyÃre also responsible for ensuring they use certified and licensed appraisers only.
There are also some financial disclosure and transparency requirements in some states.
“We need to have and the public deserves to know who owns, operates and manages these appraisal management companies,” DiBiasio said. “I think the $20,000 surety bond is really there to provide some minimal protection to consumers.”
On the Friday of a typical takeover, the FDIC arrives on-site with a large team to manage the transition. (When a large bank fails, this might include upward of 100 people.) The team has two main priorities. First, it must figure out which customers’ deposits are insured and which are not. This can be a tangle, since customers can sock away money in a variety of accounts to ensure that their deposits fall under FDIC-insured limits. The second priority is getting the bank ready to open under new ownership by Monday. That involves discarding any material with the old bank’s name on it—like posters, cashiers’ checks, and marquee signs—and putting the new bank’s paperwork, advertisements, and employees in place. Specialists from other departments, such as facilities, human resources, IT, public relations, and accounting, round out the FDIC’s team. Officials once even hired a hypnotist to help a bank employee remember a vault code.
Posted by Jonathan J. Miller -Tuesday, August 19, 2008, 12:51 AM 1 Comment
I saw the 3rd installment of The Mummy with my son recently and he opined immediately after the movie ended that “it was just about the worst movie he had ever seen.”
When you look around at every institution involved in the mortgage process, after seeing this prolonged bad movie, it’s especially interesting that, other than enforcement authorities (Like FBI and attorney generals), no one is doing anything about reparations for the rampant fraud and sloppy underwriting that likely adds up to billions. I find this a continual source of amazement.
Ticor Title, one of the largest title insurance firms in the country, is suing Countrywide Home Loans, the nation’s largest home lender, saying it shouldn’t have to pay out on a title policy because of Countrywide’s gross negligence.
In other words, title insurance companies may begin to go after mortgage lenders who were negligent in their underwriting. In other words, it is simply the low hanging fruit to help offset significant losses.
Here is the case that was the last straw for Ticor.
The case that Ticor has drawn a line in the sand over concerns a $360,000 first mortgage on a graystone Victorian in the Kenwood neighborhood on the South Side. The story of that loan was told in a front-page Tribune story in February, several weeks after a clothed, mummified male corpse was discovered in the boarded-up house by a real estate speculator who had purchased the property from Countrywide in a foreclosure auction.
I wonder if an appraiser inspected the property at anytime? Good grief. (This AP appraisal article should have been written back in 2005 when the industry was screaming about appraisal pressure.)
Posted by Jonathan J. Miller -Monday, May 14, 2007, 9:08 AM 1 Comment
One of the dire predictions (that pesky conventional wisdom thing again) of the post-Katrina US was the soon to be lack of homeowner’s insurance or at the very least, hard to get and very expensive post-war homeowner’s insurance.
In most of the country, property insurance rates for homeowners and businesses are actually lower than they were before Katrina. And amazingly, insurance rates have been falling recently in many parts of Florida and the Gulf Coast that stand to suffer severe losses from hurricanes, encouraging continued construction in low-lying areas.
Why?
No major hurricanes hit in 2006 and investment returns by the industry set a record.
Private equity firms, in search of returns, have poured money into bonds, betting on whether a hurricane will hit.
Posted by Jonathan J. Miller -Wednesday, February 15, 2006, 12:01 AM 1 Comment
With the rapid run-up in real estate prices over the past several years, its probably not a bad idea to make sure that your insurance coverage is adequate especially if you did a major renovation or expansion. This Real Estate Journal article Taking Inventory of Your Home To Get Adequate Insurance applies more to personal property within the home.
However, insurable value, the value of your home should catastrophy strike, is the amount needed to replace the existing improvement (the house). It is NOT the purchase price of your home because a large portion of the value of your property is found in the land. This concept applies to condos and co-ops as well.
This is one of the most misunderstood aspects of housing – values that appreciate and depreciate relate largely to the land value, not the value of the house. Yes, sure, the cost to replace your home will increase due to higher labor costs, higher cost of materials, inflation, etc. during a tight housing market and renovations and extensions or expansions may also impact value as well, but the value largely runs with the land.
Posted by Jonathan J. Miller -Wednesday, January 18, 2006, 12:01 AM Comments Off
PMI releases its Economic and Real Estate Trends quarterly report [PMI]. Its “a narrative publication based on an internally developed PMI model. Issued quarterly, the report includes commentary on the national economy and regional housing price trends. In addition, select metropolitan areas are analyzed. The 50 most populated metropolitan areas are featured in a tabular presentation (Metropolitan Area Economic Indicators), based on a statistical model utilizing economic data, real estate variables and market expertise. The model provides several risk measures to gauge relative residential lending risk.”
I am not arguing that the market is not seeing lower appreciation rates, and the risk of higher mortgage rates, however there does not seem to be any analysis in the report to support such statements and its the lead-in to why lenders should encourage borrowers to take out PMI insurance.
In other words, this seems to be more of a direct marketing piece than a research tool. In addition, there is no explanation on how the internal model was derived or what the logic is. How can this report be relied on?
Wyoming had the lowest mortgage-related fees and New York had the highest in Bankrate.com’s 2005 survey. That’s without taking taxes into account.
Bankrate surveyed nine to 15 lenders in each state, plus Washington, D.C., and asked them to estimate the closing costs on a $180,000 loan to a buyer with an excellent credit history who had made a down payment of at least 20 percent on a single-family home in the state’s largest city. The survey showed that:
*The biggest differences among states came from the wildly varying costs for title insurance;
*fees for settlement services and title searches accounted for much of the rest of the disparities;
*origination costs — the fees that lenders control — didn’t vary much from state to state (but they did differ from lender to lender).
