More on the Mortgage Insurance Issue

On Saturday, I told you about an article where S & P has downgraded the credit ratings of some of the main PMI companies.   Now we’ve got a story about how Bank of America is suing MGIC saying that MGIC denied millions of valid claims on defaulted loans.

A couple of thoughts on this:

• I don’t think it was a misprint that Housing Wire said millions of claims rather than millions of dollars worth of claims.   MGIC is one of the major PMI companies and Countrywide was one of the bigger 0% down lenders.   Not a healthy mix.
• I would dare venture that a large portion of the reason for MGIC denying the claims has to do with, how shall we say it, the “caliber” of the documentation that’s in the files.   Claims of fraud, misrepresentation, undue influence, all kinds of fun things are probably part of the reasons for the denial of the claims.

But the thing that I find most interesting about this article is MGIC’s response to it.  The typical response is something along the lines of “We find these claims to be totally without merit and look forward to our chance to show that we are innocent of all charges.”

But what did they say?  “We’re going to defend ourselves but we dont’ know if we’ll win and we don’t know what it’s going to do to us.”

When you take that and combine it with the fact that MGIC is already experiencing severe financial difficulties and it doesn’t bode well for mortgages with less than 20% down that aren’t FHA loans…….

Tom Vanderwell

BofA Sues MGIC Over Unpaid Insurance Claims : HousingWire || financial news for the mortgage market

Bank of America’s (BAC: 15.25 +0.39%) Countrywide Home Loans unit sued Mortgage Guaranty Investment Corp. (MTG: 5.99 +3.99%) over allegations the Wisconsin-based mortgage insurer denied millions of valid claims.

The suit was disclosed in a Securities and Exchange Commission (SEC) filing. Countrywide and BAC Home Loans Servicing filed the suit against primary MGIC subsidiary Mortgage Guaranty Insurance Corp. (MGIC) in Superior Court of the State of California in San Francisco on December 17.

The case seeks declaratory relief against MGIC for what it says are valid claims against mortgages that defaulted. The case also seeks a ruling on the “proper interpretation of the flow insurance policies at issue.”

In the filing, MGIC said it intends to defend itself but is “unable to predict the outcome of this case or its effect on us.”

Technorati Tags: PMI, MGIC, Countrywide, Bank of America

Another Reason

Here’s another reason that people don’t trust a lot of mortgage lenders.   Let me explain:

• Countrywide had a VIP mortgage program.   So what, I don’t have a problem with them offering discounts to VIP’s.   If Microsoft wants to cut Warren Buffett a deal on computers, so be it.   But they should have a set “program” for it.   In other words, if you want to do a special mortgage program for doctors, go ahead.   If you want to do a special program for Oscar Winners, go ahead.  
• But it appears that Countrywide didn’t have a set VIP program but maybe used it as a way to win political influence.   Let’s see, I think Senator Chris Dodd got one of them “VIP” mortgages.   I wonder if that’s influenced his voting and thinking on the banking world?
• And now that people want to find out more about what’s been happening in the VIP program, guess what…..

Yep, Bank of America has erased all of the tapes of those recorded conversations.

So they had a VIP program, they used it to influence government officials and they erased evidence of it.

That doesn’t make me suspicious, does it make you suspicious?

Tom Vanderwell

Phone Calls Add to Din Over Loans – WSJ.com

The discovery that Countrywide Financial Corp. recorded phone conversations with borrowers in a controversial mortgage program that included public officials — and that those recordings have been destroyed — has prompted new congressional calls for more information about the program.

Rep. Darrell Issa of California, the ranking Republican on the House Oversight and Government Reform Committee, is trying to subpoena the remaining records of Countrywide’s VIP loan program. So far, the committee’s chairman, New York Democratic Rep. Edolphus Towns, has turned down that request.

The committee’s Republican staff investigators have spent months looking into the VIP program and learned of the call-recording system from a former Countrywide employee, according to a spokesman for Mr. Issa.

The Issa spokesman said that when the investigators contacted Bank of America Corp., which purchased Countrywide in July 2008, the bank acknowledged the existence of the recording system but said all the VIP program-related calls had been disposed of.

Buy a Toaster, Get a Free Bank….

But they don’t say how much contingent liabilities come with the toaster.   Thanks to White Rabbit for a smile…..