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Mortgage Insurers dodged 100% LTV bullet

Traditional home mortgage finance structure options:

A. 20 % down, 80 % LTV mortgage, no Insurance
B. 10 % down, 90 % LTV mortgage, with Insurance

Circa 2005:

C. 0 % down, 80 % LTV mortgage, 20 % LTV HELOC (total LTV = 100 %), no Insurance

The mortgage insurers thereby missed taking risks on some of the most leveraged homeowners.

The mortgage insurers were cut out of the worst deals (lucky for them!), because Wall Street happily securitized 100% financing with 2nds and no MI (mortgage insurance) . But the losses are still piling up.

[ CR ]


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