Wednesday, September 10, 2008

Mortgage insurers and the bailout

One investor I respect was terribly surprised that the mortgage insurers fell on the Frannie bailout.


In my “Do you believe in magic post” I suggested that the mortgage insurers continue to write business only because of the continued goodwill of the GSEs. And the GSEs only do that because they hope the premiums on new business will allow the mortgage insurers to run ahead of the losses on the old business.


There has been a change of control of the GSEs. And the new management have no incentive to hide the losses of the old management by feeding premium to potential insolvent mortgage insurers.


I have no idea what the conservators will do to the mortgage insurers. But the change in management of the GSEs is unlikely to be positive though it may be neutral.




John Hempton

Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)

General disclaimer

The content contained in this blog represents the opinions of Mr. Hempton. You should assume Mr. Hempton and his affiliates have positions in the securities discussed in this blog, and such beneficial ownership can create a conflict of interest regarding the objectivity of this blog. Statements in the blog are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. Certain information in this blog concerning economic trends and performance is based on or derived from information provided by third-party sources. Mr. Hempton does not guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Such information may change after it is posted and Mr. Hempton is not obligated to, and may not, update it. The commentary in this blog in no way constitutes a solicitation of business, an offer of a security or a solicitation to purchase a security, or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.