Friday, May 13, 2005

Mortgage Risk More Costly

Perhaps you have heard the rumors this week of big losses in the hedge funds. The entire global credit structure is repricing risk and the consequences for the mortgage business are huge. "The annual cost to insure $10 million of the debt for five years of the finance unit of GM, General Motors Acceptance Corp., most actively traded swap, is $717,000, up from $229,000 in February, according to broker GFI Group Inc. in New York."

That's an increase of over 200%. And check out this table to see just how important GMAC is to the industry.

The reinsurance business, which is seeing a lot of scrutiny these days, is headed by AIG. Origination News tells us they just bought a promising firm. "A member company of AIG, has acquired an equity position with Investors Mortgage Asset Recovery Co. LLC, a provider of mortgage fraud recovery services. The company provides assignment services, under which it consults with mortgage lenders on the problems created by flipping schemes.

"Every participant in the mortgage process stands to benefit from recovered losses, but many cases are either too difficult or too small to handle through typical recovery methods," said Cindy Kirkley."


At 10:25 PM, Anonymous Anonymous said...

I heard the "rumor" about the hedge funds on my local NPR radio radio station Tuesday or Wednesday as I was driving home from work. I immediately went to this blog to see if there was any mention or more information, and was surprised not to see anything.
So, I'm happy to see this post because to me it just seems like another piece of the bubble puzzle.

At 2:46 AM, Anonymous Anonymous said...

You mean bubble conundrum?

The bubble theory appears to be getting more definitive by the day.

The blog is really great. The best part is its "liquidity". No stale information.


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