walkitout (walkitout) wrote,

that stuff, you know, that rolls downhill: real estate musings

I don't recall if I posted about this, but apparently one of the reasons there are so few short sales (that is, the type of sale where the lender agrees to let a borrower sell a property for less than the loan outstanding, and possibly forgive the remaining, or maybe it's discharged in a bankruptcy or maybe the borrower has to pay it off eventually) is that lenders are refusing to sign off on them, knowing they can collect 20% of the value (of the outstanding loan, presumably, but possibly the value of the house -- but in a lot of these cases, the value of the house is less than the outstanding loan; this wouldn't make sense at all otherwise) from the mortgage insurer (think: PMI).

As soon as I heard that, I immediately thought, aha! This is going to change when the mortgage insurance companies start going belly up, which is pretty much inevitable given the sheer volume they're dealing with, and we know no one anticipated that.

Here it is:


A few mortgage insurers have been downgraded and are on negative ratings watch.

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