S&P Downgrades Five Mortgage Insurers

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S&P Downgrades Five Mortgage Insurers

Standard & Poor’s downgrade the credit ratings on five mortgage insurance companies. The credit ratings agency said continued losses on insurance claims exceeded previous expectations, as low-risk books of business are starting to experience greater losses. “The lower-risk books of business within the mortgage sector (such as those with higher FICO scores or lower loan-to-value ratios) have been and will be more adversely affected than we had anticipated and U.S. mortgage insurers’ losses will continue to be greater than previously expected overall,” S&P analyst Ron Joas wrote. “If the US economy were to experience another setback, prolonging the exit from the recession, delinquencies and resulting losses could increase at an even greater rate, with lower benefits available from rescissions than what has been seen over the past year,” Joas wrote. “In addition, any existing and potential benefits from modification programs might reverse, and modification attempts might be ineffectual.” The mortgage insurers downgraded are: Genworth From triple-B plus to triple-B minus; PMI Group from double-B minus to B plus; Radian Group from double-B minus to B plus; Republic Mortgage Insurance Co. From A minus to triple-B minus; United Guaranty From triple-B plus to triple-B.

Mortgage rescue can kill your credit rating

Most troubled homeowners don't realize that President Obama's entering a trial mortgage modification can actually hurt their credit. It's true that many people who apply for the president's plan are already delinquent in their mortgage payments, but being in a months-long trial period may only add to the pain. Under the president's plan, troubled borrowers can have their monthly mortgage payments reduced to 31% of their pre-tax income. Homeowners are first put in a trial modification for several months to prove they can handle the new commitment and to give the bank time to collect the necessary income and hardship verification documents. During this period, industry guidelines call for loan servicing companies to report borrowers to the credit bureaus according to their status before they entered the modification - either current or the number of days delinquent. However, borrowers' accounts are also designated with a code indicating they are in a partial payment plan. The coding alone can impact credit scores, which measure a consumer's financial health and range from 300 to 850 under the FICO system. The severity depends on how many payments the borrower missed before entering the program. Those who were current in their mortgages could see their scores fall up to 100 points, according to the Treasury Department.

WSJ - Government now rooted in the economy

In 2008 and 2009, Washington strove to save the economy. In 2010, Americans will get a clearer picture of how Washington has changed the economy. Only as the recession recedes will it become fully evident how permanently the state's role has expanded and whether, as a consequence, a new, hybrid strain of American capitalism is emerging. One thing is clear: The government is a much bigger force in today's U.S. economy than it was before the financial crisis. "The frontier between the state and market has shifted," says Daniel Yergin, whose 1998 book "Commanding Heights" chronicled the ascent of free-market forces starting in the 1980s. "The realm of the state has been enlarged." Washington pumped $245 billion into nearly 700 banks and insurance companies, guaranteed almost $350 billion of bank debt, made short-term loans of more than $300 billion to blue-chip companies, propped up life insurers and money-market funds, bailed out two of the three U.S. auto makers, lent billions trying to jump-start commercial-real-estate, small-business and credit-card lending, and in two February stimulus bills enacted a year apart, committed $955 billion to rouse the economy.

Today the U.S. government, directly or indirectly, underwrites nine of every 10 new residential mortgages, nearly twice the percentage before the crisis. Just last week, the Treasury said it would cover an unlimited amount of losses at mortgage giants Fannie Mae and Freddie Mac through 2012. John Taylor, a former Bush Treasury official who is now a Stanford University economist, says the government's role will be huge. "While we may be past the emergency, we're still in a mode that will create similar interventions for quite a while, even for minor emergencies," he says. "We have a bailout mentality in this country." Even if the government withdraws, business will expect bailouts in the next crisis, and that will inspire another round of cavalier risk-taking. "If we don't re-regulate the banking system properly, we'll either get very slow growth from overregulation, or another financial crisis in just 10 to 15 years," says Kenneth Rogoff, a Harvard University economist and co-author of a new book on financial crises since the Middle Ages.

Holiday sales up

According to figures from MasterCard Advisors' SpendingPulse, which track all forms of payment, including cash, retail sales rose 3.6 percent from Nov. 1 through Dec. 24, compared with a 2.3% drop a year ago. Adjusting for an extra shopping day between Thanksgiving and Christmas, the number was closer to a 1 percent gain. Last year, the economy was in "critical condition," said Michael McNamara, vice president at MasterCard Advisors' Spending Pulse. "This year, it's in stable condition." "We had a pretty decent surge," McNamara said. Online sales were a particular hot spot, fueled by a big increase the weekend before Christmas. They rose 15.5 percent on the season, though they make up less than 10 percent of all retail sales. Stores count on a post-Christmas boost because of the growing importance of January on the retail sales calendar. Last year, the week after Christmas accounted for 15 percent of overall holiday sales, according to ShopperTrak, a research firm. Retail consultant Burt P. Flickinger describes gift cards as "the lifeblood" of the post-Christmas season, because shoppers typically spend more than the value of the cards. "Retailers with a disappointing December are going to need January to survive," Flickinger said. "Inventories are even too low for retailers."

Above Post Written by: Chris Mclaughlin with Short Sale Riches.com

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