Will the current housing market credit crisis spill over ?

Submitted by mega on Wed, 01/23/2008 - 23:40

I am an avid stock market fan and active trader. As such I am well aware of that much of the current crisis in the world markets are due to the recent disclosures of bad mortgage and real estate loans made by some of the largest player in the industry such as Countrywide Financial Corp., and E-Trade Financial. The current situation has much the same look and feel as the S&L Crisis and Fed Bailout of the mid 80's.

My question is how will this all affect the insurance industry and will many of the companies who issued homeowners policy on inflated prices be stuck as these homes continue going into foreclosure? So will the insurance industry be the next one hit on Wall Street?

Posted: 24 Jan 2008 03:49 Post Subject:

Why would a foreclosure affect the insurance industry?

Posted: 24 Jan 2008 09:21 Post Subject: Foreclosures

Why would a foreclosure affect the insurance industry?



As part of most loan packages ( all that I have ever known of) the home must have a home owners policy. This is usually written based on the value of the home. If the home value has been inflated then the insurance value has also. So I was wondering if this was not going to also end up having a similar effect as the current housing market crisis.

Posted: 24 Jan 2008 10:28 Post Subject: Article From Yesterday ( 23 Jan 08 )

This will help explain more about my concerns of how the current housing market crisis might affect the insurance industry as a whole. While this article is more concerned with the corporate bond side of the industry there really is no way to separate the line between the two I don't think. I'll highlight an interesting part then link you to the whole news article:

Fed officials are particularly concerned about the financial health of bond insurers, some of which may be close to failing. Those firms help municipalities and companies with weak credit borrow money, but over the past few years, they also delved into the business of providing insurance for mortgage-backed securities.

Now the insurers have to cover more losses than they can afford. If any of them fail, the value of the municipal and corporate bonds they insure would suffer a huge drop.

Nearly 5,000 bonds insured by Ambac Financial Group were downgraded yesterday and have dropped in value. On Friday, Fitch Ratings downgraded Ambac itself.

The rating of another bond insurer, ACA Capital Holdings, was cut from investment grade to near junk by Standard & Poor's last month after the company revealed that it faces $60 billion of mortgage-security insurance losses that it can't pay. Yesterday, it won a month's grace to unwind these contracts from the people who bought the insurance.

New York insurance regulators, officials of the Federal Reserve Bank of New York and many of the biggest firms on Wall Street are discussing how to infuse new capital into the bond-insurance companies to prevent the losses from rippling through the financial system.

The New York State Insurance Department has persuaded billionaire investor Warren Buffett's company, Berkshire Hathaway, to enter the market for municipal bond insurance. (Buffett is a director of The Washington Post Co.)

"What's going on is the unwinding of probably the biggest credit bubble in history," said David Shulman, senior economist at the UCLA Anderson Forecast. "It will take a while to undo this, and it could get very messy
------ End of article



Again this article is related to the bond-insurance but I think the housing market is also a major player in all of this as we will are now beginning to see more foreclosures . I may be wrong and this may not have an impact on the insurance industry but I think we are already seeing signs of it.
Fed Acts to Stem Panic

Posted: 28 Jan 2008 08:09 Post Subject:

I hope it don't affect insurance, we have enough affecting it.

Posted: 18 Apr 2008 02:29 Post Subject:

Soo very true. If i had half the moola I spent on insurance and taxes I would be rich.

Posted: 23 Jul 2008 04:11 Post Subject:

I can tell its effects on related industries and their health coverage. I am coming across a lot of contractors and real estate agents who have had to drop or cut back on their health coverage due to the crisis.

This has actually been good for me because more are willing to let go of their big traditional name brand coverage and switch to something more affordable with nearly the same coverage or self insuring for the small things and opting for catastrophic coverage.

the sad thing is there are a lot of them that cannot afford anything at all...

Posted: 23 Jul 2008 06:19 Post Subject:

Hi beatuplunchbox..I have one question for you..did you really come across a coverage that offered a similar coverage to that of a brand coverage (for the same worth)? Please suggest some of the good names that you have experienced!

Posted: 01 Oct 2008 11:33 Post Subject:

I have really good health insurance through my hubbys work but know soo many people without coverage or very minimal coverage. I would like to see the answer to this also.

Posted: 01 Oct 2008 01:27 Post Subject:

If a house goes back to the bank, insurance will cease. The insurance company will be paid for the amount of time the house is insured. Sure, few houses being bought does mean less policies. I think all the P&C agents have seen this hit.

In my case though, Memphis is actually still lively with people buying property. Yes, it's primarily for investment, but they are still buying - which means they still need insurance.

Fortunately, my company doesn't have their fingers in a million different places (like AIG). They deal with insurance and investments. No worries there.

Posted: 03 Oct 2008 01:12 Post Subject:

What about Geico? I have been considring changing insurance companies but am waiting for my lawsuit to settle. I started looking around because I thought they would give me the boot once everything was settled (if I had to fall back on my under ins.). I found that I can save money in all different kinds of places and add more coverage for less than I pay now.
Is there any ins. company you wouldn't suggest?

Posted: 03 Oct 2008 01:20 Post Subject:

I wouldn't necessarily NOT recommend some of the major players (well, except AIG..lol) - just make sure than when you compare, you compare apples to apples - same limits of liability, etc.

There are some smaller, local companies that I definite would NOT recommend. One I can think of bills on 28 day cycles which means you actually pay more than 12 payments per year. They also have created their own finance company so when you sign on the application, the finance company pays the insurance company the full premium. Then the customer actually pays the finance company the monthly premium (which the customer thinks is an insurance payment).

Posted: 03 Oct 2008 01:35 Post Subject:

Okay maybe I will stay with Ntionwide for the time being. How can that company get away with billing every 28 days and doesn't the customer catch on?

Posted: 03 Oct 2008 01:44 Post Subject:

Remember, it wasn't the insurance company who billed every 28 days; it was the finance company. And the paperwork the customer signed (which, of course, everyone read before signing) outlined 28 day payments.

Posted: 03 Oct 2008 01:50 Post Subject:

Oh okay I get it. Sorry..should have read a little better.

Posted: 04 Oct 2008 12:54 Post Subject:

See they passed the bailout. Still unsure od how I feel on that one.

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