Wednesday, September 17

AIG's Role in the Subprime Mortgage Mess Explained

I had posted a slideshow back in February (here) explaining the subprime mortgage mess. AIG is in trouble mainly because it insured many of the securities that these mortgages were resold under.

"But the Security was insured. What about the insurers?"

"Are you kidding? There is no way they have enough money set aside to cover this mess. They fucked up."
Click on the slides above to view the full slideshow and to review how we got here in the first place.

The Subprime Mess Explained (SubPrime Primer) - 28 Feb 2008
*** Video: Real Estate Prices illustrated via a Roller Coaster Ride *** - 06 Apr 07
Interest Only - Worse than Renting - 06 Dec 07
*** Mortgage 'Rate-Freeze' Does Not Delay Loan Reset *** - 08 Dec 07



J said...

I was wondering a couple of things, maybe you can clarify it:
* Wouldn't individual PMI cover some of this? (at the mortgage end, not the investor end).
* Can the banks, which bought the crappy/defective mortgages go back and sue the Mortgage companies?

Fred Fry said...

Good question and unfortunately I think an industry professional needs to answer it.

With that in mind, do remember that a number of mortgage companies have already gone down (ie Countrywide) so it is kind of too late to push the mortgages back on them. I think they did at some point gaurantee them but remember seeing some agreement with one firm that limited how much they would cover.

As for PMI I suspect that claims have run much higher than PMI payments into the system draining that pool as well.