GLG News by Financial Guaranty Experts
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Martin KamarckPrincipalMAKO Consulting LLC
Beyond Credit Enhancement: The Value of Risk Management
March 9, 2009
Buffett Warns Insured Muni Bonds Could Be Next Shoe to Drop | www.tradingmarkets.com
The Bond Buyer headline: A default is a default, is a default, is a default. For bond issues most vulnerable to fiscal stresses, monoline insurers "write themselves into the indenture," with surveillance rights, reporting requirements and -- most imprtantly -- covenants and remedies more akin to an (old fashioned) bank loan than a bond issue. Especially with their portfolios of insured risks under stress, the monolines will aggressively exercise those rights as proxy for bondholders, so insured bondholders should be, generally, better protected. If, in his haste to cash in on the market opportunity in muni bond insurance, Buffett missed this basic element of the business, then BHAC's loss experience could be much worse than predicted.
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Martin KamarckPrincipalMAKO Consulting LLC
With the GSEs "Nationalized," Will There Still be a Market for Mortgage Insurance?
September 15, 2008
U.S. bails out Fannie Mae, Freddie Mac, ousts CEOs | www.bizjournals.com
The GSEs succeeded in supporting the creation of a broad, deep, liquid national market for mortgages. They used their market power to impose standardization on mortgage terms and underwriting. Thus was born the "conforming mortgage." Mortgage insurance is an artifact of this history. It is an inefficient and (at the individual whole loan level) unnecessary credit enhancement. But the rumors of MI's demise are premature. The last thing the new management of the GSEs want to do is spook the markets with sudden moves, loud noises or big changes. That said, there will be pressure to impose much more rigorous capital allocation/portfolio risk management controls. Politically, they can't reduce volume, per se, immediately at least, but the management of counterparty risk exposure to the MIs may well become more active. Bad news for weaker MIs. Later the survivors will again be caught between price competition and "innovation" (bad risk) in a smaller market.
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Martin KamarckPrincipalMAKO Consulting LLC
With the GSEs "Nationalized," Will There Still be a Market for Mortgage Insurance?
September 12, 2008
U.S. bails out Fannie Mae, Freddie Mac, ousts CEOs | www.bizjournals.com
The GSEs succeeded in supporting the creation of a broad, deep, liquid national market for mortgages. They used their market power to impose standardization on mortgage terms and underwriting. Thus was born the "conforming mortgage." Mortgage insurance is an artifact of this history. It is an inefficient and (at the individual whole loan level) unnecessary credit enhancement. But the rumors of MI's demise are premature. The last thing the new management of the GSEs want to do is spook the markets with sudden moves, loud noises or big changes. That said, there will be pressure to impose much more rigorous capital allocation/portfolio risk management controls. Politically, they can't reduce volume, per se, immediately at least, but the management of counterparty risk exposure to the MIs may well become more active. Bad news for weaker MIs. Later the survivors will again be caught between price competition and "innovation" (bad risk) in a smaller market.
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Martin KamarckPrincipalMAKO Consulting LLC
With the GSEs "Nationalized," Will There Still be a Market for Mortgage Insurance?
September 12, 2008
U.S. bails out Fannie Mae, Freddie Mac, ousts CEOs | www.bizjournals.com
The GSEs succeeded in supporting the creation of a broad, deep, liquid national market for mortgages. They used their market power to impose standardization on mortgage terms and underwriting. Thus was born the "conforming mortgage." Mortgage insurance is an artifact of this history. It is an inefficient and (at the individual whole loan level) unnecessary credit enhancement. But the rumors of MI's demise are premature. The last thing the new management of the GSEs want to do is spook the markets with sudden moves, loud noises or big changes. That said, there will be pressure to impose much more rigorous capital allocation/portfolio risk management controls. Politically, they can't reduce volume, per se, immediately at least, but the management of counterparty risk exposure to the MIs may well become more active. Bad news for weaker MIs. Later the survivors will again be caught between price competition and "innovation" (bad risk) in a smaller market.
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Maureen BoltonPrincipalGlobal Capital Access
July 30, 2008
Treasury and Banks Kick Start Home Financing Tool | www.reuters.com
This article is important because it announces and describes: a) the US Treasury's support of covered bonds, an on-balance sheet method of funding mortgage originations, as an alternative to off-balance sheet mortgage securitizations or mbs b) Four major US banks announcements of their intentions to bring covered bond issues to market in the near future and and their commitment to provide pricing information in order to facilitate the trading of covered bonds and c) the FDIC's support of a covered bond market and its policy statement describing how it would treat covered bond investors in the event that an issuing bank become insolvent. The government and market participant actions described in the article are remarkable because they appear to contemplate an on-going involvement of the US Treasury and FDIC in the funding of mortgages that is more hands-on than any such actions to date, creating a defacto US govt gtd covered bond market.
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Joseph DelaneyManaging PartnerHilb Rogal and Hobbs of Metropolitan Washington, Inc.
April 22, 2008
Insurers Overly Focused On Cat Models, Says Expert | www.propertyandcasualtyinsurancenews.com
Primary insurers and reinsurers will demand that catastrophic modeling be used in order to justify their underwriting decisions of this type of insurance. These newer models in conjunction with in-house capacity aggregation tools (Insurers now know where and how much of their capacity is in play) will guide their underwriting decisions from windstorm and earthquake to workers compensation in terrorism prone cities like DC and NYC. The process is another way to spread the risk, so that any one insurer does not take a huge hit from any one event. Using technology to spread risk will utimately decrease volatility in insurance markets.
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Martin KamarckPrincipalMAKO Consulting LLC
It's not how broadly you spread it; it's how deep.
February 28, 2008
Arcane Market is Next to Face Big Credit Test | www.nytimes.com
Lesson of monoline debacle: Core issue is concentration of counterparty risk.
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Martin KamarckPrincipalMAKO Consulting LLC
Proposed Split Creates Short-Term Solution, Long-Term Problem
February 27, 2008
Bond Insurer Plans a Split to Protect Ratings | www.nytimes.com
Instead of protecting policyholders, NYS regulators have scrambled to assure availability of bond insurance for benefit of public debt issuers. Core of their strategy was to force shareholders and creditors (the banks) to contribute, one way or another, to the solution. To do so, they pulled off a high-stakes bluff. The result is a short-term fix that will end up weakening the financial guaranty industry over the long haul.
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Maureen BoltonPrincipalGlobal Capital Access
Like any proud shopper, Temasek is happy to have recognised a bargain in Merrill
January 7, 2008
Temasek Supports Merrill Despite Sub-Prime Losses | www.bankingtimes.co.uk
This article summarises Temasek's recent equity investment in Merrill, including the price paid and future intentions. Temasek appears to be more than satisfied with its investment and is inclined toward similar investments (financial institutions undervalued due to over-estimates of subprime/CDO related losses) in the near future.
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Amanda AtkinsChief Executive OfficerAfinia Capital Group
AAA Subprime 80 cents on the dollar – a good estimate not wild speculation
November 7, 2007
AAA Sub-Prime Valuation Issues | ftalphaville.ft.com
Recent suggestions that the ABX index is a poor proxy for AAA subprime RMBS fail to recognise its value.
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