ONE SOLUTION: WE NEED MORE AFFORDABLE MORTGAGE INSURANCE!

Mortgage Insurance (Funds) (“MI”) Type Products: The costs of avoiding MI may be too high for market stability. The default and foreclosure rates prove that it is too high for the middle class, subprime borrowers and borrowers in high-priced market areas like California and the eastern seaboard. Is the investor and lending industry taking too much in fees without mitigating risk in the market especially on non-conforming second liens? Should all market participants pay for risk mitigation or MI type products? The “concept” of private mortgage insurance or “MI” (“PMI”) is a good one from a market standpoint because it insures and shares risk. Insuring or sharing risk is what makes markets work. It protects the mortgage holder (lender) from complete loss in the event of default. It hedges some risk inherent in the financial mortgage vehicle. Borrowers generally have a negative opinion about MI. They view it as too cash-expensive. Now that President Bush in late December 2006 signed into law allowing tax deductions for mortgage insurance the comparison of using MI or using piggyback loans without MI will change. Borrowers must always remember that piggybacks with adjustable high rate HELOCs can be deadly. Piggybacks and non-piggybacks are in need of MI type risk mitigation, and an overhaul or intelligent refinement that takes into account the borrower’s affordability. High rate second liens overload the borrower’s carrying burden. MI should insure such second liens, or better facilitate one-loan programs. The GSEs will have to change policies to meet this need as well.

TID, SHILO & MI Integration: We must integrate TID and the SHILO solutions with the new and existing MI solutions. This will allow for more price risk alignment and enhanced stability in loan products. Joseph Thomas of Retirement Networks (Florida), and the author suggest the following risk mitigation conceptual examples at a no or low cash cost basis to the borrower:

Foreclosure Mortgage Insurance™ (“FMI”) (TM) – FMI under certain conditions may cover certain cost burdens as well as return FRESH START money, credit or opportunities to the borrower. Remember, the wealthier the borrower, the less risk is introduced into the markets.

Default Mortgage Insurance™ (“DMI”) (TM)– DMI under certain conditions, may cover missed payments; up to12 months or more.

Investors Mortgage Insurance™ (“IMI”) (TM) – Second liens have been over priced from the borrower’s perspective; especially certain adjustable rate piggybacks with high rate seconds (HELOC). If piggybacks are to continue, the cumulative risks inherent must be mitigated without simply charging the borrower more cash-burdened money. Investors in such loans must be offered risk mitigation insurance benefits as a “substitute” or “equivalent” for increased price burdens on the borrower. The borrower alone can not afford to pay the price for this risk.