Well done this is part of the data I was looking for. This confirms the "margin call" clause part of the disaster equation I speak of although not clear - but typical corporate spin.
But the intent is clear - we can ask you to top up your equity if the value falls below the outstanding mortgage.
Now the insurance part of this equation... If anybody can find it we have the ultimate recipe for disaster. Bankers too busy making money and handling their own business to do the law degree or understand insurance adequately.
THEY CANNOT YET SEE THAT THIS CLAUSE HAS TO BE ENFORCED OR THE LIABILITY WILL COME STRAIGHT BACK TO THEM - ULTIMATELY US WHO WILL HAVE TO BAIL OUT THIS MESS. My hope is that the banks pick this up now and do their DD or this will hurt US not the insurance industry who, just like the floods, will seek to shift the cost elsewhere.
Their business is to assess risk, mitigate that risk (for themselves), take your money and avoid as much 'pay out' as they can to retain profits and to run their business. Don't hate them either this is just the system as each of us tries to survive to the optimum level we can with whatever means we have at our disposal within our own personally set ethics levels.
Overvalued properties will fall in value this is what my "mark to fantasy" comment is about. Banks can't afford to let this collapse now or their balance sheets are in serious trouble. The spin and noise will continue while they ease their way towards the exits. When it blows up they shift the blame. Houses are too dear on many metrics.
Otherwise if: #loans were there, to be qualified for, in sufficient quantity #if economic conditions were good #if real incomes were really rising faster than inflation (I refer to actual price inflation not the CPI or monetary inflation) #if banks were not worried then why the cocktail parties in Asia, on offer heavily discounted real estate with no attached finance on offer...
Then why are listings growing, auction pass in rates falling - and sales and prices falling?
Time to pay the piper and all the while this slow motion train wreck hurtles towards that bend in the rails and that town. Bummer!
