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So, Florida mortgage-related financial gambling is about to explode again? That only took 16 years... >> Using Florida as a case study, we show that traditiona

by ethbr1 2y ago

So, Florida mortgage-related financial gambling is about to explode again? That only took 16 years... >> Using Florida as a case study, we show that traditional insurers are exiting high risk areas, and new lower quality insurers are entering and filling the gap. These new insurers service the riskiest areas, are less diversified, hold less capital, and 20 percent of them become insolvent. We trace their growth to a lax insurance regulatory environment. >> We find that these new insurers would not meet [government-sponsored enterprise] eligibility thresholds if subjected to traditional rating agencies’ methodologies. We then examine the implications of these dynamics for mortgage markets. We show that lenders respond to the decline in insurance quality by selling a large portion of exposed loans to the GSEs. As a former resident, this is comically on-brand for Florida (and granted, some other regulatory-captured states): allow business to do as it will, ignoring systemic problems, and then when the risk dice finally come up snake eyes exclaim "No one could have possibly seen this coming!"

JumpCrisscross 2y ago
It’s almost comically familiar. A ratings agency (Demotech) favourably rates small insurers so their policies can be used to sell mortgages to Fannie & Freddie. If a big storm hits the insurers collapse, borrowers default and Fannie & Freddie have a mess on their hands. The only missing piece is a depository institution (or someone levered by one) with a bunch of Florida mortgages with Demotech-rated insurance, but I’m sure that’s squirreled away somewhere in Florida’s financial system. No doubt each of the small insurers, Demotech, and the mortgage originators will be incredibly sorry about the state of affairs, an apology they will have to regrettably deliver from a yacht moored off Saint Croix.
- deleted 2y ago
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croes 2y ago
If DeSantis doesn't believe science about climate change maybe he believes money.
deleted 2y ago
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swatcoder 2y ago
It's not my state, but in this case, the politics are as much populist as corporatist, aren't they? As viable, sound insurance is made unaffordable and inaccessible by radical increases in both costs and risks, jeopardizing the ability to buy or sell insured property at all, you can kick the can down the road and protect your next candidacy by quietly easing up on "sound". The catastrophic consequences won't come until later, but the underlying market gets to keep floating and stay liquid in the meantime. Whether it's in their long-term interests or not, voters want that, don't they?
- ethbr1 2y ago
  I guess it depends if we're talking individual-voters or aggregate all-voters. Individual voters (who own property) would very much like to avoid any additional costs. Aggregate all voters presumably don't feel great about the costs of subsequent bail-outs (especially considering states can't run deficits).

by ethbr1 2y ago

JumpCrisscross 2y ago

It’s almost comically familiar. A ratings agency (Demotech) favourably rates small insurers so their policies can be used to sell mortgages to Fannie & Freddie. If a big storm hits the insurers collapse, borrowers default and Fannie & Freddie have a mess on their hands. The only missing piece is a depository institution (or someone levered by one) with a bunch of Florida mortgages with Demotech-rated insurance, but I’m sure that’s squirreled away somewhere in Florida’s financial system. No doubt each of the small insurers, Demotech, and the mortgage originators will be incredibly sorry about the state of affairs, an apology they will have to regrettably deliver from a yacht moored off Saint Croix.

deleted 2y ago
[deleted]

croes 2y ago

If DeSantis doesn't believe science about climate change maybe he believes money.

deleted 2y ago

[deleted]

swatcoder 2y ago

It's not my state, but in this case, the politics are as much populist as corporatist, aren't they? As viable, sound insurance is made unaffordable and inaccessible by radical increases in both costs and risks, jeopardizing the ability to buy or sell insured property at all, you can kick the can down the road and protect your next candidacy by quietly easing up on "sound". The catastrophic consequences won't come until later, but the underlying market gets to keep floating and stay liquid in the meantime. Whether it's in their long-term interests or not, voters want that, don't they?

ethbr1 2y ago
I guess it depends if we're talking individual-voters or aggregate all-voters. Individual voters (who own property) would very much like to avoid any additional costs. Aggregate all voters presumably don't feel great about the costs of subsequent bail-outs (especially considering states can't run deficits).