Oireachtas Joint and Select Committees
Thursday, 27 November 2014
Joint Oireachtas Committee on Finance, Public Expenditure and Reform
Mortgage Insurance Schemes: Discussion
11:20 am
Mr. Angel Mas:
Our experience is that it should be the opposite of sub-prime lending. Our belief is that the combination of low-quality underwriting on high loan-to-value mortgages is toxic and there is an experience that has been horribly painful. What mortgage insurers do precisely is to isolate the second half of the risk in a mortgage, that is, the severity - the loss that occurs when one lends a large proportion of the property value - but also impose high quality on the first factor of risk, that is, the probability of default, which refers to the quality of underwriting. There is a perfect alignment of interest from the insurers that assume that the first loss in every mortgage is minimised and the quality of underwriting is maximum quality.
I would insist that low quality underwriting on high loan-to-value mortgages is toxic. We need to ensure high quality underwriting and high quality lending, while still minimising the risk associated only with high loan-to-value mortgages, which is the severity, not quality, of underwriting.
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