“Insured mortgage lending is almost riskless and costless to lenders.”—Finn Poschmann (Source)
This statement implies that lenders are getting a free lunch off the taxpayer’s back…that lenders reap all the profits and offload almost all their risk to unsuspecting Joe Sixpack and Grandma Millie.
Let’s examine that for a brief moment.
In the first place, describing insured lending as “costless” is as amusing as it is perplexing. It’s quite difficult to launch and operate a successful underwriting and mortgage funding operation without:
A multi-million dollar upfront investment (sourced by people who expect to see their money back).