by Calculated Risk on 3/27/2007 02:11:00 PM

From Reuters: Lennar says worst may not yet be over for inventory

Here is a real Time transcript of Lennar CEO Stuart Miller's comments (hat tip Brian):

“Let me begin by saying that these are difficult times for the home-building industry. We have recently completed our quarterly operation reviews with our division management team, and based on these extensive business plan and execution reviews, I can say first hand and with certainty that market conditions are very difficult across the country. As I listen to many of the leaders in the industry speak, that is our competitors and as I listen to economists and analyst and is investors, the message is becoming very unified and that is although we see some sporadic indications of firming in some markets, and we all look forward to seeing a firm foundation from which we can build forward, the reality is that market conditions are still challenging at best and in some markets continuing to deteriorate. Homes available for purchase has continued to climb while demand has been surely reduced. The market once driven by speculative build-up in demand and purchases that over the past years spurred more recent build up in inventory supply from speculators then put increased supply as they put homes back on the market and created the supply over hang and overall climate of customer caution.

On the demand side, the investor/purchaser part of demand has all but evaoprated. Primary purchasers on are on the side lines or demanding better pricing before purchasing. Because of the rapid deterioration of subprime lending market, an additional component of demand has now been sidelined because of the inability of a customer to qualify for a mortgage or because the purchaser of a customer's home needed for closing cannot qualify. What is clear is supply and demand have shifted and had are continuing to shift in some markets more rapidly than expected, and the inventory over hang will have to be absorbed before conditions normalize.

This is not new information. There remains a sizable amount of work to be done before our market finds any equilibrium. We have not seen evidence that the much anticipated winter/spring selling season has yet taken. Home pricing is continuing the process of being recalibrated in many markets through the use of incentives, brokers commission and price reduction, and the industry is continuing to be challenged to adjust home prices and land values as well. This recalibration process has not yet stabilized.

Further more, it is unclear today whether there is another shoe to drop. Questions remain as to whether our economy will weaken and the housing led recession or perhaps it is the supply and inventory over hang will be exacerbated by the resetting of mortgage rates on many adjustable rate mortgages that have fueled the market over the past years. Rate adjustments are creating payment stress concurrent with home prices falling and equity evaporating. On the other hand, the liquidity that exists in today's financial market is a real wild card and could be a critical mitigating factor alleviating negative market forces and restoring balance.

Lennar's strategy has been certain and consistent as we have seen these market conditions unfold over the past year. We have consistently focused primarily on protecting our balance sheet first and foremost. We have maintained day by day focus on our business operations. We have continued to refine our business model in each of our markets. We've mapped out a strategy to regain our margin in this new market environment, and we are determined to be possible positioned for recovered market conditions. Our overriding strategy is defined by our focus on our balance sheet. Our company has intensified the focus on generating strong cash flow at the expense of maintaining margins.”

by Tanta on 3/27/2007 10:19:00 AM

Fitch has a new publicly available Special Report, Impact of Financial Condition on U.S. Residential Mortgage Servicer Ratings. It identifies a high-risk class of servicers and points to some of the sources of increased risk:

To date, the financial difficulties of the various parties have been caused mainly by liquidity, overcapacity, margin pressure and poor asset quality, all of which are directly origination/ seller focused. However, for servicers who are captive to an origination shop and/or issuer, and who do not have either a diversified product mix or a financially strong parent or partner, difficulties experienced at a corporate level will undoubtedly impact the servicing operation, eventually if not immediately. For third-party subprime servicers, this impact is less. However, these servicers could also experience a loss of new loan volume, as well as the potential for higher default levels in current portfolios. Much of this increase could be caused by the defaulting subprime borrowers being unable to obtain refinancing, both due to flat or decreasing home price appreciation and the tightening of credit standards on new originations. Any servicer, whether captive or third party, which has predominantly subprime credit quality loans in portfolio, could find its timelines and overall cost to service facing increased levels not seen in recent history.
. . .
The major areas of concern for some originators/issuers of subprime products, and therefore their captive servicers, are liquidity, overcapacity, margin pressure and asset quality. Although in recent periods some reduction in liquidity capacity could be managed, based on declining volumes, current liquidity trends are primarily a result of tripped covenants and liquidity providers’ rapidly declining risk appetite. To date, when covenants have been tripped, the profitability covenants are frequently the first to be triggered. Previously, the liquidity providers were more willing to extend maturities for a short period in order to provide a company an opportunity to repair the breach. It now appears that these banks’ flexibility is declining, and margin calls have begun in earnest. Margin calls, combined with early payment defaults (EPDs), have eroded some firms’ financial position to the point that several are on the brink of bankruptcy, necessitating them to stop funding new originations and/or seek potential sale or partnership arrangements.

In recent years the industry has seen new participants enter the market, which has led to overcapacity. This overcapacity has begun to ease, with several players exiting the market, or at a minimum tightening underwriting guidelines and eliminating certain products. More consolidation is expected before the industry will be appropriately sized for expected ongoing mortgage market dynamics. In addition, extremely aggressive competition, rising funding costs and slowing origination volume have pressured profitability. Margins on whole loan sales have sharply deteriorated due to supply/demand imbalances, as well as the declining risk appetite among investors. Aggressive competition has also been a contributor to the deterioration of asset quality as evidenced by EPDs and rising default rates on subprime loans. . . .

Currently servicers are challenged with rising expenses, shrinking margins and fluctuating origination, and therefore portfolio, volumes. In addition, servicers are dealing with the complexities of natural disasters, compliance to varying federal and state regulations, as well as servicing a number of new and unique products. Further, the increasing delinquency environment may stress those servicers that are not adequately staffed or prepared to manage seriously delinquent loans with flexible default management solutions.

The entire report is fairly brief—five pages—and certainly worth a read. Bear in mind that the “historical” experience in the mortgage industry is that servicing income is counter-cyclical: you make more on servicing in those periods in which you make less on originations. History may be refusing to repeat itself for some people right when that would be convenient.

by Calculated Risk on 3/26/2007 05:30:00 PM

Some people are wondering why existing home sales were up and new home sales were down. In the long run these two series correlate very well.

Click on graph for larger image.

This graph shows the annual new and existing home sales since 1969. Use the left scale for existing home sales and the right scale for new home sales. Clearly, using annual data, the two series move together.

Note: Rsquare is 0.87.

However there are some timing differences as to when the data is reported. From the Census Bureau:

New home sales and existing home sales are released each month at about the same time. Many comparisons are made between the two series, but before doing any comparisons, one must be aware of some definition differences that affect the timing of the statistics.

The Census Bureau collects new home sales based upon the following definition: "A sale of the new house occurs with the signing of a sales contract or the acceptance of a deposit." The house can be in any stage of construction: not yet started, under construction, or already completed. Typically about 25% of the houses are sold at the time of completion. The remaining 75% are evenly split between those not yet started and those under construction.

Existing home sales data are provided by the National Association of Realtors®. According to them, "the majority of transactions are reported when the sales contract is closed." Most transactions usually involve a mortgage which takes 30-60 days to close. Therefore an existing home sale (closing) most likely involves a sales contract that was signed a month or two prior.

Given the difference in definition, new home sales usually lead existing home sales regarding changes in the residential sales market by a month or two. For example, an existing home sale in January, was probably signed 30 to 45 days earlier which would have been in November or December. This is based on the usual time it takes to obtain and close a mortgage.

The shorter answer: new home sales have been crushed, existing home sales are about to be crushed.

For the general economy, new home sales are far more important, because of the related employment and spending on materials. However, for those directly impacted by existing home sales (real estate agents, appraisers, mortgage brokers, home inspectors, etc.), the coming slump in existing home sales will have a larger impact.

by Calculated Risk on 3/26/2007 11:15:00 AM

Please don't miss Tanta's post this morning: Unwinding the Fraud for Bubbles

For more graphs, please see my earlier post: February New Home Sales: 848 Thousand

Click on graph for larger image.

The first graph shows New Home Sales vs. Recession for the last 35 years. New Home sales were falling prior to every recession, with the exception of the business investment led recession of 2001. This should raise concerns about a possible consumer led recession in the months ahead.


The second graph shows Not Seasonally Adjusted (NSA) New Home Sales for February.

Sales have fallen back close to the levels of '96 and '97.


The third graph shows monthly NSA New Home sales. This provides a different prospective of the housing bust.

NOTE: For existing home sales, February is typically a very weak month. However, for New Home sales, February marks the beginning of the spring selling season. This is because New Home sales are reported when the contract is signed - and buyers are hoping to move during the summer. Existing home sales are reported at the close of escrow - so the early summer months are usually the strongest months of the year.

March is typically the strongest month of the year for New Home sales. And this graph shows that 2007 is starting to shape up like 1982 with no surge in spring sales.

by Calculated Risk on 3/26/2007 09:33:00 AM

According to the Census Bureau report, New Home Sales in February were at a seasonally adjusted annual rate of 848 thousand. Sales for January were revised down to 882 thousand, from 937 thousand. Numbers for November and December were also revised down.


Click on Graph for larger image.
Sales of new one-family houses in February 2007 were at a seasonally adjusted annual rate of 848,000 ... This is 3.9 percent below the revised January rate of 882,000 and is 18.3 percent below the February 2006 estimate of 1,038,000.


The Not Seasonally Adjusted monthly rate was 71,000 New Homes sold. There were 88,000 New Homes sold in February 2006.

On a year over year NSA basis, February 2007 sales were 19.3% lower than February 2006. February '07 sales were the lowest since February 1997 (69,000).


The median and average sales prices were up. Caution should be used when analyzing monthly price changes since prices are heavily revised.

The median sales price of new houses sold in February 2007 was $250,000; the average sales price was $331,000.


The seasonally adjusted estimate of new houses for sale at the end of February was 546,000.

The 546,000 units of inventory is slightly below the levels of the last six months. Inventory numbers from the Census Bureau do not include cancellations - and cancellations are at record levels. Actual New Home inventories are much higher - some estimate about 20% higher.


This represents a supply of 8.1 months at the current sales rate.


More later today on New Home Sales.

by Tanta on 3/26/2007 08:10:00 AM

There is a tradition in the mortgage business of distinguishing between two major types of mortgage fraud, called “Fraud for Housing” and “Fraud for Profit.” The former is the borrower-initiated fraud—inflating income or assets, lying about employment, etc.—that is motivated by the borrower’s desire to get housing (not the same thing as “real estate”), by means of getting a loan he or she doesn’t actually qualify for. It may require some collusion by the loan originator or appraiser, but it may not. It is usually the least expensive kind of fraud to lenders and investors, since the goal is getting (and keeping) the property, so the borrower is at least usually motivated to make the payments. The problems come about, of course, because these borrowers failed to qualify honestly for a reason. Borrower-initiated fraud loans may be considered “self-underwritten,” and such loans do have a much higher failure rate than the “lender-underwritten” ones. Their only saving grace is that the lender tends to recover more in a foreclosure than in a fraud for profit case. Penalties to the borrower rarely ever come in the form of prosecution; losing the home and becoming a subprime borrower for the next four to seven years—with the credit costs that implies—are the borrower's punishment.

Fraud for profit is simply someone trying to extract cash—not housing—out of the transaction somewhere. If it is borrower-initiated fraud, it’s not a borrower who wants a house; it’s a borrower who wants to flip a piece of real estate or launder money or in some other way grab the cash and leave the lender holding the bag. Most of it, however, is initiated by a seller, real estate broker, lender, or closing agent (or all of them in collusion). It generally requires additional collusion by bribable appraisers, although it can certainly be initiated by a corrupt appraiser looking for a kickback, or can merely take advantage of a trainee or gullible appraiser. This is the flip scam, straw borrower, equity skimming, misappropriation of payoff funds, identity theft kind of fraud. It may not be as common as fraud for housing, at least in some markets, but it’s much, much more expensive to the bagholder. At minimum, the fraud-for-housing borrower wants to take clear, merchantable title to the property and maintain it at an acceptable level. That’s either unnecessary expense or (in the case of title) a hurdle to be gotten over by the fraud-for-profit participant.

The problem with this traditional distinction is that, recently, we seem to have an epidemic of predator meeting predator and forming an alliance: a borrower willing to commit fraud for housing meets up with a seller or lender willing to commit fraud for profit, and the thing gets jacked up to a whole new level of nastiness. Consider the “cash-back purchase” scam we keep hearing about: that’s a perfect example of a borrower who wants a house, a seller who wants an illegitimate profit, and a broker or appraiser or settlement agent who wants a kickback all conspiring to defraud the lender: it’s hard to call it either fraud for housing or fraud for profit because it’s both.

What, in the past, might have kept the two fraud types separate—the fact that a normal borrower would not see it in his or her best interest to borrow more money than necessary to pay more than fair market value for a home—disappeared in the mania of buy-more-borrow-more and pass the “screwing” on to the next sucker who buys it from you. As soon as borrowers became convinced that paying substantially more for the property than the current seller did just a few months ago is always and everywhere a good sign, you could no longer rely on the “rational agent” borrower to at least limit his fraudulent tendencies to lying on the loan application in order to get away from apartment life. You actually see them agreeing to sign “secret” sales contract clauses that will require them to borrow more than the fair market value of the property, and then give the excess loan proceeds to someone who won’t be helping to repay the debt. Or accepting “down payment assistance” from an interested party, in order to buy a property whose price is inflated by the amount of the “assistance.” That this doesn’t seem to strike them as self-defeating tells you a lot about how uninformed or misinformed we are, how far into a true mania we’ve gotten. In the old days, you used to be able to count on RE frauds to display basic self-interest, naked or camouflaged.

Telling the difference between the victims and the victimizers, the predators and the prey, and the fraudulent and the defrauded, is getting a lot harder when you have borrowers not required to make down payments able to lie about their incomes in order to buy a home the seller is overpricing in order to take an illegal kickback. The lender is getting defrauded, but the lender is the one who offered the zero-down stated-income program, delegated the drawing up of the legal documents and the final disbursement of funds to a fee-for-service settlement agent, and didn’t do enough due diligence on the appraisal to see the inflation of the value. Legally, of course, there’s a difference between lender as co-conspirator and lender as mark, utterly failing to exercise reasonable caution, but it’s small comfort when the losses rack up. With tongue only partially in cheek, I’m about to suggest a third category of fraud: Fraud for Bubbles.

Everybody likes to hear lurid or merely entertaining stories from veterans of the Loan File Wars about weird fraud cases.
A recent CNN piece quotes a Clayton analyst as having found a mortgage note signed by “M. Mouse” (hat tip, Andrew!). How did anyone miss that? I have my own war stories, but to be honest with you, I’m still hesitant to share much about them. I realize that in the internet era it’s a losing battle, but still: every time you talk publicly about a fraud scenario, you’re giving someone an idea—either to try to perpetrate the scam, or to evade the tricks people like me use to find their traces in a loan file. I can remember training loan officers to look carefully at a W-2, and to recalculate the withholding taxes, since so many fakers of W-2s would either forget to do that, or wouldn’t do it right. Imagine how distressed I was when one of my loan officers went home and fixed that bug in his fake W-2 template.

What I want to do instead is to make some general observations about why so much fraud is missed by lenders. Obviously, there are lenders who are colluding with borrowers, or who are defrauding investors or borrowers or some other party; that’s either “fraud for housing” or “fraud for profit” or the new hybrid of the two. To me, that’s the least interesting problem (although it’s an important one). I want to talk about the extraordinarily widespread “insufficient caution” problem in this industry: the lenders who are just too easy to defraud. It seems to me that this problem gets to the heart of a lot of the issues we keep talking about here: toxic mortgage products, loose standards, out of control home price bubbles, and the endless chain of “disintermediation,” outsourcing, temping, dumbing down, fragmenting, and otherwise morphing of the business of home mortgage lending into a big fraud magnet. It often seems as if the industry just stopped believing that it could ever really be at risk.

My theory of the Fraud for Bubbles is, in a nutshell, that it isn’t that lenders forgot that there are risks. It is that the miserable dynamic of unsound lending puffing up unsustainable real estate prices, which in turn kept supporting even more unsound lending, simply masked fraud problems sufficiently, and delayed the eventual “feedback” mechanisms sufficiently, that rampant fraud came to seem “affordable.” So many of the business practices that help fraud succeed—thinning backoffice staff, hiring untrained temps to replace retiring (and pricey) veterans, speeding up review processes, cutting back on due diligence sampling, accepting more and more copies, faxes, and phone calls instead of original ink-signed documents—threw off so much money that no one wanted to believe that the eventual cost of the fraud would eat it all up, and possibly more.

On the one hand, everyone does know that you can’t run a mortgage lending business with the same level of anti-fraud measures they use at Domino’s to keep from wasting pizzas on prank calls. On the other hand, we are starting to see—and I predict we will start to see a cascade of—stories of lenders with such lax internal controls that if they did remember the risks, you have to conclude they just tried to repress those memories. Go back and read the Cease and Desist order for Fremont. Does it sound like an operation that believes in the reality of risk? Is everyone still convinced that “hey, we sell the risk to someone else” still means squat when it comes to fraud and misrepresentation?

I said I didn’t want to get into too much detail, but I’ll tell you right now that some kinds of fraud are so easy to spot it’s pathetic. You don’t need to have the borrower sign “M. Mouse” on the note. Asking for income documentation, ordering tax return transcripts prior to closing, requiring settlement agents to fax the final purchase contract to the lender for approval prior to close, enforcing arm’s-length transaction rules: this stuff isn’t hard to do, and it will not catch everything but it will sure catch a lot, and it’ll catch it before you close, which is really the cool part. So what’s the response whenever you suggest these things? It costs too much. It takes too long. It drives up transaction costs and therefore puts a drag on home prices. It “unfairly” takes its bites out of our favorite new borrower segment: first time homebuyers, self-employed entrepreneurs, real estate “investors.” It makes loans harder to sell and securitize instantly and cheaply. It makes it harder for an originator to make those representations and warranties based on the bliss of ignorance. It could bring down the whole secondary market as we know it!

So I’ve heard all that before; you need not hand it to me again in the comments. You need, if you are inclined to find any of that compelling, to tell me in somewhat more detail how your cost/benefit analysis works. You can always find one anecdote of one legit, deserving borrower who wouldn’t get a loan if I controlled for fraud as much as I’d like to. You can’t always get me to believe that it’s worth it to originate or buy 49 fraudulent loans in order to get that one good one. You certainly can’t get me to believe that I’m the one who is risking everyone’s “confidence” in the secondary mortgage market.

I suspect most of us feel, generally, that fraudsters—borrowers, lenders, anyone else—who get burned just got what they deserved. True enough. But lending fraud, like warfare, creates quite a bit of “collateral damage,” in all senses of the term. Those honest homeowners watching their neighborhoods collapse after the fraud-bombs finally detonated are not probably very comforted by the fact that it wasn’t their fault. So when we debate the question of potential “bailouts,” we keep running up against the question of who needs or deserves the bailout. If you want to do something to assist the honest homeowner who bought with an 80% loan but is now upside down because of the neighbors’ fraud, how do you do that without, inevitably, helping out the lender who facilitated that fraud, too? If you want to do something to protect the stability of the honest lenders, how do you do that in a way that doesn’t, inevitably, also protect the scumballs and incompetents?

Getting into a bubble is easy. Getting out?

by Calculated Risk on 3/25/2007 03:41:00 PM

From the LA Times: 'Short sale' brought them relief -- which IRS is going to tax

Question: I understand that a "short sale" means the mortgage lender agrees to accept as payment in full a sale for a home's market value even if it is below the mortgage balance. ... The lender agreed to accept a short sale for $183,785 though our mortgage balance was $210,000. But we received IRS Form 1099 from the lender showing we had taxable "debt-relief" income of $26,215. How can we be taxed on money we didn't receive?

Answer: As an alternative to foreclosure when a mortgage borrower stops making payments, some lenders will accept a "short sale" of the property for less than the mortgage balance. ...

However, the IRS says debt relief is taxable. ...

I believe this is also true when a homeowner resorts to jingle mail. A common scenario might be a homeowner who refinanced their home with cash out, and then discovers they can no longer make the payments, and that they have no equity in their homes. If the homeowner then just mails the keys to the lender - jingle mail - I believe the homeowner will receive a tax bill for the difference between what what the house sells for in foreclosure and what they owed. I also believe the lender might pursue the homeowner for any losses (the 2005 Bankruptcy Law made it more difficult for homeowners to declare Chapter 7 bankruptcy).

UPDATE: In the comments, attorney Bill McLeod writes:

... there are some new forms and new requirements, and I have to make my clients gather far more documents than I ever had to before BAPCPA became law, but a struggling homeowner can still file Chapter 7 if this [is] the option they are considering.

Anyone in this difficult situation should consult with an attorney and tax advisor.

by Tanta on 3/25/2007 11:37:00 AM

With a deep curtsey to Mozo Maz, as I'm not wearing a hat to tip:

The Charlotte Observer seems to have gotten the right party's attention ("Loans builder arranged will get federal review"):

Federal housing officials will review whether Beazer Homes USA complied with federal rules in arranging government-insured loans for buyers in its subdivisions.

The Department of Housing and Urban Development,
responding to an Observer investigation, will look at lending records from Charlotte and other cities where a large share of Beazer loans ended in foreclosure, officials said Friday.

The review casts Beazer into the growing pool of lending-industry participants under government scrutiny for the
way they sold mortgage loans to low-income families in the past decade.

Good on the Charlotte Observer's team of reporters and editors for doing what journalism is supposed to be. Good on HUD for responding the Observer.

Now if only we could get HUD onto these problems before they end up in the newspaper. . . .

by Tanta on 3/25/2007 08:34:00 AM

David S. Hilzenrath reports in yesterday's Washington Post:

Freddie Mac, still fixing weaknesses that came to light in 2003, yesterday issued its first timely annual report in five years, which showed that the giant mortgage funding company lost $480 million in the fourth quarter. That compared with a profit of $684 million in the comparable period a year earlier.
. . .
"Families are finding it hard to stay in their homes as deteriorating house prices, regional job losses and increasing mortgage payments are making their homes less affordable," chairman and chief executive Richard F. Syron said in a prepared statement.

Last year, Freddie experienced a slight deterioration in the creditworthiness of loans "as more loans transitioned through delinquency to foreclosure" and as "the expected severity of losses" on individual homes increased, the company said.
. . .
Freddie reported that the delinquency rate on its single-family home mortgages -- the percentage of loans at least 90 days past-due or in foreclosure -- declined to 0.53 percent last year, from 0.69 percent the year before.

There were also less favorable developments. The company lost $126 million last year on loans it had to repurchase from other investors because they were late 120 days or more. In 2005, there were no such losses, spokesman Michael Cosgrove said.

For a company the size of Freddie Mac, $126 million is not a crippling loss. But it shows that the repurchase problem--in this case, apparently, of loans sold with recourse--is affecting everyone in the food chain. Freddie's report also may indicate that the problem for prime and near-prime will be loss severity, not loss frequency. Subprime, it seems clear, faces the same or worse severity problems, but of course at much higher frequencies.

by Tanta on 3/24/2007 01:51:00 PM

I had meant to post something on this a while ago; it’s a March 15 press release from HUD.

Assistant Secretary for Housing - Federal Housing Commissioner Brian Montgomery today reaffirmed the need to modernize the Federal Housing Administration (FHA) and give homeowners a better alternative to exotic high-cost mortgages. . . .

The National Association of Realtors reports that last year 43 percent of first-time homebuyers purchased their homes with no downpayment. Of those who did make a downpayment, the majority put down two percent or less. Modernization legislation, which overwhelmingly passed the House last year, would replace the FHA's stringent three percent minimum cash investment requirement with a flexible plan that allows homeowners to put down almost no money down, one, two or even ten percent.

To prevent the FHA from being priced out of many housing markets, the FHA's modernization legislation would also increase loan limits. Today, few buyers of homes in California or much of the Northeast have been able to use FHA financing because FHA's loan limits aren't high enough to meet the cost of most homes in those regions. By increasing and simplifying loan limits, FHA would once again be a major player in high-cost areas.

FHA modernization legislation would also create a new, risk-based insurance premium structure that would match the premium amount with the credit profile of the borrower. It would replace the current structure, in which there is standard premium amount for all borrowers, while still protecting the soundness of its Insurance Fund.

So, we have some interesting new terms to work with:

“Flexibility”: This is a good idea because a program that “allows” no down payment can also “allow” a 10% down payment. The old program “required” a 3% down payment, and “allowed” anything larger than that. That was inflexible, you see.

“Simplicity”: This is a good idea because a “simple” definition of a moderately-priced home—and thus a maximum FHA loan—can allow FHA to be a “major player” in the game of helping house prices keep going up and up and up. The “complex” definition of a moderately-priced home, on the other hand, might allow FHA to function as a drag on runaway home price appreciation by limiting financing options and thus helping to force prices downward.

“Modernization”: This is a good idea because having a large, fairly homogeneous risk pool, with some individual variation in credit quality, that is all priced the same way for insurance purposes, only worked in the Dark Ages. The new, modern, risk-based approach is much cooler, because there is no question that we know, precisely, how to price that risk, and that whole “group insurance policy” thing is never cheaper than individually-underwritten policies.

You may add those terms to the “Ownership Society” dictionary.