Housing Chill Begins to Pinch Nation's Banks

I have been hearing from acquaintances in the insurance business that the Housing Chill is hitting the bottom line of the insurers as well.

People who are short of cash are cancelling policies, life AND
disability, so as to eliminate the monthly premiums. And the "Whole
Life" segment is seeing a rise in early cash-outs, where people are
looking for the cash value of the whole life policies. I am hearing
this from agents for some pretty big companies, Mass Mutual, Northwest
Mutual and Guardian.

Example of blood on the saddle—true story from a lunchtime
conversation today (9/1)…….

A Pittsburgh real estate attorney (not me, by the way) is currently in
the process of losing his Brooks Brothers shirt because he bought into a
group of condos & houses in Florida. "I was expecting to flip them, just
a layup shot" as he told me.

Now all of his properties are undersecured, and cash-flow negative. One
of his lenders is asking for copies of recent balance sheets and cash
flow statements. They are sending out the appraisers to do new
appraisals. Whoops. This guy is now in the process of cashing out a
lifetime worth of whole life insurance policies to get the funds to stay
afloat. Here is his summary, verbatim……..

"It seemed like a no-brainer. Florida real estate looked bulletproof.
The Baby Boomers are going to retire, move to Florida and live in their
condos overlooking the beach. You could get a bankable appraisal on
buildings that had not even been constructed. Just buy, hold, sell and
pocket the difference. Now I am taking a haircut down to my scalp. I
am cashing out all of the whole life policies that I accumulated over my
entire career. This was the kids' college money, if not my retrement
nest egg. What in the hell was I ever thinking? My wife is furious, my
kids don't know about this but they are going to hate me, and my dad is
just shaking his head, like 'I thought I raised you better than that.'
I am probably going to have to work until the day I die, and then my
family will not have any life insurance on me. Man, did I ever screw

Note the last line. At this point, he is blaming himself. Just wait.
Eventually he, and others like him, will probably figure out that they
have been victimized. We will all figure out some way to blame other
people, and then sue the class-action crap out of them. Or bomb them
back to the stone age.

Best, BWK

The Daily Reckoning