And we were surprised on the 2008 vintage …

… when, in truth, maybe we shouldn’t have been. HW readers might recall our earlier coverage of MGIC’s earnings call for Q2 in which the company all but admitted that 2008 vintage mortgage loans are performing like those from 2007. Which is to say, junk. A deconstruction of an Orange County Register story this morning by Tanta at Calculated Risk shows, in no small part, why this is: this is an industry has yet to clean up its act. Even after the battering ram we’ve run into. Read all of her post — it’s worth it. And it provides at least some anecdotal evidence why insurers like MGIC are still facing problems on their book of business. Highlights:

And if you were, like most people, working on the assumption that lenders and other industry participants had at least cleaned up their acts in time for the 2008 mortgage vintage to be worth something, think again. There isn’t any significant fact about this transaction I can identify that isn’t a red flag … From the mortgage broker who put the deal together: “Whatever agreement the buyer and seller made, it was between them.” From the appraiser who dutifully came up with a value of $625,000: “Like Sanchez, she had no knowledge of the terms of the sale.” From the escrow agent who closed this loan: “It sounds to me like the seller helped out,” she said. “If someone gave them $125,000, what’s the problem? That’s a beautiful thing, if you ask me.”

Stunning. HW’s Richard Bitner has been railing in television appearances lately about a broad, systemic failure in the origination industry; and, if anything, the above is proof that such grand failures don’t tend to just fix themselves.

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