Just a heads up to the economic/real estate watchers out there, another casualty may very well be on the way. This time we are looking at bond insurer Ambac.
During the last craze Ambac wrote guarantees on mortgage-backed securities and collateralized debt obligations. Guess what happened. The underlying asset values fell and Ambac had to pay out on the contracts they wrote. This has created a funding crisis in the company. As of Monday they believe they have funding to reach into the second quarter of 2011 – BUT – are warning that money may run out before that. As a result bankruptcy may be on the table.
If Ambac is facing this issue it makes one wonder how long it will be before PMI and MBIA are in the same boat.
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