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Started By
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PMI: Someone explain this to me again?
Posted on 3/31/09 at 8:09 am
Posted on 3/31/09 at 8:09 am
I couldn't find this exact discussion in a search, but I'm sure its been discussed before...
Why are we having so many foreclosures if we have so much PMI out there?
Why are we having so many foreclosures if we have so much PMI out there?
4
Posted on 3/31/09 at 8:35 am to coloradoBengal
I don't know and sad to say I hadn't thought about it until a caller on Rush asked him about it ... he was speechless ... said he'd not even thought about that but that it was a VERY good question!
Wish I knew the answer ...
Wish I knew the answer ...
Posted on 3/31/09 at 8:41 am to coloradoBengal
PMI is insurance for the lender, not the borrower (even though the borrower directly pays for it, the beneficiary is the lender).
With that being said, your question was why do we have foreclosures if we have PMI. PMI protects the lender if they can't recoup their assets (the amount borrowed) if the borrower defaults. The process of recouping their asset (the house) is to foreclose on it.
So if the borrower quits paying, the bank forecloses, THEN if they don't recover their loss, they will make a claim with the Private Mortgage Insurer to cover their loss.
As you can see, PMI doesn't stop a foreclosure since the PMI claim takes place AFTER a foreclosure if the proceeds from the sale of the home don't cover the balance of the loan.
Someone correct me if I'm wrong, but that is my understanding.
With that being said, your question was why do we have foreclosures if we have PMI. PMI protects the lender if they can't recoup their assets (the amount borrowed) if the borrower defaults. The process of recouping their asset (the house) is to foreclose on it.
So if the borrower quits paying, the bank forecloses, THEN if they don't recover their loss, they will make a claim with the Private Mortgage Insurer to cover their loss.
As you can see, PMI doesn't stop a foreclosure since the PMI claim takes place AFTER a foreclosure if the proceeds from the sale of the home don't cover the balance of the loan.
Someone correct me if I'm wrong, but that is my understanding.
Posted on 3/31/09 at 10:55 am to coloradoBengal
most of the PMI companies are insolvent. It's another one of those counterparty problems.
Posted on 3/31/09 at 12:39 pm to coloradoBengal
The way a lot of sub prime loans were structured they didn't require PMI, for example 80/20 loans.
Just more ridiculousness out of this mess.
Just more ridiculousness out of this mess.
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