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re: PMI: Someone explain this to me again?
Posted on 3/31/09 at 8:41 am to coloradoBengal
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.
1
Posted on 3/31/09 at 8:52 am to MikeBRLA
quote:
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.
Okay. But doesn't that mean the bank still gets its money?
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