Mortgage Insurance?

[andviv]

I was thinking, given that there are so many foreclosures and so many people struggling to make ends meet...

What is the role of the mortgage insurance then?

I know I have had mortgage insurance on some of my rentals, no all of them, but what does that really mean?

If a borrower can't pay anymore then the bank gets paid by the insurance and then the insurance tries to collect from the borrower? or can the borrower just walk away? how does that work?

Anybody here really knows about it?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[andviv]

bump, just in case somebody that does know missed it before.

 

[Runum]

I'm curious too although none of my properties have PMI.

 

[yveskleinsky]

If a borrower can't pay anymore then the bank gets paid by the insurance and then the insurance tries to collect from the borrower? or can the borrower just walk away? how does that work?

It is my understanding that mortgage insurance is insurance in the loosest sense of the word. The mortgage insurance insures the bank if a borrower is unable to pay, however the mortgage insurance doesn't cover the loan for the full amount.

If the borrower walks away then the bank gets the house; the insurance does not try to collect from the borrower.

...I actually hadn't thought about mortgage insurance until you brought it up. ...If most (if not all) properties with less than 10% down are assessed with mortgage insurance, then how are the banks bleeding thru the nose so bad on them? ...I suppose the insurance was designed to only hedge a bet, not actually be redeemed. Interesting.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Cat Man Du]

Remember that PMI only covers the first 20% of the loan. The other 80% is on the hook.

 

[Bilgefisher]

Remember that PMI only covers the first 20% of the loan. The other 80% is on the hook.

Wait, I thought PMI covered was needed if you were borrowing more then 80% of FMV? I thought anything borrowed less then 80% FMV didn't require PMI?

 

[yveskleinsky]

Wait, I thought PMI covered was needed if you were borrowing more then 80% of FMV? I thought anything borrowed less then 80% FMV didn't require PMI?

PMI is required when you are putting down less than 20% of FMV. For example, if you put 5% down and financed 95% you would have PMI. Many borrowers were getting around this by doing a 80/10/10, or an 80/15/5. If you can split up the remainder above 80% you could get out of PMI. Don't know how things are playing out right now as I haven't bought a property in the past 8 months.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[hatterasguy]

PMI companies are going bankrupt because they cannot cover all the short falls. This correction has shown it to be just about worthless, nothing more than an extra expense for the owner.

 

[andviv]

If the borrower walks away then the bank gets the house; the insurance does not try to collect from the borrower.

This is what I understand as well, but I'm not sure. I was hoping somebody here actually *knew*.

 

[Cat Man Du]

PMI is required when you are putting down less than 20% of FMV. For example, if you put 5% down and financed 95% you would have PMI. Many borrowers were getting around this by doing a 80/10/10, or an 80/15/5. If you can split up the remainder above 80% you could get out of PMI. Don't know how things are playing out right now as I haven't bought a property in the past 8 months.

You won't get the 80/20 anymore as they are a thing of the past. The insurance company can come after you for the 20%, but in todays economy - they probally won't. The bank however can and will come after you for the loan amount, including the top 20% of the loan. There are no more free rides. Things are getting nasty.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.