Colli Real Estate

What is the purpose of PMI (private mortgage insurance?)?

I have a question. All conventional mortgages, When the buyer filed less than 20% as a deposit required to buy PMI (Private Mortgage Insurance), which is supposed "Protect" the lender against losses in case of default by the borrower. In the case of an FHA loan, they are insured by the government Federal. Given this result does not collect their loans instituit loss of insurance companies? Is not government guaranteed loans by the FHA? Please help me understand why consumers should lender have the GPA, but now we ask help??

Well, they collect, when PMI is in place. The problem is that these poor quality loans, mortgage brokers to convince people to "avoid" the cost of PMI, with two mortgages – the second would be 20%, the first of 80%. Thus, many These loans PMI did not cover! Furthermore, before lenders may require, are closing and auction of the property – and that costs money, for each property. Lenders are asking for help because the Sarbanes / Oxley – SOX. He said the law, lenders are required to declare the "value" loans. Well, if nobody wants to buy the loan, the "value" is zero! So you see, on paper, their assets have declined dramatically. You can not convert the zero value of the property to the auction after the closing and property Not true, in fact, that the loan has been reduced to zero, because the property is still worth something – it's just that nobody wants to buy the mortgage on the property. Thus, the PMI does not apply. The mortgage should not be in rebellion! Simply select "non negotiable" to the borrower not be able to use it as an asset. And with all the consequences of market subprime, well, nobody is buying mortgages, particularly high risks. I hope that helps.

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