Mortgage insurance is a policy that is placed to protect title holders or the lender if the homeowner happens to pass away, starts missing payments, or just cannot meet the requirements of the mortgage contract. This insurance can also be referred to as; mortgage title insurance, mortgage life insurance, or even private mortgage insurance (PMI).
PMI may also be referred to as “lenders mortgage insurance” if the lender happens to pay off the premium and not the homeowner. Lenders will often do this in exchange for a higher fee structure and or interest rate on the mortgage. Since the lender paid the premium, the premium is passed along to the homeowners monthly mortgage payment.
If a homeowners down payment on the home is less than twenty percent of the loans original balance, you will be required to purchase mortgage insurance.
However, most borrowers cannot come up with enough money to cover a twenty percent down payment on the home. So because of this a financing technique was developed called 80-10-10. This refers to the first mortgage remaining at eighty percent of the homes value, ten percent for a down payment instead of twenty, and with the remaining balance creating a second mortgage lien. The second lien tends to have a much higher interest rate than the first loan. Mortgage insurance is no longer needed once the homeowners equity becomes at least twenty percent of the loan.
There is also another technique typically known as 80-15-5 were the borrower is only able to come up with a five percent down payment.
Mortgage insurance can pretty much benefit any borrower and will allow them to purchase their dream home more quickly, and also increase your buying power dramatically.
About Evan Bedard
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We are having a difficult time with a loan modificaion. In attempts to obtain a modification we found that we had PMI insurance. When we purchased our home, we were specifically told that we were in a program that allowed 5 % downpayment and DID NOT require PMI. After getting a call and a letter from a PMI company, we were told that we have a lender paid PMI policy and that this PMI company had a desire to help us become current again on our loan. We went back in our origination documents and found no information that PMI existed on our loan. We also found many other discrepancies on our loan such as a yield spread premium, numerous good faith estimates, numerous settlement statements, as well as our income very inflated! We were sickened by what we found!
To say the least, we are headed for forclosure and we have very limited income and cannot afford an attorney, due to a severe auto accident which is the reason we cannot make our payments. I am thankful to be alive, and we thank God for his provision, but we are desperatly trying to see if we have any recourse in this matter. The loan was in October 2002, but we just discovered all of the predatory lending issues in July 2009. The local Legal Aid society said unless we have a forclosure date set, that they cannot help us. (Cannot figure that one out! Seems like they want them to forclose?). Anyhow, any help or where we can get a forensic audit on our loan? Or is is too late to receive any kind of restitution?