Here’s what Wikipedia says (take it or leave it):
“Lenders Mortgage Insurance (LMI), also known as Private mortgage insurance (PMI) in the US, is insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan. It is insurance to offset losses in the case where a mortgagor is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property.”
In other words, the insurance only gets paid:
1) after default
2) after foreclosure and sale and
3) only if the lender can’t recover his costs from the sale.
Maybe our resident mortgage expert can comment.
“In other words, the insurance only gets paid:
1) after default
2) after foreclosure and sale and
3) only if the lender can’t recover his costs from the sale.
Maybe our resident mortgage expert can comment.”
That’s exactly it. I wrote software in the 80s to file mortgage insurance claims. The only thing missing from this discussion is the fact that there were a dozen or so private insurers, plus FHA and VA.
That, and the fact that the insurance is for the lender’s benefit, not the homeowner’s.
The current cleanup will be complicated by the fact that some of the lenders and investors will have a hard time putting their hands on the paperwork, particularly the note. Makes foreclosure rather difficult.