| A question on Mortgage Insurance and the current market |
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Avino
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Cash: $ 24.80
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| A question on Mortgage Insurance and the current market |
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I am wondering why are so many funds and companies are loosing money on sub-prime mortgages, when one of the things banks do on a subprime loan is require PMI, which is suppose to protect the bank from loosing its money.
On that same note, wouldn't it make sense for these PMI companies to help out home owners instead of having to pay outright for the loss once the bank forecloses? I just want to know what role these insurance companies are playing in all of this (other than making it more difficult for homeowners to pay their mortgage, since they are the ones that have to pay for PMI). I'm just curious.
~A.
Also blogging @ avinos2cents.blogspot.com
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Wed Oct 17, 2007 7:03 pm |
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coaster
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Cash: $ 1357.80
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Location: Wisconsin
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That's a pretty complicated question. First though, PMI doesn't cover the whole loan, so they aren't going to be hurt that bad. Typically, they only cover the difference between 80% of the loan and what's been paid off. i.e. if you've got 5% of the loan paid off when you default, the mortgage holder gets 15% from PMI plus the property. So when the bank sells, they only have to get 80% to break even.
~Tim~
Eye Candy : Why Whimsy
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Fri Oct 19, 2007 12:56 pm |
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Avino
Preferred Member
Cash: $ 24.80
Posts: 118
Joined: 27 Mar 2006
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I think PMI is still a scam  They basically tell you, we don't think you will be able to afford your house, so we are going to make it even more unafordable for you by requiring you pay PMI to protect us, but not protect you.
I think mortgage companies and banks should redo their formula for how they charge interest and pay down principal on home loans. Its outrageous that you end up paying back almost double or more of your initial loan amount if you pay back by their terms. And then if in 15 years you run into trouble, even though you have probably already paid them more money than what they lent you, they still take your house.
If any laws get passed they should be to make borrowing money for a mortgage fair for both the bank and the consumer, not just the bank. And besides banks are using a consumers money in the first place to fund these loans.
~A.
Also blogging @ avinos2cents.blogspot.com
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Fri Oct 19, 2007 3:40 pm |
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coaster
Senior Advisor
Cash: $ 1357.80
Posts: 6686
Joined: 11 Oct 2005
Location: Wisconsin
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Do you have many millions of dollars to make campaign contributions? Banks do. Is it any wonder that banking laws are tilted heavily in their favor? 
~Tim~
Eye Candy : Why Whimsy
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Fri Oct 19, 2007 5:32 pm |
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