Why aren't we asking: WHY ISN'T THE PMI PAYING FOR THE BAILOUT OF THESE BAD MORTGAGES

[TinaBopper]

Why aren't we asking: WHY ISN'T THE PMI PAYING FOR THE BAILOUT OF THESE BAD MORTGAGES?

Or are the bankers collecting the PMI insurance on top of the government buyout?




What Is PMI?
PMI is extra insurance that lenders require from most home buyers who obtain loans that are more than 80 percent of their new home's value. In other words, buyers with less than a 20 percent down payment are required to pay PMI.

Benefits of PMI
PMI plays an important role in the mortgage industry by protecting a lender against loss if a borrower defaults on a loan and by enabling borrowers with less cash to have greater access to homeownership.

 

[LittleLightShining]

Great question!

 

[Elle]

The PMI isn't paying for all the sub prime mortgages that have defaulted because the subprime mortgages are not required to have PMI.

 

[LittleLightShining]

The PMI isn't paying for all the sub prime mortgages that have defaulted because the subprime mortgages are not required to have PMI.

How can that be? I was under the impression that anyone who got a mortgage with less than 20% down HAD to pay PMI.

 

[Kalifornia]

Regulations were changed that allowed buyers to avoid PMI requirements by getting two mortgages to buy. They borrowed the 20% down payment from one lender, and the 80% primary mortgage from another, hence avoiding paying PMI premiums.

 

[Elle]

Sub prime or non-conventional mortgage rules are not the same as conventional mortgages. With sub prime loans anyone, and I mean anyone could get a loan. People were able to be refinanced out of a foreclosure situation and pull cash out at one point in the mid to late 90's. People with mid scores as low as 480 were able to get mortgages with no money down, no PMI. Then came the NINJA loans, which means no income, no asset, no job verification. They also didn't check credit for these loans.

 

[LittleLightShining]

Regulations were changed that allowed buyers to avoid PMI requirements by getting two mortgages to buy. They borrowed the 20% down payment from one lender, and the 80% primary mortgage from another, hence avoiding paying PMI premiums.

I have a Fannie mortgage. We didn't have20% but got a grant to assist with the down payment. It wasn't the full 20% so we are paying PMI. I have a hard time believing that the majority of subprime mortgages don't have a PMI requirement.

 

[Elle]

Fannie follows conventional rules. That is why you have the PMI. I was a mortgage loan officer off and on for over ten years. PMI was not a requirement with sub prime loans.

 

[LittleLightShining]

Fannie follows conventional rules. That is why you have the PMI. I was a mortgage loan officer off and on for over ten years. PMI was not a requirement with sub prime loans.

Ok, so why did Fannie need the bailout?

I almost wish I had been more reckless in getting my mortgage instead of getting a fixed rate loan I could afford with a $70/mo PMI payment.

 

[Elle]

Fannie & Freddie needed a bailout because the bubble started to burst.

This kind of explains what happened with Fannie and Freddie

http://money.cnn.com/2008/04/21/news/economy/fannie_freddie/

They just got too big. Then people started losing jobs and the economy went in to toilet.

 

[LittleLightShining]

Fannie & Freddie needed a bailout because the bubble started to burst.

This kind of explains what happened with Fannie and Freddie

http://money.cnn.com/2008/04/21/news/economy/fannie_freddie/

They just got too big. Then people started losing jobs and the economy went in to toilet.

I know. I know what they said.

Having PMI am I foolish to keep paying my mortgage?

 

[kathy88]

As an ex-mortgage broker I can say that poster # 2 is absolutely correct. These subprime products were designed to avoid PMI. Not required.

 

[Bruno]

To the OP : That is an excellent question, and maybe the unanswered question of this whole mess. Where were the premuims going if they are not going to cover payment of the default?

Fannie follows conventional rules. That is why you have the PMI. I was a mortgage loan officer off and on for over ten years. PMI was not a requirement with sub prime loans.

Then I'm sure you are aware any non-conventional FHA or VA loan had to have not PMI, but rather MIP, Mortgage Insurance Premium. This was "guaranteed" by HUD. Many of the Freddie loans would have been in that category.

I serviced loans for years with a mortgage company. All FHA and VA loans had MIP, most of which were required for the life of the loan and could not be dropped. Some had a cancellation option at 80 % LTV, which was usually 12 to 15 years into the payment schedule on a 30 year loan.

Any loan regardless of loan type had to have either PMI or MIP until a 80% LTV ratio or have entered with a 20% downpayment (in which case it would not have been subprime).

Did you really have subprime loans without any mortgage insurance? That surprises me, but I guess I should stop being surprised.

 

[RonPaulMania]

First of all most of the mortgages that caused this problem weren't sub-prime, although they were a huge problem. Many of the Fannie and Freddie loans that were backed by PMI aren't talked about.

Second, there was no 100% financing for 480 mid-scores, it's 580 for subprime. Fannie though was funding 100% for a 520 mid-score if your collections were under $3000. Fannie loans had PMI.

Third the way they got around PMI was self-insuring the 2nd mortgage with high interest rates that were well above prime. Instead of charging 7%, which was common in sub-prime world, it was 11-12% and the rate was considered self-insuring the loan with a high enough rate to cover default.

 

[walt]

why are the mortage lenders being transferred back the criedt risk (it's in the documents way deep)?

why aren't we getting refunds from the borkers, mortgage appriasers, etc who made this farce?

 

[Elle]

Second, there was no 100% financing for 480 mid-scores, it's 580 for subprime. Fannie though was funding 100% for a 520 mid-score if your collections were under $3000. Fannie loans had PMI.

There was 100% financing for 480 mid scores. Those are what NINJA's were used for. My boss would run a credit report and if it came back at 480-520 that is when he would write the NINJA. I have also seen sub primes written with scores as low as 520. New Century Mortgage specialized in these types of loans. Collections did not matter either.

Another way to avoid MIP or PMI with an FHA loan specifically, is going with a term of 15 years.

 

[pepperpete1]

AIG Review news gives a good explanation

Why aren't we asking: WHY ISN'T THE PMI PAYING FOR THE BAILOUT OF THESE BAD MORTGAGES?

Or are the bankers collecting the PMI insurance on top of the government buyout?




What Is PMI?
PMI is extra insurance that lenders require from most home buyers who obtain loans that are more than 80 percent of their new home's value. In other words, buyers with less than a 20 percent down payment are required to pay PMI.

Benefits of PMI
PMI plays an important role in the mortgage industry by protecting a lender against loss if a borrower defaults on a loan and by enabling borrowers with less cash to have greater access to homeownership.

This site gives a good explanation in question and answer format.

http://dialog.newsedge.com/portal.a..._4964000000b5fb95]&rtcrdata=on&epname=FINSVC&

 

[N13]

Sub-prime loans have no pmi.

But institutions can issue a credit default swap on them.

 

[max]

How can that be? I was under the impression that anyone who got a mortgage with less than 20% down HAD to pay PMI.

not with subprime......only the fannie mae conventionals required it

 

[jsteilKS]

Another thing about PMI is that alot of people my age in there early 20's figured out that they could take a class through Akorn that would get you around the two rainy day deposits in your checking and PMI insurance with Bank of America and US Bank.