What is PMI? PMI is Principal Mortgage Insurance. It is insurance that a lender obtains from an insurance company (which I believe AGI, at the government bailout, was one of the largest providers of mortgage insurance) and they ensured that the lender would not lose any money as a result of lending more than 80 percent loan to value in the event that the mortgage went into default.
Well, you can imagine the mortgage insurance is busy paying off these days with all the loans that have decreased in value. And so the lenders who have mortgage insurance for loans that exceeded 80 percent loan to value make a claim on their mortgage insurance once they conclude the mortgage foreclosure action, and they are entitled to be paid by whoever gave them the insurance.
Some borrowers believe that mortgage insurance is for their benefit, since they paid for it. Mortgage insurance is not for the benefit of the borrower- it’s for the benefit of the lender, and you pay for it because you’re getting a loan that’s in excess of 80 percent loan to value.
Some folks think that mortgage insurance is like credit life insurance, so that if you die then the loan would be paid off, but that is not the case. It’s something that lenders obtain if you obtain a loan that’s greater than 80 percent loan to value.
So if you have any questions about it, give me a call at (727) 847-2288. Thank you.