NLIC.org

Brent Said:

How do you calculate private mortgage insurance for a home loan?

We Answered:

Private Mortgage Insurance rates are usually set by the insurance company insuring the loan which is calculated with consideration to how much of the loan needs to be insured. In the case of an FHA loan (government insured), you pay part of your PMI upfront (1.5% of the loan amount) and the rest (.5%/12) in your monthly payment. On an FHA loan of $115,000 you would $1725 at closing plus a monthly PMI of $47.92. Plan on $67.03-$86.25 extra per month if not an FHA loan (.7%-.9% divided by 12 months).

Philip Said:

What is the purpose of PMI (private mortgage insurance?)?

We Answered:

Well, they ARE collecting, when PMI is in place. The PROBLEM is, with these substandard loans, the mortgage brokers were convincing people to "avoid" pmi costs, by taking TWO mortgages - the second would be for 20%, the first for 80%. So many, many of these loans, have no PMI coverage!

Plus, before the lending institutions can collect, they have to foreclose and auction off the property - and that costs money, for EACH property.

The lenders are asking for help, because of Sarbanes/Oxley - SOX. The LAW says, the lenders have to report the "value" of the loans. Well, when no one wants to buy the loan, the "value" is zero!! So that makes it look, on paper, like their assets have dropped dramatically. They can't convert that zero into the property value, until after they foreclose and auction off the property

It's not TRUE, in reality, that the loan has dropped to a zero value, because the PROPERTY is still worth something - it's just no one wants to buy the mortgage on the property.

SO, the PMI doesn't apply. The mortgage doesn't even have to be in default! It just has to go to "not sellable", for the lender to not be able to use it as an asset. And with all the subprime market fallout, well, no one is buying mortgages, especially the higher risk ones.

Hope that helps.

Arlene Said:

How does private mortgage insurance work?

We Answered:

You will pay PMI until you have 20% equity in the house, but please keep in mind that this will take a long time because your initial mortgage payments are primarily going towards interest, not principal. So, to speed the process along, you could make additional principal payments each month. Then, once you get 20% equity they should cancel the PMI, but sometimes you need to notify them in order to get it cancelled...so definitely keep track on your own. There is a good loan amortization calculator on microsoft's website, where you can put in the amount of the loan and extra payments that you make, so you can use these numbers to track the equity that you have.
I think that the catch with the 80/10 is that the loan for the 10% isn't a fixed rate and is more like a home equity loan.
I think the ideal thing to do would be to keep saving until you have 20% to put down, but if that isn't an option then I really don't know if it is better to pay PMI or get an 80/10 loan.

Ken Said:

What role does (PMI) Private mortgage insurance play in the Sub Prime Mortgage disaster?

We Answered:

It doesn't play much of a role at all, in my opinion. The Sub Prime situation by and large involved high loan to value financing vehicles, whether it be "interest only", 80/20 combo loans, stated, or what have you. In the 80/20 combo situation, there was no mortgage insurance involved. PMI is involved in the pre-construction fiasco, but that's another story in itself. In fact during the 80/20 craze, the PMI folks lobbied Congress to get a deductibilty situation set up ( consult your tax advisor) so they could get back in the game.

Carl Said:

Where is Private Mortgage Insurance in this financial bail out.?

We Answered:

conventional loans allowed 80/20 financing as well.

However, now to actually answer the question. I don't know. LOL

We'll have to see the plan next week. It would be great if the rates went down and there was no PMI.

Francisco Said:

Am I being extorted by my private mortgage insurance company?

We Answered:

No it's not extortion. They're making you a counteroffer. If you want to sell it for $175k then you owe them $77k. You can't just get a mortgage for $275k and think the other $100k will be forgiven.