NLIC.org

Dave Said:

Is there anything I need to know before renting out my "primary residence" home?

We Answered:

Personally, I would have a reputable Real-Estate company that specifically deals with leasing homes rent out your house for you. It is not wise to do this on your own if you are confused about the legalities of this type of situation.

Things to consider:

If you have a VA loan, it requires that the mortgagor (the one that is the veteran) lives in the household.

There is no guarantee that your home will not become "waste" after the lease expires.

You become a lessor and with that you are limited to your rights to your property even though you estate is legally yours (you hold reversionary interest in your home during the lease period, meaning the property will revert back to you at the expiration of the lease term).

You may not enter the premises of the tenant without their permission, unless specifically authorized in the lease contract.

You are in charge of a leasehold estate which is a non-freehold interest tenancy. Leasehold estates are considered the tenant's personal property or chattels real, because the lease gives the tenant certain rights in the property, but only for the specified time listed in the contract, while you hold title to the property.

You may have liability for all and any injuries incurred on your property during the time of the lease...

Seek a Real Estate attorney first before finding out your legal rights later when problems arise.

Naomi Said:

What does my PMI cover, and why has this not covered the losses of recent foreclosures?

We Answered:

PMI protects up to 90% of the loan amount with proceeds payable to the lender. PMI does nothing for the homeowner, except afford the lender additional security for their risk in lending to you. Indirectly, it allows banks to loan money when prudence might dictate otherwise.

PMI companies ARE paying out billions of dollars to lenders, but again, the lenders must foreclose first, and then file a claim to collect 90% of their losses. This is still not enough to stem the tide.

Keep in mind that a lender might only make 2-4% of the loan amount as profit, after selling the loan. If the loan goes bad, the lender has to buy it back, while making your missed payments. Then, the lender has to go through all of the expense of foreclosing or otherwise settling your case before trying to collect from the PMI firm.

If this was on a loan-by-loan basis, it might not be so bad, but that is not how it works. A lender will package $100 million worth of loans in a single offering. They might sell that bundle for $103-104 million. If the default rate goes over a certain amount, say 3-5%, then the lender has to give back the $103-$104 million all at once.

As you can imagine, it only takes a couple of bad bundles to break a lender. If a lender has a 5% default rate, they are out of business, because they had to pay all of their profits out to buy back those bundles. That's without even taking into account any of the lender's expenses of marketing, salaries, and operations.

Defaults are quite high right now, so that is the reason for the collapse.

You are paying it, because you didn't have 20% to put down on your home. If you did, you would not be walking away, unless your house dropped in value by that much with no chance of recovery.

Good luck!

April Said:

How can I get my PMI lowered?

We Answered:

I am in the same boat.

If your mortgage is with F.H.A. you are required to have this until you have had the loan for 5-years at that point if your balance is below 80% of the value of your home you can drop it.

My balance is well below 80%, was when I took out the loan but I still have to pay this until 5-years have passed. Another 2-years for me.