by callbarbre » Thu Sep 16, 2010 06:00 pm
If borrower defaults---misses a payment or 2--does the lender recoup losses out of the PMI? if foreclosed houses had PMI do lenders recoup losses from PMI? Seems to me lenders are not taking much of a hit with the bailouts and collecting from the PMI for their loses---couldn't they do more on helping owners stay in their houses with loan mods--principle reductions of 20-30%!!!!!!!!!!
Posted: Thu Sep 16, 2010 10:51 pm Post Subject:
Missing a payment or two is not technically a default. Not unless the lender sends a formal default notice and initiates foreclosure proceedings. This usually does not happen that quickly. Not until 4-6 consecutive payments or more have been missed do lenders typically begin the process.
PMI is protection for the lender against any monetary loss FOLLOWING a default on the loan. If, in the aftermath of a trustee's sale, the lender did not recoup all of its fees and unpaid loan principal and interest, it may apply to the PMI carrier for a reimbursement of that amount. A PMI payment added to the proceeds of the trustee's sale = 100% of the lender's interest in the loan, plus fees and costs.
The borrower pays for the protection and receives no benefit from PMI.
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