Monday, December 08, 2008
CSI: Real estate and private mortgage insurance
For many years, buyers who put less than 20% down on a home have had to pay private mortgage insurance. This is a percentage fee, tacked on to a monthly mortgage, that protects the lender against default on the loan. The loans are insured. And "pmi" isn't inexpensive for the borrower.
I'm sure this has occurred to many of you before this, but: if there was so much insurance on mortgage loans, why are lenders in such trouble from all the defaults? Where did this insurance money go? Who collected it? Where is it now? Why hasn't it helped stabilize the real estate market? Does anybody know?