OK, NOW THAT THE FEDERAL GOVERNMENT IS BACKING JUST ABOUT EVERY MORTGAGE LOAN PRODUCT KNOW TO MAN WHY IS IT THAT MY CLIENTS STILL NEED TO PAY FOR AN ADDITIONAL INSURANCE AGAINST DEFAULT?
The Federal Government is now guaranteeing the performance of Fannie & Freddie... If borrowers default, thats ok. The originating lender, servicing lender, or purchaser of that debt will not lose a thing because Uncle Sam's hand is firmly in place to help steady the imbalance.
So, why do our clients all have to pay an additional premium to a company that is essentially doing nothing. It like the loans are now doubly insured!!
Of course I imagine that the PMI companies will help the government recoup some of their loss... But ultimately it is our tax money insuring these loans.
Christopher - good question and just one more oddity in our industry. I think it is safe to assume when there is PMI that the MI company will be required to pay the claim since they've been collecting on it. The government backing is still there, so yes it technically is double-insured.
Todd - It makes sense to some degree... The government will recoup some of their loss on defaulted mortgages... But the lender is completely insulated in any way from any sort of risk. the government backs the mortgage and the PMI backs the government...
I liked your blog and articles... I'm starting a sub referral group at realestateloans dot com within a few weeks... please consider joining me. mike mike.realestateloans.com
Thanks for the great advice. I will check back often. I really like the blog. I am new at blogging but I am beginning to learn quite a bit from reading blogs like the ones I find on Active Rain. If I can ever be of help just let me know.
Thanks, Terry
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