jIM wrote:
- quote -


PMI is paid to an insurer, I think there are 5-6 big ones out there. It
works as you're assuming it does (creates pool of money from which
covered losses are paid, in defaults).

If your down payment is at least 20%, you don't need to buy PMI. Of
course in the new way of buying a house, borrowers were able to get 2nd
mortgages, to reduce the amount of cash-down required to avoid PMI. It
started with 80-10-10 (10% on a 2nd mortgage, 10% down) but in the
extreme there were 80-20s.

You are probably thinking that borrowing 20% + 80% is the same as
borrowing 100%, and someone that did that is an obvious candidate for
PMI, much more so than the guy who puts 15% down. Bingo! If only the
mortgage business was run by people with common sense, instead of
finance MBAs from Wharton.

-Tad

When a person pays PMI- who gets the money paid into the PMI account?

Is this account a buffer to bail out loans which are defaulted, or is
it really purchasing some type of insurance, and when would this
insurance kick in?

If a sub prime loan is defaulted, I assume that these loans were
either

a) exempt from paying PMI
or
b) PMI insurance did not cover the default

Just asking for my own knowledge. thx