Most sub-prime mortgage loans require PMI, why aren’t insurance proceeds paying off most of the bad loans?
Deal Score0
Wouldn’t investors in mortgage backed securities be made whole and the housing crisis lessened if indeed the PMI was making up the shortfalls?
You are wrong. Many subprimes don’t have PMI. That’s why all those 80/20 dual loans were created – to get around the PMI requirement.
Sure, but PMI only covers the down payments that these “purchasers” Didn’t make, not the whole loan. So only covers up to 20%, and often that was a different lender for the down payment than the regular loan in some of these schemes where “buyers” put 0% down. Two or more lenders 80/20 and variations.
Sub-prime loans did not have PMI. That is why a lot of people went with them instead of doing a FHA loan where they had to pay PMI. This is one of the issue that come out of all this mess. PMI was not tax deductible so many buyers didn’t want to go that way. Also a lot of loan brokers were not able to offer FHA loans. They had to pay to be FHA loan brokers and they didn’t do that because they could offer the sub prime loans.