Insurance Fraud with Sub-prime Mortgages
by geomagnetSeptember 29th, 2008 at 7:30 PM
Filed under: Business
 |
|
As a realtor I am shock to constantly hear about the sub-prime mortgage crisis. Every loan that I know originating with less than 20% down payment as security requires a PMI (Private Mortgage Insurance) to cover the loan in the event of foreclosure. This means every sub-prime mortgage has a PMI. If you pay for a PMI you already know it is not an insignificant amount of change. So what happened when all these bad loans bellied-up? Where did the money from the PMI go? Why the hell am I ( a tax payer) expected to pay for these bad loans when there is an insurance company out there who is obligated to pay for these foreclosures? I feel like hurricane Andrew just blew through town and now all the insurance companies are doing everything under the sun to escape their responsibility. I think its high time to file a class action suit against these insurance companies who continuously take our money, promise protection and deliver hot air when duty calls. |
 |
Rate this Article
Submit a Critique
Critiques
Show Oldest First
Good question. I just took the continuing education exam for Florida Real Estate license. The study guide stated that Private Mortgage Insurance is for the event of a foreclosure. However, some life insurance policies cover mortgage pay off in the event of the owners death, leaving the clear title for the heirs.
Here is another definition I pulled off the FHA website:
Required on virtually all conventional loans with less than 20% downpayment. Although the payments for PMI are included in your mortgage payment, it protects the lender should you default on the loan. On FHA loans, you will pay a MIP (Mortgage Insurance Premium) which accomplishes the same purpose.
However, My wife (also a Realtor) explained that during the RE boom, the lenders where not requiring PMI on loans structured as "no docs", "zero-downs", "no-closing", "wrap-arounds", and various loans which are now being fingered as the notorious culprits.
I like your message about PMI, and the responsibility of insurance. It is very interesting to ponder with everything going on.
You said; "Every loan that I know originating with less than 20% down payment as security requires a PMI (Private Mortgage Insurance) to cover the loan in the event of foreclosure."
Are you sure about this? I think the PMI only is paid when there is a death of a
mortgage owner. It is like a life insurance policy to protect the loan company,
(the mortgage bank) not the homeowner. Since no one died the PMI is void. PMI,
has always been a rip-off, quazy-life-insurance product they sell for profit.
I think we should invoke a good attorney and sue the USA Congress for not doing its job of protecting the American public. This is a real life business shame on
the millions of USA taxpayers.
Stableman
I was thinking about why PMI didn't help or wasn't widely addressed, and I guess this PowerPoint, specifically the "we f*cked up" portions, explains it all.