Comments on: A closer look at mortgage insurance

By: cbw111

cbw111 — Mon, 13 Jul 2009 12:48:03 +0000

Why should borrowers have to pay for the bank's mortgage insurance? If the bank is willing to risk financing a loan with little or no down payment, why shouldn't the bank pay for its own risk? This is main philosophical difference and the reason the outrageous PMI payments drive borrowers crazy. I often wonder if the mortgage insurers are subsidiaries of the banks. That would be too ironic, so I doubt it.

By: Fielding Mellish

Fielding Mellish — Fri, 13 Mar 2009 15:34:57 +0000

I've heard of some CPA's being willing to assist taxpayers in writing off mortgage insurance irrespective of their income level (and before it was officially allowed by congress) on the theory that any money own has to pay purely for the use of money is, by definition, “interest”. I don't know whether there's any case law on how that turned out, but it always seemed logical to me.

By: Jeff Lubar

Jeff Lubar — Fri, 13 Mar 2009 13:09:06 +0000

The private mortgage insurance industry has always been and continues to be guided by the goal of providing homeownership opportunities for all Americans. Among other things, this means ensuring that home buyers can afford to build up equity in their homes and remain in their homes over the long term. The notion of sustainable homeonwership was largely absent when borrowers could circumvent mortgage insurance and get a zero down payment low-doc adjustable piggyback loan instead. Many of those borrowers are now in trouble or have already lost their home. Now we're seeing a “return to quality” for lenders, borrowers and investors after years of market imbalances driven in large part by excessively risky, zero-verification mortgages that circumvented mortgage insurers’ important first loss role in the mortgage market. Prudent underwriting requires that borrowers have some equity at origination (generally 5 to 10 percent down for conventional loans in declining markets). Requiring borrowers to be more financially vested in their purchase should help slow delinquencies and foreclosures.
Mortgage insurers continue to do what they were desinged to do: pay claims as they come due, even in periods of economic stress.