What is a private mortgage insurance?

Jul 14, 2021

Kiritsis Law Group 212 922 0005

By: John Kiritsis, Esq., CPA, MBA, MS, JD, LL.M

Generally, private mortgage insurance, refers to a mortgage guaranty insurance, which protects a lender, against debtor default. Typically, a private mortgage insurance, is payable to the lender and/or the entity, with the pool of securities that were used to take out the mortgage loan. The monthly payments often vary, based in terms of loan amount involved and default risk assessment. Pending changes in tax laws, could influence an owner’s ability to deduct monthly insurance payments. A piggyback loan, could be a way to avoid or provide an alternative to a private mortgage insurance.   There are some controversial arguments by some, that assert that the existence of private mortgage insurance, has an enabling effect on predatory lending; this notion is based on the idea that buyers who are required to pay private mortgage insurance are more likely to default, and thus they have to essentially pay higher fees. A private mortgage insurance (PMI) is often called a lender’s mortgage insurance (PMI). Another potential use of PMI is that it may bolster a trench of a mortgage backed security (MBS) during the securitization process. 

 

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