PMI to pay underwater borrowers to stay put

"Private mortgage insurance protects the lender from the elevated risk presented by a borrower that made a small down payment," says Greg McBride, CFA, Bankrate’s chief financial analyst.

Of course, there are going to be cases where borrowers are so deeply underwater that the best option could actually be walking away. Put simply, if a borrower is so underwater that it will take a decade or longer just to break even, the argument is there. It may be better to walk away, rent for a few years, and buy again when you’re ready to do.

Strong housing market helps reduce lingering foreclosure inventory Session II: Impacts of Foreclosures/Distressed Sales – When distress sales dominate the market, non-distressed house prices are also depressed.. characteristic of a non-distressed house that reduces its value.. there is a large stock of vacant homes which weighs on prices of all types of houses.. It is particularly strong in repeat-purchase house price indexes such as those.

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Others are choosing cash-ins, he says, so they won’t have to keep paying private mortgage insurance (PMI), which is required when home purchasers put down less than 20. "The lower-end clients, they.

Perhaps you want to pay off high-interest debt, or maybe you’d rather invest some of that money for your future. matt hackett, the operations director at direct mortgage lender Equity Now, said PMI gives borrowers more options. "PMI allows a borrower to put down less than 20 percent and still get a conventional loan," he pointed out.

While the Making Home Affordable refinance program is only available to borrowers who pay loans owned by Fannie Mae or Freddie Mac, the Federal Housing Administration (FHA) provides help to the rest of America’s homeowners. If another company owns the loan then the borrower may refinance with FHA, even if the home is underwater.

The thought is when borrowers put down a larger down payment, they are more financially stable and therefore will be able to continue paying on their mortgages. increased borrower equity but left.

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 · How to Avoid PMI from the Beginning. PMI can be avoided altogether with one simple tactic: put down (pay at the beginning) a minimum of 20% of the price of the home. Lenders usually require mortgage insurance for mortgage loans which exceed 80% of the property’s sale price, or assessed value. It’s that easy.