"The Official Portrait of Miss InDiana"

"The Official Portrait of Miss InDiana"
aka "Miss Victory"

Saturday, September 20, 2008

What happened to the PMI in the Freddie/Fannie meltdown?

"The question I keep asking and no one wants to answer is what happened to the Private Mortgage Insurance (PMI) the homeowner paid for before foreclosing. If PMI is meant to insure the MORTGAGOR against default, why are these banks going under??? The PMI insurers should be taking the losses!!!"
The comment above was a response to a Washington Post article "Calling Out the Culprits Who Caused the Crisis".

Can any of our readers answer the question? It's a good one.


Melyssa said...

I paid PMI on my house for five years until I had 20% equity built. Didn't all that money I paid (and they kept) go into some kind of fund to insure against defaults?

Anonymous said...

Borrowers were avoiding PMI by taking out "piggyback" loans for the down payment. These piggybacks were funded by a second mortgage. There were a host of other really bad lending practices going such as no documentation loans. Also, home values in some areas (speculative markets like FL) were so inflated that when the bubble burst the property values fell way below the loan balances. The amount of PMI taken out didn't cover such large losses.

Pete Boggs said...

While there are a few other factors, confiscatory property taxes (IRRESPONSIBLE GOVERNMENT & FAILED STEWARDSHIP) have T-boned Indiana's real estate market, driving values down from purchase prices at which people entered the market.

The state housed can't hide the results of failed oversight (DLGF anyone?) and oxymoronic policy, or pretense of a "market value" assessment system.

Property owners are better off renting (which is the effective reality of our onerous system) and putting their money in a measly savings account, rather than endure the punishment of additional taxes on their income (after all, where does the money come from to pay for property taxes & related excess?); taxes which are levied on debt and unrealized gains (?!?).

As "America" is ever more defined as a land of punishment (taxation) rather than achievement (free market ideals), people are unfortunately, financially better off, divesting themselves of the punished asset class which includes real estate.

A government that's incapable of admitting its mistakes can't be counted on for solutions. If you've ever seen a B-rated movie where characters make all the wrong decisions after getting lost in the woods on what started as a camping trip; if you can recall that genre of movie, you understand our government and the leadership vacuum from which it suffers. Self appointed "elites," skilled in appearance rather than substance, are too self dealing to make any significant difference or impact (improvement) in the lives of others.

We've ignored our true & greatest inheritance, our Constitution; trading it for the wide bellied "comfort" of complacence. The way back is simple. The way back is the Constitution! The main "difficulty" in finding our way back, can be found in the mouths of an unwilling, uninspired, unimaginative, cowardly, elitist, political class. Yep, we need cowboys and mold breakers, not credit takers.