نتائج طلاب العراق 2013

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 private mortgage insurance questions bank of america mortgage insurance questions pmi

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تاريخ التسجيل : 27/01/2013

مُساهمةموضوع: private mortgage insurance questions bank of america mortgage insurance questions pmi   السبت فبراير 09, 2013 1:11 am

private mortgage insurance questions bank of america mortgage insurance questions pmi
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It always amazes me how people manage to go through an entire lifetime in such a state of absolute ignorance and confusion, yet have incredibly strong thoughts and opinions on everything they do not comprehend and have absolutely NO understanding of.

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Simply put, the mortgage holder is insured for the loss incured as a result of default.

Simple example, mortgagee defaults, mortgagor forecloses, sells house, recoups some or all of mortgage amount. The PMI insurer covers the difference of the mortgage amount and the amount recouped by foreclosure. Got it?

So, the insurer is rarely on the hook for the full amount of the mortgage. Defaults rarely result in great losses, so the business is relatively stable and profitable.

EXCEPT for the recent unforeseen spate of foreclosures---which resulted in losses ONLY as the result of homes, which in certain extreme cases, in California, Florida, and Detroit, for example, had little or no resale value in the recent and present market climate.

Most of which was the result of mortgages being given, not so much to unqualified buyers, but to the fact of *developers*, borrowing, overbuilding and overselling. CA and FL are perfect examples of this, developments built in locations which simply could not sustain development. The Imperial Valley in CA, and developments built in the center-lands of FL way beyond I-19 and even I-4 (The west and center corridor hgwys.).

Developers, chasing the market, built in these areas because, in relaton to the incredibly 'up' market, land in these areas was cheap, and allowed the developers to meet the price of the target market, in terms of cost and market price.

The problem was that the reason the land was cheap, was because no one wanted to live in these places, and the only thing which made development in these areas appealing was the cost in relation to the over-priced market. In these locations, developers could build cheaply and sell cheaply. And as long as 'demand' was out-sized and the overall market over-priced, developments in these outlying areas had value.

Once the overall market burst, lowering demand and prices, as well as increasing availabiltiy of homes in more desireable locations, the market for these outlying areas totally collasped, as demand to live in such areas dropped to nil.

The above set of circumstances is what caused the PMI insurers to lose money.

In normal times, they never lose. Normally, its a boring, stable, profitable business. Unfortunately, as their due diligence was based on historic patterns which had never changed, they were ill equipped to make judgments on a market such as that of the previous decade or so. No PMI insurer had ever experienced such an overbuilt circumstance, nor a market where mortgage risk was offloaded to bond holders, thereby skewing the tradtional underwriting standards. In effect, the PMI insurers were clueless to the changes in the business, and suffered as a result.

If they had been aware, they would never had provided insurance for such overbuilt properties and developments. (I did not cover the coop/condo Miami nor the devolved markets of Detroit and the rustbelt, but they are quite similar in nature.)

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Just an aside, as a result of the 'crash', many developers were left holding the perverbial bag. Many had vast stocks of land holdings in these outlying areas which almost overnight were rendered almost worthless (a bit of an overstatement, but to the point), representing a huge loss in capital.

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Btw, PMI insurance is not just for the "least" credit worthy, but for anyone purchasing a property in whcih the lender feels the need for greater security. It is mainly about the amount of 'leverage' used to finance the property. One could have perfect credit and high income, but choose to purchase a very expensive property, for example, with a relatively low down payment. PMI insurance would normally be required.

Such circumstances are a relative norm in a high cost market like NYC, where, for example, a down payment of $100K on a million dollar property is small!! Such a buyer would require PMI insurance, even with an income of $500K or more. NYC is a prime PMI market.
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