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Originally Posted by Hugh R
So bottom line is that PMI insurer's didn't end up paying off, the went BK or something? I would have thought that PMI insurers sold all their obligations as credit swaps and such in bundled packages.
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Maybe, but I haven't read anything on or seen any evidence of that yet. I don't think PMI is very common and it certainly wasn't with subprime, aka the most problem-prone, loans.
80-10-10 and 80-15-5 loans got popular in the late 90's and really cut into the PMI market. I mean, why would you pay a monthly PMI premium, which doesn't build equity and isn't tax deductible, when you could pay a piggy back second, which does build equity and is tax deductible? And if your credit wasn't good enough for a piggy back loan, then you'd have been better off going FHA and, in the early 2000's, subprime.
When I was in the A paper biz, thes PMI reps called on our office all the time. They'd bring us breakfast, lunch, sponsor happy hours, etc. I felt sorry for them because I just couldn't find a need for their product and never once had a borrower for whom PMI made sense. I think the one loan I did that probably had a lender-paid PMI policy was a 100%, oddball investor, single loan. Back then that required a min. 700 FICO and had a rate high enough to cover the PMI.
I'd love to read about what's become of them since subprime is gone, conventional and FHA are tougher, etc. But again, if a PMI company ever denied a claim, it didn't affect the homeowner. It affected the lender.