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How do the banks get away with not talking to you until your 90-days late? I've been told that on day 91; insurance pays the bank for the bad loan. So if the mortgage has been paid, how can the bank come back and "double dip" by foreclosing on you and taking the house to re-sell to someone else.
How do the banks get away with not talking to you until your 90-days late?
Collection calls should start around the 17th of each month if that month's installment hasn't been paid.
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Originally Posted by HouseSolutions
I've been told that on day 91; insurance pays the bank for the bad loan.
Nope. Not how it works.
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Originally Posted by HouseSolutions
So if the mortgage has been paid, how can the bank come back and "double dip" by foreclosing on you and taking the house to re-sell to someone else.
If a home ends up in foreclosure, the bank files a claim for loss with the mortgage insurance company. They will still take an overall loss in many cases, but the MI company will make the loss smaller/less painful. At this point, the bank can prepare the house for sale and marketing. They will have to pay a realtor, may potentially pay for costly repairs to the home, etc. Trust me selling REOs is NOT a money-making business for the average bank.
PMI was NEVER about "making lenders whole". Instead it was (and is) a way for lenders to "broaden the upside potential of residential lending while enhancing the range of risk products investment banking clients can use to creatively mitigate risk"...
The PMI companies (like MGIC and Radian) did not have any "magic money machine" that would transform a few extra dollars a month into the full appraised value of the home on which a mortgage was written to borrowers that otherwise would not have been credit worthy. Instead what those premiums did was to show a positive cash flow on a range of credit / insurance instruements (like CDOs) that enabled the Lehman Bro/ Bear Stearsn /AIG guys to sell these contracts to one another (with some underwritten by themselves and others by GS, JPM, BofA/Merrill and Morgan Stanley/Citi ...) for HUGE trading profits with the full blessing of credit rating agencies ( Fitch, S&P, and Moodys) because to their pea brains the PMI magically made sub primes loans just as solid a mortgage to a guy that fought in WW II and would rather chew off his own fingers than default on a loan. Big mistake there...
SO the point of PMI is to expand the range of borrowers than can get loans NOT to make lenders whole. Best case a PMI firm MIGHT pay about 60 cents on the dollar for a property that was part a fraud / faulty loan documentation. That still leaves the lender with the collateral (the house...) to auction off and TRY to recover the other 40% of the money they lent. Not good.
Whoever told you that doesn't know what they're talking about at all.
Well Said - Debsi, you are I have covered this before.
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Originally Posted by chet everett
PMI was NEVER about "making lenders whole". Instead it was (and is) a way for lenders to "broaden the upside potential of residential lending while enhancing the range of risk products investment banking clients can use to creatively mitigate risk"....
I appreciate all the comments...there's a lot of mis-information out there and sometimes its not clear whose telling the truth. Thus, why I posed the question. Thanks!
Realize that my mocking tone was not directed toward you but the "whiz kids" at the investment banks and rating agencies that dreamed up the schemes to allow anyone with a pulse to get a mortgage.
And to be clear, my reference to WWII vets that would rather loose a limb before they'd default on a loan committment is not meant to say that anyone shouldn't (or should...) think of a loan as anything other than a financial decision with consequences that are both positive and potentially negative. Further somehow I left out a "was not" about what circumstance would trigger a PMI payment to a lender -- it is sorta like when you have a claim on your homeowners insurance. If the insurer finds out your house burned down not becuas of a lighting strike but becuas you decided to try using your Weber Kettle on your mattress that is sorta what happens if the lender finds out the loan was based on false documentation / willful attempt to commit fraud.
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