Private mortgage insurance companies to the rescue
June 27th, 2009 | by mbhunter |The real estate mess is hurting not only homeowners, but businesses as well. Bad things happen at both ends when the mortgage payments stop coming in. The homeowner of course loses his house and his good credit rating, but the businesses that were involved in lending the money lose out as well. Banks may get the house back but this is an expensive procedure, and house prices are falling across the country. Home equity lines of credit get sacked, too.
Private mortgage insurers have to pay as well. These are the companies that underwrite insurance, usually purchased by the homeowner for the benefit of the lender, on mortgages for which the down payment was less than 20%. Although insurance companies do have to pay out claims as part of the course of business, they don’t make money paying out a lot of claims. (No insurance company does.) So that’s why some private mortgage insurers are helping certain homeowners keep their payments current.
Businesses are in business to make money, and if paying $2,000 per month for six months while one of their clients looks for a job saves them from losing their home — which means they don’t have to pay tens of thousands of dollars to the lender — then they win. This is loss mitigation, and it’s a happy and healthy way for businesses to take care of themselves. They’ll do what they need to do in order to stay in business.
The more I see of all of the mortgage fallout, foreclosures, whatever, the more I’m in favor of seeing the involved parties work things out to their benefit, by themselves, without subsidies, regulations, kickbacks, rate controls, etc. It will hurt more, but it will be over with that much sooner, and everyone comes out ahead in the long run. Try to subsidize and it will last longer and cost everyone more.
So if you’re behind on your mortgage payments, talk with those people who stand to lose if you default or are foreclosed on. They may just listen to you.
4 Responses to “Private mortgage insurance companies to the rescue”
By Best CSS Gallery on Jun 29, 2009 | Reply
Good advice
By Mikael @ Retire Early on Jun 29, 2009 | Reply
Its a great point and I agree that it would probably be the best solution for everyone. Like you say that the banks loose money when they take over a house then it is not just “bank” but actually the shareholders that owns the bank that loose money and for some of the major banks and insurance companies some of the major shareholders are pension funds which means that ALL OF US are the ones loosing money.
So coming up with a solution for everyone would be the best way to go.
Mikael
By Mike on Jul 14, 2009 | Reply
I had no idea this was going on but it totally makes sense. For people in danger of foreclosure this could really help. Working together is the only way we are going to get out of this mess.
By www.landlordpropertyinsurance.net on Oct 10, 2009 | Reply
The last sentence is pretty valuable to keep in mind. A lot of people don’t seem to realize that banks do not like taking away a house with foreclosures – it’s a financial burden of dealing with the property.