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foreclosure

What Is Private Mortgage Insurance, And Is It Really Worth It?

By //  by Khaleef Crumbley

When I was a kid, one of the things that I remember about home ownership is that people would have to save up for a long period of time in order to be able to put down at least 20% of the purchase price of the home as a down payment. However, over the past 10-15 years, the practice of planning a home purchase based on when you could save up a 20% down payment has essentially become obsolete.

What Is Private Mortgage Insurance (PMI)?

Because of this failure to come up with the standard down payment, more and more people began paying private mortgage insurance premiums during the real estate boom of the mid 2000s. Private mortgage insurance (or PMI) is insurance that is in place to ensure that mortgage lenders do not lose money in the case where a mortgagor is not able to repay the loan, and the full costs cannot be recovered even after a foreclosure and sale of the property.

Because of this, private mortgage insurance is usually required when the borrower is putting up less than 20% of the purchase price or appraised value of the home. The cost of your insurance will vary depending on the size of the down payment and the loan and the location of the property (like one of these retirement havens), but they typically amount to about one-half of 1 percent of the loan – which would be about $2000 a year on a $400,000 house.

PMI definitely makes sense from the lender’s perspective, since they are taking on more risk by extending a loan that is at or close to the value of the property. In some cases you will actually pay an upfront premium in addition to the ones baked into your mortgage payments.

PMI is an extra fee that can add a substantial amount to your monthly mortgage payment (especially when you consider interest, homeowner’s insurance, and taxes), and you may be required to pay this amount until the equity you have in your home reaches the twenty percent threshold.

How To Stop Paying Private Mortgage Insurance:

If you currently owe less than 80% of the value of your home and are still paying PMI, contact your mortgage company immediately for instant savings (it issupposed to be canceled automatically once you owe less than 78%). They will require proof that your equity position is stable and is more than 20%.

That “proof” will come in the form of an independent appraisal. Unfortunately, you are usually not given a choice regarding the appraiser or the total amount of the fee; but at least you get to pay for it (sometimes at a cost of $500 or more)!

If you still owe more than 80% of the value of your home, but you have enough money in savings (“enough” is relative), it may make sense to pay down your mortgage in order to stop paying these fees.

My Thoughts About PMI

Waste Money

To me, it doesn’t make sense to pay insurance premiums for a plan that doesn’t even cover me . I wonder how many people actually add PMI to the equation when figuring out if it’s time to buy a home. What was that? Most people don’t make any calculations when trying to buy a home? Well, then I guess they won’t mind paying an extra couple of hundred dollars (with the home prices in my state) per month in order to grab a piece of the “American dream”. Maybe you can buy a home overseas instead! 😉

Seriously, how many other types of insurance can you think of where the one paying the premium doesn’t benefit at all from the protection offered by the coverage? And to me, if a loved one benefits, then I benefit, so you can’t add any types of life insurance to that list.

If you have crunched the numbers and you can tell me that it is better for you financially to rush into buying a home with little to no down payment and paying PMI, then maybe there may be some merit to this; but as far as I can see it (in most cases that I have observed), it is a huge waste of money, and it is another cost of being financially unprepared and undisciplined!

Photo credit: Freedigitalphotos.net

Filed Under: Housing Tagged With: financial economics, foreclosure, Insurance, insurance pmi, insurance premiums, lenders mortgage insurance, life insurance, mortgage, mortgage insurance, mortgage insurance pmi, mortgage insurance premium, mortgage law, mortgage loan, pay private mortgage insurance, private mortgage insurance, private mortgage insurance pmi, private mortgage insurance premium, real estate, types of insurance, united states housing bubble

Homeowner Forecloses On Bank Of America After Illegal Foreclosure By Bank Backfires

By //  by Khaleef Crumbley

Yes, the title of this article is correct. After the North Carolina based Bank of America foreclosure procedure backfired, the homeowner was able to foreclose on the bank!

Bank Of America Foreclosure Gone Wrong

According to a story on Digtriad.com, the Bank Of America foreclosure was filed against the home of a couple who didn’t even have a mortgage. This is another reason why becoming a cosigner on a loan is so risky (lenders make terrible mistakes all the time)! They owned their home outright! The couple said they paid cash for the house:

The case went to court and the homeowners were able to prove they didn’t owe Bank of America anything on the house. In fact, it was proven that the couple never even had a mortgage bill to pay.

What I want to know, is what in the world make BOA believe that the couple owed them money on this home, when they never even had a mortgage (this is the reason why I am trying to pay off debt)! It’s really bad when buying a home with cash is as risky as investing in Brazil!

Since it was the bank that filed this wrongful foreclosure, they were ordered by the judge to pay the legal fees of the homeowners.

I guess you’re wondering how did it go from BOA owing them a few thousand dollars, to the homeowners being able to foreclose on the bank!

Bank Of America Foreclosure In Reverse

From this point on, the story looks identical to Bank of America foreclosure proceedings, except now the bank is the one who owes a debt:

After more than 5 months of the judge’s ruling, the bank still hadn’t paid the legal fees…”They’ve ignored our calls, ignored our letters, legally this is the next step to get my clients compensated, ” attorney Todd Allen told CBS.

So, now the bank is the one who is late paying a debt, and refuses to even work with the homeowner! Well, what do you do when someone (or some company) legally owes you money, refuses to pay, refuses to speak to you, and owns property? You seize their assets!

Sheriff’s deputies, movers, and the Nyergers’ attorney went to the bank and foreclosed on it. The attorney gave instructions to to remove desks, computers, copiers, filing cabinets and any cash in the teller’s drawers.

This had to be an amazing scene. Could you imagine seeing all of the bank’s cash (damaged money and all), furniture, equipment, and workers all sitting out on the lawn? Fortunately, it didn’t have to go that far; although, this should have been settled months ago!

The wrongful Bank of America foreclosure is what caused this mess in the first place, and now they don’t want to pay the homeowner what they rightfully deserve!

Here is how this hilarious situation ended:

After about an hour of being locked out of the bank, the bank manager handed the attorney a check for the legal fees.

I’m sure they have to deal with a lot of people who owe them hundreds of thousands of dollars, but still fight against the foreclosure process (as if they did nothing wrong); but that wasn’t the case here! They should have written out this check as soon as the judge ordered them to pay the homeowner’s legal fees!

photo by MoneyBlogNewz

Reader Questions

Do you feel that the homeowners had a right to foreclose on the bank?

Are you as upset as I am about BOA failing to pay the money which they owed?

Am I the only one who wanted to see the bank’s property out on the lawn and sidewalk?

Filed Under: Housing Tagged With: bank, bank of america, bank of america foreclosure, boa, buying a home, cbs, cosigner, equity stripping, finance, foreclosure, foreclosure procedure, foreclosure proceedings, home insurance, lenders, loss mitigation, money, mortgage, mortgage bill, north carolina, Personal Finance, real estate, real property law, wrongful foreclosure

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