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Name:
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John C
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Subject:
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??
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Date:
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10/21/2008 11:56:56 AM
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to Pontoon - I agree with Dave Ramsey 100%. Didn't say it was my idea. It wasn't Dave's, either, totally. Who cares. Just do the right thing, is all I'm saying.
PMI - a big issue with varied answers. Here are some major reasons why PMI is not the saving factor:
1.) PMI is only on conventional loans, mostly. Not the subprime, exotic mortgages that are causing a lot of problems
2.) PMI, in conventional loans, is only required when the LTV is greater than 80%. ("loan to value" or mortgage amount divided by home value). Most people, if they don't have a 20% down payment, would get a home equity line or 2nd mortgage for the rest, TO AVOID PMI. So if they bought a $100,000 home and only had $10k to put down, they would get a $80k first mortgage and $10k home eq or 2nd mort. So PMI won't help them as they set it up to avoid PMI. Had they done a $90k 1st mortgage, yes, PMI would be in effect (most likely).
3.) Lenders / Mortgage companies / subprime lenders etc would set these things up and write them up as refinances. Remember all of those commercials in 2002 - 2006 about refinancing? They would write up an 80% 1st mort then loan them the rest in a home eq or whatever, up to 110% of the home's value. Remember the ads "pay off medical bills, student loans, car loans, or TAKE A VACATION!! Tap in to the equity of your home now!!" Remember all of that? Borrowers would just take on all that debt, lenders would lend it, and it snowballed.
The above being said, I am sure that in many cases, PMI is being paid out. But remember, many of those policies are written by huge insurance companies - like AIG.
The above is not an exhaustive list, but simply (IMO) the major cases in which PMI is NOT involved. If you talk to a person that is getting foreclosed, and PMI is not involved, my wild guess is that one of the above will be the case.
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