PMI


Also found in: Dictionary, Thesaurus, Medical, Legal, Acronyms, Encyclopedia, Wikipedia.

Private Mortgage Insurance (PMI)

Policy protecting the holder against loss resulting from default on a mortgage loan.

Private Mortgage Insurance

An insurance policy that a mortgage holder buys on behalf of a lender, protecting the lender in the event of default on the mortgage. Most lenders require their mortgage borrowers to purchase PMIs if the mortgage's loan-to-value ratio is more than 80%. Generally speaking, annual premium payments on PMIs are equal to 0.5% of the value of the mortgage at the time it is borrowed. When the loan-to-value ratio falls below 78%, most lenders are required to inform homeowners that they may cancel their PMI policies. Some borrowers avoid PMI by taking out a piggyback mortgage, that is, a second mortgage allowing one to borrow up to 100% of the home's value in which the loan-to-value ratio is approximately 80% in the first mortgage and 20% in the piggyback.

Private mortgage insurance (PMI).

When you buy a home with a down payment of less than 20% of the purchase price, your lender may require you to buy private mortgage insurance (PMI), which protects the lender against the risk that you may fail to repay your loan.

The premiums you can expect to pay will vary, but typically come to about 0.5% of the total amount you borrow.

For instance, on a $150,000 mortgage, a typical annual PMI premium would be $750, which is 0.5% of $150,000. Divided into monthly payments, this premium would come out to $62.50 a month.

You can usually cancel your PMI when you meet certain criteria. Generally, this is when the balance of the mortgage is paid down to 80% of either your home's original purchase price or its appraisal value at the time you took out the loan. You can check if it's possible to cancel your PMI by reviewing your annual mortgage statements or by calling your mortgage lender.

If you forget to cancel your PMI, your lender is required by federal law to end the insurance once your outstanding balance reaches 78% of the original purchase price or appraisal value at the time you took the loan, or you have reached the mid-point of the loan term, provided you meet certain requirements.

The lender must give you information about the termination requirement at closing. There are some exceptions to the termination rule, including high risk mortgages, VA and FHA mortgages, and those negotiated before July 29, 1999.

PMI

See private mortgage insurance.

PMI

See Private Mortgage Insurance.

Mentioned in ?
References in periodicals archive ?
The high proportions of such mortgages sold to Fannie Mae and Freddie Mac may reflect stricter underwriting standards for mortgages without PMI, the required low loan-to-value rations on mortgages without PMI, and the difficulties these institutions face in collecting comprehensive informations about the risk characteristics of lower-income borrowers.
Given that PMI companies use their own underwriting standards, for the most part regardless of who holds the mortgages, we expect that the distribution of borrower characteristics among privately insured mortgages does not vary much by type of institution.
One possible explanation is that PMI companies, when insuring the risk of mortgages with high loan-to-value ratios, provide the best value for individuals with higher-incomes (but little wealth).
The credit risk or the majority of FHA-eligible mortgages extended to lower-income or to black or Hispanic borrowers is carried either by the FHA or by depository institutions (or their affiliates) who are not using PMI for such mortgages (table 4).
The FHA and depository institutions (including affiliates) accounted for about 60 percent of the FHA-eligible mortgages extended to black or Hispanic borrowers, PMI companies accounted for about 14 percent, and Fannie Mae and Freddie mac accounted for about 10 percent.
In contrast to patterns found among FHA-eligible mortgages, Fannie Mae and Freddie Mac hold in their combined GSEO-eligible risk portfolio a higher proportion of lower-income mortgages without PMI than do depository institutions.
To evaluate the respective roles of the FHA, the VA, portfolio lenders in the primary market, secondary market institutions, and the private mortgage insurance companies, we compared information on individual home mortgages reported by lenders covered by HMDA in 1994 to those reported by PMI companies for that year.
The higher percentage of insured mortgages in our data likely reflects the exclusion of non-owner-occupied properties and properties outside of MSAs (often mobile homes), for which mortgages rarely carry PMI.
Almost all jumbo mortgages for lower-income borrowers and census tracts were extended without PMI (table 4) and were sold for private mortgage securitizations (table 4, "Other") or held in portfolio by depository institutions.
By merging HMDA data with data from PMI companies, we created a unique database that allowed us to count the total number of mortgages that were originated by institutions in metropolitan areas during 1994 as well as the number of such mortgages covered by private mortgage insurance.
This result was to be expected because the FHA generally insures the mortgages of borrowers who currently have few assets available for down payments and closing costs and who do not usually qualify for a mortgage with PMI.
27) The MICA request was a response to growing public and congressional interest in learning more about the activities of PMI firms as they relate to issues of fair lending, affordable housing, and community development.
Credit risk and the provision of mortgages to lower-income and minority homebuyers

Financial browser ?
Full browser ?