Oct 172007

Everything that was “old” is new again, including PMI.

PMI is Private Mortgage Insurance and is required for most mortgage loans when the Buyer’s downpayment is less than 20% of the purchase price.

Back when the now infamous 80/20 or “piggyback” loans were making inroads into the mortgage industry, I was one of the last holdouts at my company (besides my pal and fellow old-timer Barry W.) still originating mortgage loans with PMI. Younger loan officers looked at me as if I were mad for still talking, originating and closing PMI loans. Eventually I made the leap and included the “piggyback” mortgages on the product menu I recommended to clients. Those 80/20 or 80/15 piggybacks I originated all had fixed rates—I just don’t do ARM loans—and, even though the interest rates on the second mortgage was high (usually 9-11%), often the total mortgage payment was cheaper than a mortgage loan with PMI.

The added benefit of mortgage interest tax-deductibility didn’t hurt the situation, either. PMI is not tax deductible.

With the mortgage meltdown mess eradicating most all of those piggyback loan programs, and borrowers still needing to finance more than 80% of the purchase price of a home, the need for loans with PMI has become a default issue.

I’ve noticed also that some Lenders are offering “Affordable” mortgage financing products with reasonably priced PMI payments in order to assist First Time Homebuyers obtain financing during the mortgage meltdown days of 2007. This is a really good thing because too often the PMI premiums—and thus the monthly payment included with a Borrower’s mortgage payment of “PITI”—are so high as to prevent Buyers from moving forward on a home purchase.

Once again I say, “What once was OLD is NEW again!” Welcome back, PMI.

[tags]PMI, PITI, piggyback, mortgage meltdown, homebuyers, Private Mortgage Insurance[/tags]

  One Response to “The Return of PMI: Private Mortgage Insurance”

  1. […] begin refusing to insure such loans. PMI is required when your downpayment is less than 20%. The PMI or “Private Mortgage Insurance” protects the Lender for the […]

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