What does the part about “less the amount the lender recovers” mean?
Here’s how this insurance helps protect your lender from loss: You borrow $250,000 and your home is worth $275,000. You get PMI which “covers” the balance above 80% LTV, ($220,000), leaving $30,000 over 80% LTV that is “exposed.” Should you default on your loan and require the lender to foreclose, the PMI company would pay your lender the portion of the $30,000 they insure less the amount the lender recovers, if any, at the foreclosure sale.
I found this answer about the private mortgage insurance online
It is saying that the PMI company will pay the lender the difference between the % of the $30k MINUS (-) any amount that the lender might recover from the sale of the home.
MI companies are bleeding money right now. I got an email yesterday that PMI will not issue insurance on anybody with less than a 620 or a DU or LP level. What that means is if you have less than a 620 you will have to put down 20% to get a house if you want to go conventional.
Here is a copy of the email.
As part of our continuing efforts to support our customers’ ability to facilitate sustainable homeownership and adapt to recent and anticipated trends in the mortgage market, PMI is making guideline changes regarding the A-Minus & Expanded Criteria rates for mortgage insurance effective March 10, 2008:
• Any loan with a FICO® score less than 620 is no longer eligible; this includes A-Minus (FICO scores 575 to 619) & Expanded Criteria loans.
• Any loan with the following Desktop Underwriter® (DU®) or Loan Prospector® (LP) recommendations are no longer eligible, regardless of FICO score:
o DU - EA I, EA II, EA III, Refer with Caution, Refer with Caution IV
o LP - Caution, Caution 500 Offering A-Minus Eligible
• The A-Minus & Expanded Criteria rate sheet will be removed from PMI’s systems and the pmi-us website on March 10, 2008.
Please note: when loans are processed through DU or LP, PMI requires that the recommendation be disclosed in the Risk Classification or DU/LP recommendation fields, even though these fields are not currently mandatory. Inaccurate or incorrect information could result in the mortgage insurance being cancelled or rescinded.
PMI is committed to achieving affordable, responsible and sustainable homeownership in all of the communities we serve, and we appreciate the opportunity to work with you to achieve this goal. If you have any questions, please contact me at the number listed below or call 800.966.4PMI