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1.3.2.9 Private Mortgage Insurance Companies

Mortgage insurance is common in mortgage transactions involving home purchases. When the borrower’s down payment is less than 20% of the purchase price, private mortgage insurance is generally required. The cost of this insurance is added to the borrower’s monthly payment and escrowed by the lender. If the borrower defaults, the mortgage insurer will pay the lender some of the monies not recouped in the foreclosure process. The Homeowner’s Protection Act of 1998 requires that the insurance be terminated once the equity in the home equals twenty percent, upon written request, or in any event once the equity reaches twenty-two percent.22

In many cases, mortgage insurers have an interest in preventing foreclosure, and they can be an ally to the borrower in negotiating a workout or settling claims.

Footnotes

  • 22 {22} 12 U.S.C. §§ 4901 through 4910. See § 2.2.11, infra.