The purpose of Private Mortgage Insurance

[OneEmerald]

I mean having the 20% down means no pmi

What is the purpose of private mortgage insurance? A lot of people have to get it but what does it do?

[joe d.]

What is the purpose of private mortgage insurance? A lot of people have to get it but what does it do?

IT protects the lender in case of default at the borrowers expense/premium, when less than 20% is put down on purchase of said property.

[Surfing USA]

IT protects the lender in case of default at the borrowers expense/premium, when less than 20% is put down on purchase of said property.

Then why is there mortgage crisis?

[mesue]

Fanny Mae and Freddie Mac were the ones paying the lenders.

[OneEmerald]

Then why is there mortgage crisis?

Agree -- I am still confused.

[geo_wny]

So many risky mortgages that went bankrupt that the companys went broke, these were the main two and without them to get a mortgage you would have to have 20% down to even think about financing, if you could find an instituition that would lend...

I think i explained it correctly (i'm not in realestate)

[zanna vaida]

Remember "No downpayment" signs?

Or , "Bad credit, no credit?"

People were offered and took loans and couldn't swallow the reality when "something" happened. Both parties got stuck. The outcome?

[FMD]

the melt down was a house of cards that has just begun to collapse. The next shoe to drop is the credit card markets.

But the housing market worked something like this;

Bank A who has loans out there begins making loans to people who should NOT have loans in the first place thanks to pressure from congress, Clinton, Carter... so now these trillion dollar banks are lending cash to folks that cant handle it. All is ok for awhile. then during the clinton years, banks were told 'lend more!'

So they did. well jump ahead a bit... side note (banks lend and barrow from fellow banks to keep payroll and utilities paid, its a pool of money thats moved from bank to bank, also referred to as commercial paper)

Welp, now that banks are lending to shady folks who are starting to default, fanny and freddy begin dishing out billions for these default mortgages. Now they BOTH have a crap load of bad debt they cant get rid of. The banks, seeing this on the horizon, start packaging bad loan with good loans, or all bad loans, classifying them as A1 mortgage backed securities and selling them on the market making the mortgages some elses problem.

A1 securities are like the king turd of all securities gaurenteed to pay, worht the most... the mortgage backed security is like a share of stock that pauys a certain % every quarter or whatever... So the banks start selling these things on the market. bringing in extra cash to offset the negative equity thats building. welp, fanny and freddy simply ran out of money to bail out banks.

then AIG fell... anotheri nsurance company for banks.

then the crap hit the fan and it came out that banks were repackaging bad loans and calling them good securities... lehman brothers, and a few others fell because the 'credit freeze hit'

banks stopped lending to other bankers, stopping the pool of cash everyone uses for day to day operations such as pay roll. Now these billion dollar bankers are scrambling... the fed reserve - a PRIVATE bank steps in and says it will refill the pool with tax payer backed loans, heres a blank check. the US Treasury began doing this as well. BEFORE the bail out.

Then the powers that be, sent the 700Billion dollar bail out thruogh that had nothing to do with money. Infacty if I remember correctly, the treasury had something like 1.1 trillion to spend and didnt 'need' the 700billion. The provisions of control was what was important in the bail out bill. the dollar amout was a distraction.

Problem is, no one wanted this bail out. other problem it wasnt needed but gave Paulsion supreme control over the US economy.

our stock market has now affected GLOBAL markets. which are beging to fall apart. this will get worse, alot worse, before it gets better.

[zanna vaida]

Stay cool in a hot situation. relax. it always get worse before it gets better. Don't worry. read and/or write a good book, instead.