Re: approaching forclosure in MI

Posted by Julio Martinez-Clark on January 25, 2008 at 17:50:34:

In Reply to: approaching forclosure in MI posted by Becky on January 25, 2008 at 16:48:39:

Becky,

According to Wikipedia, "Lenders mortgage insurance (LMI), also known as Private
mortgage insurance (PMI) in the US, is insurance payable to a lender that may be
required when taking out a mortgage loan. It is an insurance in the case that the
mortgagor is not able to repay the loan, and the lender is not able to recover its costs
after foreclosing the loan and selling the mortgaged property."

Per definition, I understand PMI will protect the lender for the amount of the original
loan amount (or a percentage of it). If what you owe the lender with late payments,
penalties, legal fees, etc is more than what the lender is protected for with the PMI
purchased at closing, the lender depending on your state laws, could come after you
for a mortgage deficiency judgment.

The following is an excerpt from an article that I wrote on the subject titled Homeowners’ Dilemma: To be or not to be in Foreclosure:

"In regards to a mortgage deficiency judgment, it depends on your state laws. Generally,
if your first mortgage/lien holder forecloses on the property, it isn't that common to see
that the first purses deficiency judgments because it's usually the larger loan, and its
goal with the foreclosure is to take the property and then sell it and get their money
back (or most of it); again, it depends on your state laws and the disposition of the 1st
to pursue a deficiency judgment. In the case of a second lien/mortgage holder, under
current market conditions, it could very well be wiped out at the sale (nobody bids in
your home and the 1st will take it back) and then in order to make you pay, it will try to
harass you (phone calls, letters) and perhaps sue you to get a judgment against you
that can be enforced by garnishing your wages, bank accounts, other personal and real
property that you may own, and seizing and selling your assets to satisfy the debt.
Many homeowners are concerned about personal liability from mortgage foreclosure
deficiency judgments. Although they accept loss of equity, if any, in property which is
foreclosed by their mortgage lender, people are afraid of a deficiency judgment."

I hope this helps,

Julio Martinez-Clark

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