November 20th, 2009 | 
Author:
Mortgage guarantee insurance or MGI is a precaution worth taking, as it can come in handy when you are unable to pay your mortgage repayments due to ill health or an accident. It saves you the stress of having to pay mortgages when you have mounting expenses associated with treatment or when you have no income for a certain period of time.
People often think that it need not apply to them, that they are safe, but one cannot guarantee that they will always be safe from ill health or other serious circumstances. The correct policy at the best possible price is a safety net incase things go wrong and mortgage lenders accept lesser down payments than usual.
How It Helps Homeowners
Mortgage guarantee Insurance Agencies usually check the qualifications of the borrower and the value of the collateral provided by the purchased property. When the homeowner defaults on paying the mortgage and the proceeds from the sale of the property are not enough to cover the remaining debt plus the costs, the mortgage guarantee insurance company pays the lender the amount that is short and the costs. The MGI agencies usually offer coverage for a predetermined amount of time, which can be sufficient for the homeowner to recover and get back to work.
Mortgage guarantee insurance usually offers protection to lenders from defaults by homeowners who have less than 20% equity interest in the mortgaged property. This has made it possible for people to own homes with very little initial investments.
People used to prefer government insurance agencies, but today almost three quarters of the market is dominated by the private sector. The study has shown however that there is not much difference in the premium offered by the various companies, so customers are not given much of a choice. Mortgage guarantee Insurance has enabled more people to become homeowners and minimized the risk that mortgage lenders used to take.
Homeowners rest easy that mortgage payments need not be a worry in case something terrible happens and lenders, due to the security of insurance, are willing to lend money more readily.
Mortgage guarantee insurance is offered through programs administered by the Federal Housing Administration and the Department of Veterans Affairs as well as many private agencies. Shop around until you get the best deal at the lowest price possible, Use the Internet to get quotes from different agencies and make your choice so that you get the best deal possible. It will not cost much for a person with a regular well paying job to go for the security offered by Mortgage guarantee insurance.
There are firms that offer their services and products to new entrepreneurs making it easier to run and manage the business.
David Gass
http://www.articlesbase.com/mortgage-articles/the-need-for-mortgage-guarantee-insurance-52084.html
Posted in Insurance Agencies
FHA Mortgage Loan Default?
My husband and I were forced to relocate. We rented out our home that was an FHA guaranteed mortgage. The home was destroyed (literally more damage than the property is worth). We are unable to repair or rent out. We made payments for some time, but are no longer able to do so. We did not qualify for forebearance or special programs as we did not live there. We attempted to sell, even at a reduced amount and had no luck. 6 months on the market, and not one interested person. Attorney letter stated that the home is going to auction. What happens after this? If it’s auctioned for $10,000 but we owe $27,000 —does my mortgage insurance cover the balance or do I fax wage and IRS garnishments? Please do not answer if you are speculating on what will happen. I would like a response from someone who has a factual answer. I realize that foreclosure is not a responsible thing, but given our situation, there is no other option —so, you don’t have to tell me that either. Thanks!
The home was rented by advice of Midland Mortgage Company. We did not qualify for help because our income decreased. We were FORCED to relocate to seek specialized medical care for my son – thank you.
The home was destroyed due to ignorance by the renter. They paid the mortgage and made minor repairs per their contract. We made no money from it. However, they weren’t handy people. Their work to the plumbing resulted in a collapsed sewer line. The roof leaked & leaked & leaked and I was not told. I would have filed an insurance claim on that. This caused roof and raftor damage as well as wall damage inside the home (structural walls). Should I go on… In addition, after abandonment of property, I learned that the home was subject of a drug bust in which a great deal of what one would call cosmetic damage occured. Home had hidden "compartments" cut into walls. The walls now have holes all in them. The ceiling has holes as well as the law enforcement officer entered the attic and broke through in a few places. I could go on forever, but I think you get the point. Now homeowners insurance will cover this malicous damage.
This was our primary residence for 2 years. So, before we rented it out, we got permission from the mortgage company and followed all the mortgage companies guidelines for renting. Thank you Lisa
Texas — refinancing not an option due to son’s increasing medical bills. Refinancing would be a temporary solution. I still could not salvage the home for the amount of damage — yes, that’s our fault — not the mortgage companies — but unfortunate situations strike most of us unperfect people.
Cannot be answered without knowing what state and if you have ever refinanced.
I can answer the mortgage insurance question. No, it covers the lender and not you. That does however make it more unlikely that they would do anything about a shortage, but whether they can or not depends on where you are and if it’s purchase money or not.
Edit – Response to Mary B
The only person on here that is clueless is MARY B. She does not live where I am and has no idea what the law is. In California they get 1 bite of the apple. If they foreclose on a purchase money loan, they CANNOT seek a deficiency Judgement. It is the same in other states as well. Mary’s long list of ridiculous "credentials" just shows how desperate she wants to be believed no matter how idiotic her commentary is.
Mary does not accept emails so I can’t send her the california civil code so she can stop making these ridiculous accertions; but in summary.
The majority of California foreclosures are non-judicial. There is no possibility of a deficiency judgment in a CA non-judicial foreclosure. CA Civil Code 2924 has specifics.
If a lender wanted to pursue a deficiency judgement, they need to do a judicial foreclosure. The lender may not seek a deficiency for a foreclosure on an owner-occupied 1-4 unit property if the loan was a purchase money loan.
Check to see if Texas is the same.
References :
20+ Year Broker
No one is forced to relocate…that is always a choice.
FHA mortgage insurance DOES NOT protect you….it protects the lender and gets dropped if you have more than 20% equity in the home.
If the home got destroyed because you violated the terms of your mortgage and rented it out….whose fault is that? It certainly isn’t the lenders….that is YOUR fault.
When your home is sold, the lender will get a deficiency judgement against you for what the home didn’t pay of the principle.
A judgement can be renewed every 10 years…forever, if you don’t pay the balance.
There are alot of unknowledgeable people on Y!A that will tell you that banks don’t seek deficiency judgements…but I am here to tell you that THEY DO and they do it often. The only time they don’t seek one, is for fractional amounts that would cost more to seek the remedy than they would collect.
That is why you didn’t qualify for any of the programs…b/c you violated the terms of your mortgage by renting the place out.
References :
Realtor…see profile for more….former DE FHA/VA underwriter.
There is no insurance which will ‘cover’ your payments when you do not make them as agreed. FHA guarantee covers the lender, not you. Since you are defaulting, FHA will make the lender whole and cover your deficiency to the lender. Now it’s FHA which is out the money you don’t want to pay.
Your benevolent Uncle Sam is there when you need him, but he does NOT like it at all when you do not pay him back as you promised you would. Your Uncle gets mean about it and takes you to court for a judgment because he had to pay off what YOU didn’t pay off.
So now you’re going to be dealing with a court situation with your loving Uncle. Understand what happens now ?
References :
Why didn’t your Home Owner’s insurance pay if house was destroyed? Was it destroyed by renters or an act of God? If you lived in the home for one year as your primary residence, there is nothing against FHA guidelines that you can’t use it as investment property. You just can’t get another FHA loan. Depending on when you bought the house, mortgage insurance drops off when your LTV gets to 78% on an FHA loan, not 80%. And as some others have stated, mortgage insurance protects the lender, not the borrower.
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