ocn2000 Posted March 13, 2007 Report Share Posted March 13, 2007 I have MPI (mortgage protection insurance) on my home mortgage. Assume I default and quit paying, my understanding is that the MPI reimburses the bank for any loss they incur on the property. Like the difference in value from what is owed versus what the house is sold for after a foreclosure. What would be the liability for the homeowner in that situation? This is entirely an academic question, fortunately, I have no money troubles at the moment. Thanks. Link to comment Share on other sites More sharing options...
Gary Craig Posted March 14, 2007 Report Share Posted March 14, 2007 You answered your own question - PMI (Principle Mortgage Insurance) only protects the bank in the event you deflaut on the loan. Defaulting on your mortgage - this is something diffinately you do not want to do. Do not even flirt with the idea!!! It takes a minimum of one year after forecloser, before anyone will extend you credit for another loan. It will take years to rebuild your credit. If you default on the loan - your home becomes the property of the bank. You are giving up your equity and all rights to the property. Again PMI only benefits the bank..... Link to comment Share on other sites More sharing options...
ocn2000 Posted March 14, 2007 Author Report Share Posted March 14, 2007 I understand the above post, but the heart of the question was if the bank is paid off by PMI, what is the homewoner liable for?? There should be no debt so to speak. If you had equity and lost it, that would be bad. In my hypothetical, I put 0 down and have no equity to speak of. Link to comment Share on other sites More sharing options...
firstsource Posted March 20, 2007 Report Share Posted March 20, 2007 The PMI (a brand name for a Mortgage Insurance company) covers the amount over the 80% of the sales price/appraised value that you borrowed. The rest of the mortgage could be a loss for the mortgage investor that holds the note. Charles Link to comment Share on other sites More sharing options...
ocn2000 Posted March 20, 2007 Author Report Share Posted March 20, 2007 Could they come after you for the difference?? I also read something about being sent a "1099" and having to pay tax on the "forgiven" portion of the loan. I could not verify that though. Link to comment Share on other sites More sharing options...
firstsource Posted March 21, 2007 Report Share Posted March 21, 2007 Short sales can result in additonal taxes as the IRS can consider that a taxable gain. Not logical but they say it is like the lender giving the borrower money. Charles Link to comment Share on other sites More sharing options...
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