Private Mortgage Insurance (PMI) is an insurance policy paid to a lender in the event that a homeowner defaults on his home loan.
These defaults are up 35 percent over last year, according to an industry group — bad news for all homeowners requiring PMI with their mortgage.
Much like home insurers adjust premiums after a worse-than-expected Hurricane Season, PMI insurers are raising mortgage insurance rate for all homeowners, regardless of credit history.
And it comes at a time when PMI is in higher demand.
Because second mortgages are not as available as in recent years, using PMI is the only way for some homeowners to get approved for home loans with a less-than-20-percent downpayment.
PMI rates are higher than they were six months ago and additional defaults make it likely that PMI rates will rise again in 2008. As PMI rates increase, so does the cost of homeownership for people whose lenders require it.
Mortgage-Insurer Defaults Hit Record
December 31, 2007. 12:30. P.M.