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Unformatted text preview: , 25–, 30–, and 35– percent coverage. These are the standard coverage's that many of the lenders will require on many of the loans they originate or fund. If the mortgage is to be sold to Fannie Mae or FHLMC, however, the required overages are as follows: Fixed–rate mortgage
Dynasty School (www.dynastySchool.com) 6-19 REAL ESTATE FINANCE
91 to 95% loans 86 to 90% loans 81 to 85% loans 80% and under Loans with possible negative amortization 91 to 95% loans All other loan/value ratios 25% coverage 20% coverage 22% coverage 17% coverage 12% coverage No coverage One can see that normally Fannie Mae and FHLMC require less coverage, thus increasing the lender's exposure slightly. Let us use the same example as before and calculate the lender's exposure to loss through Fannie Mae or FHLMC. Sales price Loan amount–95 % Borrower's down payment Loan amount PMI Coverage Total PMI coverage $70,000 $66,500 $ 3,500 $66,500 X22% $14,630 Once again, the lender's exposure to loss would be the sales price, less the down payment, less the PMI coverage or– $70,000 – $3,500 – $14,630 = $51,870 This would have the lender actually making a 74.1 percent loan, increasing the lender's exposure by less than 3 percent. The coverages discussed above are only the basic coverages and many are available. You as a real estate professional, however, will normally deal only with the coverages outlined above. PMI PREMIUMS
PMI companies' operations and rates are monitored by the Insurance Commissioner of the State of California. Competition, however, keeps them relatively uniform from the issuing companies.
6-20 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 6: HARD MONEY LOAN & CONVENTIONAL LOANS
Generally, PMI companies insure loans on one to two units up to 97% and on three to four units up to 90 percent. Figures can vary from company to company and the following examples are for illustration purposes only. 1. Loans over 80 and up to 85% loan–to–value coverage – The insurance ordinarily covers the top 12% of the...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10