Unformatted text preview: consummated. Using junior loans, land contracts, wraparounds and other creative financing devices (will be described in later chapters), sellers frequently agree to help finance a portion of a property’s sale price rather than lost the deal. Some loans made directly between buyer and sellers involve first deeds of trust, however, most individual financial agreements, involve junior financing instruments in which a seller carries back a portion of the equity in the property. A large number of private party loans are seller carry backs. PRIVATE MORTGAGE INSURERS (PMIS)
These are private businesses which offer mortgage insurance and mortgage–backed securities insurance. There are approximately 18 major mortgage insurers which are approved to insure mortgages to be purchased by FHLMC. Type of institution – Insurer. Organization – PMI's are corporations organized under state laws. Dynasty School (www.dynastySchool.com) 4-3 REAL ESTATE FINANCE
Purpose – The bulk of the PMI business is the insurance of lenders against loss due to default on home mortgages. Most companies also insure lenders and investors against losses from commercial loans and leases, obligations of municipalities, and mobile home loans, and provide some casualty insurance. Increasingly, they insure the cash flow on mortgage–backed securities. The securities are backed by conventional loans, and most issuance are linked to tax–subsidized revenue bonds issued by states and municipalities. Mechanism – PMI's deal only with lenders approved by them. Insurance is usually written for home mortgages with loan–to–value ratios above 80 percent. The PMI covers 20 to 25% of lender losses on such loans. Even after the lender has approved a loan, the PMI Company may approve or reject the lender's decision or may make conditions to be met for the loan to be approved. CHARACTERISTICS OF PRIVATE LENDERS
Private lenders generally have some common characteristics, regardless of whether the loan is made directly by the individual...
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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