• It isn't designed to protect the borrower. PMI protects the lender if the borrower defaults on the loan. It used to be required on loans where the borrower had less than a 20% down payment. That level is being raised now to 30%.
  • It protects the lender, not the borrower. It's not a scam, it's just an expense the borrower wishes he didn't have to pay. Basically, PMI is something that gets attached to your mortgage so it can be sold on the secondary market if the equity ratio is too low, the borrower's credit too poor, or the loan is otherwise substandard in some way. These loans are bundled and treated as commodity investments, and you can't have a commodity if there are some spotted apples in the bushel. The PMI covers up the spots.
  • PMI insurance is to protect the lender. Perhaps you are thinking of Mortgage Insurance, which is offered by many different insurance companies to pay your premiums when you are sick, or pay off your balance when you die. Mortgage Insurance of this type is not a scam, but is way overpriced for what you get. Hubby and I have term life insurance policies which we have arranged to take care of whatever expenses they will have to cover. We also have disability coverage which will pay a monthly stipend in case either of us becomes disabled.
  • Also..........once a certain ratio from how much you owe to how much equity you have in the house is met then the PMI is no longer required.

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