Private Mortgage Insurance Q

Factual Questions
1

A simple question about PMI, if you will.

I know that PMI is usually required on a mortgage when the buyer fails to put down a certain percentage (20% in most cases) of the purchase price. This protects the lender against the property owner simply picking up and walking away. I also know that most people cancel their PMI once they achieve that 20% stake in the house.

My questions are:
[ul]
[li]Who benefits from PMI?[/li]The obvious answer is the lender. But, for example, suppose there is a $100K mortgage. Now the owner defaults, who gets the $100K? The lender I presume, correct?
[li]Exactly what happens in case of a default?[/li]So, now suppose the home owner is laid off, is incapacitated, dies, etc. and can no longer pay the mortgage. The PMI kicks in and reimburses the lender. Now what happens to the house? Does the insurance company get it? Surely not the lender, they got reimbursed by the insurance, correct?
[li]Can it be beneficial to have PMI even when not required to protect the home owner?[/li]Or could PMI be used to protect the home owner in case s/he can no longer pay? Could it be used in a case where the home owner has more than the 20% equity to make sure that they can keep the house in case of loss of income, debilitating illness, etc.

Zev Steinhardt
[/ul]

2

The first question and most of the second: If there is a $100k mortgage meaning $100 k is still owed, in most cases the mort. co. will take possesion of the property and sell it. IF you meant there was $100k already paid off on the house, you are again correct, the buyer gets jack sh1t, and the mortgage company gets the property.

But then again there is a lot of technical details such as who the mortgage was sold to (i.e. Fannie Mae or Freddie Mac) which I cant get into becuase I don’t know enough about it.

The third question: Never. Ever. That is where personal insurance comes in. A lot of mortgage companies sell a type of insurance that does pay off the house in case of death, etc, but why would you get that and not regular insurance that would pay a lot more than the house if something happened to you.