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Consider a borrower who purchased a $300,000 home using conventional conforming financing at 90% LTV. The underwriting approval requires private mortgage insurance (PMI) with
Consider a borrower who purchased a $300,000 home using conventional conforming financing at 90% LTV. The underwriting approval requires private mortgage insurance (PMI) with 30% coverage. Suppose over time the borrower pays down the principal of the loan to a balance of $260,633, but is no longer able to make any additional payments and defaults. If the servicer were to foreclose on the collateral property and sell it clearing $159,058 in net proceeds, how much is the loss of principal taking into consideration the protection provided by the mortgage insurance policy?
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