What do the mortgage companies mean when they say they can not insure you house loan.?

Question

What is the danger to the homeowner?

I have been in the new home for over a year now and they just now told me that they could not insure my loan. They said they made a mistake and overlooked something in my credit. I do not know what dangers I face now because of this.

Answer 1

It is most likely an FHA loan that you have. Conventional loans with PMI require a certificate at closing so if insurance was not available you would have never closed. FHA insures the loan after the loan has closed.

The only danger to you at this point is DO NOT SIGN ANYTHING, DO NOT AGREE TO ANYTHING and do nothing that will enable the lender to accelerate the note. Make your payments on time keep the property in good repair,etc. Read your Deed of Trust or Mortgage or what ever your State calls the document that secures the loan with your property. It spells out all of your responsibilities, adhere to them closely. They are stuck holding your Note (or selling it at discount)until you give them an out.

Answer 2

Here is the simple fact about it. Homer owner insurance is required by all bank and financial institutions that hold the title to a home, and this is to protect their interest, the house. If your house was to burn down tonight and you don't have insurance on it, you will have to pay for a new house on your own and out of your own pocket. Now if you don't have insurance the bank can not recoup it's losses if there is no more house. They can take the land if your house in on a fee simple lot, but they lose the rest of it because there is no house. It is like having a car and no insurance, someone steals it you are out a car, but still have to make the payments, if the car is insured and it gets stolen the insurance company pay for the lost of the car in full or in part depending on the type of car, the age of it and the monetary value that it is worth, same thing with your house. I guess I just made it ia little more complicated with my explanation, but the truth is, if anything happens to your house and you don't have insurance on it you will still be responsible for the mortgage even if the house doesn't exist any more, but if it was insured the insurance company would be responsible for paying off the mortgage and or paying for the house to be rebuilt. I hope that kind of answers your question. Good luck and take care....Have a Happy and safe New Year....peace....

Answer 3

You say you've been in the property a year, so I'm going to presume you're talking about an existing, rather than a new loan.

Unless it's got a call "feature" they can't defund your loan once it's recorded, so the loan you've got now should be fine for you.

What they're likely trying to do is stampede you into refinancing, since without PMI they can't sell your loan. Unfortunately for them, they're stuck at this point unless you let them off the hook, and they'll have to hold your loan themselves and hope you don't default.

There's a fair amount of this sort of thing going on right now, as lenders that gave out 'warm body' loans suddenly realize the consequences. Don't draw any lines in the sand without talking to a lawyer first, but if I understand your situation, they can't force you to refinance.

Answer 4

If you are putting less than 20% down, P.M.I. insurance is required, so you might have qualified for a mortgage, but your loan is also underwritten by the P.M.I. co. , and they have rejected your loan. Without that insurance, your mortgage co. cannot sell the loan to secondary marketing. You should be receiving a letter explaining this answer.

Answer 5

Most likely you are putting down less than 20% and they cannot get PMI on it for whatever reason. The most likely reason would be your credit rating or your debt to income ratio. Basically it means that there won't be a loan forthcoming if they can't get PMI so you'll have to come up with more down payment money.