If a homeowner had purchased Private Mortgage Insurance, because she made a less than 20% down payment,?

Question

what happens to the mortgage value and the house? My aunt died 2 weeks ago, and we found a PMI policy, but until tonight, we were confusing that with MLI, mortgage life insurance (in this case, the mortgage would be paid off). Does the mortgage value increase back to the sale price of the house since the borrower, my aunt, will default from now on? Thanks.

What happens if her sister, another aunt of mine, makes the mortgage payments from now on? Does the mortgage company still reclaim the full value? I assume she'd have to pay the PMI premiums as well until 22% of the house is paid off, right, the point at which the insurance automatically terminates? Thanks.

Answer 1

The house belongs to her estate. The executor of her estate will have to sell the house, as part of probate.

If someone "takes over" mortgage payments, that doesn't mean they own the house - it's STILL owned by her estate.

PMI doesn't change - it's part of the mortgage payments, until the equity in the house hits 20% or the house is sold (which includes, foreclosed upon and sold).

The loan amount on the house doesn't change. Either it gets paid, or the bank forecloses. If the house goes into foreclosure, the PMI will pay the bank the difference between the loan balance and the amount the house is auctioned off for. You, or the estate, won't ever see a penny of anything that the PMI covers.

Answer 2

Private mortgage insurance is there to protect the lender, not your aunt. It's intended to cover some of the loss in the event that your aunt defaults. Since your aunt has died, her house now belongs to her estate. If the house was bequeathed to someone, they will either have to sell the house to satisfy the mortgage, or obtain financing on their own for at least the value of the mortgage. Assuming your aunt had other possessions and assets, those would also be sold to help satisfy the mortgage.