Suppose a borrower purchases a $250,000 home with a 5 percent cash down payment. Because the initial loan-to-value ratio (LTV) is 95 percent, the borrower must purchase private mortgage insurance (PMI) from Mortgage Guaranty Insurance Corporation (MGIC). One year later, the borrower has made no principal payments on the loan and the lender forecloses and sells the home for $215,000. How much must MGIC pay the lender on the PMI policy?
Suppose a borrower purchases a $250,000 home with a 5 percent cash down payment. Because the initial
loan-to-value ratio (LTV) is 95 percent, the borrower must purchase private mortgage insurance (PMI) from Mortgage Guaranty Insurance Corporation (MGIC). One year later, the borrower has made no principal payments on the loan and the lender forecloses and sells the home for $215,000. How much must MGIC pay the lender on the PMI policy?
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