Claims Payment

When a lender has notified the PMI company that an insured loan is in default as per the procedures of the PMI company, the insuring company has two ways of handling the claim. First, the company can pay the lender the full amount of the remaining loan balance. If this is done, the PMI company will take title to the property and then dispose of the property. Second, the PMI company can pay the lender as per the coverage purchased (20, 25, or 10 percent of the loan balance) plus other expenses in the policy of the PMI company, and the lender will then dispose of the property.

Claims under insurance issued by a PMI company are handled differently from claims filed against FHA mortgage insurance. The fHa will pay the lender the outstanding loan balance either in cash or debentures secured by the United States Treasury and FHA will take the property.

If a foreclosure occurs on a property that is insured, the PMI company either:

♦ Pays off the lender in full and takes title to the property, or

♦ Pays the lender in accordance with the insurance, usually 20 to 25% of the principal balance plus certain expenses. The lender then keeps the property and is responsible for selling it.

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