Comment by unsnap_biceps
6 days ago
Some loans require PMI if your outstanding balance is larger than the current value. PMI is very expensive and, unlike a TV or car, you might be forced to give up your house because it devalued too far and you can no longer afford mortgage and PMI.
I'm not saying we shouldn't make housing affordable, but it's worth considering the impact for everyone.
I don't think lenders have any ability to retroactively require PMI; certainly no mortgage I've ever signed permitted this.
Correct - though the dirty secret is some percentage of the economy is run on rolling loans against house equity, and prices stagnating or dropping would slow that down.
Isn't that something regulation (of mortgages) solves way better than forever banning decrease in housing costs?
how would that work?
Easy: make it illegal to require PMI in that case. Some loans will require PMI at signing (IIRC, often this will be when you put down less than 20%; you're required to carry PMI until you've paid off enough to get your principal below 80% of the purchase price), but we can certainly make clauses unenforceable that require it later under whatever conditions.