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If I have PMI on my mortgage and end up losing my home to foreclosure

Hiram, GA |

Does PMI protect me from deficiency? If I have PMI and in the future end up losing my house to foreclosure, can the bank still come sue me for any deficiency? Isn't PMI insurance coverage in the event of a defaulted loan? Please clarify. If they can't sue you then is it safe to reaffirm a mortgage in a chapter 7 bankruptcy.

Attorney Answers 4


  1. Although PMI insurance does insure the lender, I don't believe it insures you from liability. if a deficiency is allowed in your state (in many states, deficiencies are not allowed), I wouldn't rely on PMI to protect you from deficiency.

    Hope this perspective helps!


  2. Private Mortgage Insurance (PMI) is insurance that protects your lender against non-payment should you default on your loan and does nothing in that regard for you. PMI will not protect you from deficiency. As the buyer of this coverage, you're paying the premiums, so that your lender is protected. PMI mitigates the default risk that's associated with low down payment loans. Consequently, the only real benefit it confers is lowering the down payment requirement.

    The posting attorney is admitted to the U.S. Tax Court and authorized to represent clients in all 50 states before the IRS. Outside of IRS matters, the posting attorney is licensed to practice law generally in the State of Texas and no other state. The information provided in this post is for general educational purposes only and should not be relied upon as legal advice by any party. No attorney-client relationship is formed with any party by the mere posting (or reading) of this information on the AVVO website. Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency


  3. Whether the bank can come after you for a deficiency depends on the laws of your State. I would seek the advice of an attorney licensed to practice in your area.

    I can answer the PMI question for you. PMI insurance is not for your benefit. It is for the mortgage companies benefit. Unfortunately, you pay the bill. PMI is designed to make the mortgage company the beneficiary and you the bill payer. PMI cannot prevent deficiency.

    When the loan goes into default, PMI may cover the note holder or named beneficiary of the policy (don't worry, it will never be you, unfortunately!). Whoever, has to pay the benefit of the insurance policy will inherit the right to come after you for the deficiency if a deficiency is allowed in your State.

    This answer is intended for informational purposes only and no attorney/client relationship is formed by the viewing or reading of the response to the users question. Always seek the advice of competent and legal counsel before engaging in any legal action.


  4. Under Georgia law, if the house is foreclosed and the sale is confirmed, the bank can seek a deficiency from you. Bankruptcy is the only way to get rid of that obligation, PMI will not prevent deficiency.

    In answering questions on AVVO, the law office of Glen Ashman is not undertaking to represent you, and you should consider hiring counsel to assist you. In that answers here are based on brief and limited information there may be facts that would affect the accuracy of an answer here, so again, hiring counsel is always prudent. If you are in the area and wish to retain Mr. Ashman, you will need to call for an appointment and sign a retainer agreement.