Mortgage insurance began in the United States in the 1880s but the industry-first enjoyed major growth following the implosion of the 1920s real estate bubble. In the 1950s, Milwaukee lawyer Max H. Karl invented the modern form of private mortgage insurance, which helped to put homeownership within reach for millions of families. Private mortgage insurance, or PMI, encouraged lenders across the country to issue mortgage loans to buyers whose down payments were less than 20 percent of the price of the home being purchased. The resulting greater availability of credit helped to fuel the home building boom of the 1960s and 1970s.

For a reverse mortgage, the Mortgage Insurance Premium (MIP) is a fee paid by the borrower to the Federal Housing Administration (FHA). All reverse mortgage borrowers must take part in the FHA Mortgage Insurance Program because this program provides protection for both the borrower and the lender.

How does mortgage insurance operate when you have a reverse mortgage? If something happens to the lender, FHA immediately takes over the servicing of your loan so you have access to your funds without interruption. If the loan balance exceeds the value of your house when your loan becomes due, FHA pays the lender the difference. This is very important in these days of fluctuation in the prices of real estate. The Mortgage Insurance Program helps to create a stable market, encourages lenders to lend, and assures long-term availability of the FHA reverse mortgage program.

Borrowers are charged an upfront premium and an annual premium of .5% of the outstanding balance on your reverse mortgage.

If you have a question about reverse mortgages or mortgage insurance, call Angella Conrard at (949) 267-3409. I will be happy to answer your questions, be of service, and help you live your most comfortable life!