I was recently advising Peter and Grace who were experiencing mortgage stress due to a Covid induced decrease in their income. They became very distressed when I explained how their mortgage insurance could operate if their lender began to enforce the mortgage.
The Lender took out the Mortgage Insurance and has its benefit;
Peter and Grace paid the premium;
Peter and Grace default in the repayments;
The Lender claims all moneys owing by Peter and Grace from the Insurer;
The Insurer pays all these monies to the Lender;
The Lender is happy as it has all its money and incurs no loss;
The Lender assigns all its interest in the Mortgage to the Insurer as is required under the mortgage insurance policy;
The Mortgage is still registered on Peter and Grace’s home;
The Insurer issues legal proceedings against Peter and Grace due to the default, seeking the payment of all monies owing and the sale of the house if these monies are not paid;
Peter and Grace cannot refinance due to lack of income, which is no fault of their making;
The house is sold;
The Insurer has all its money
Peter and Grace are homeless.
The conversation moves to conclusion with Peter saying “ I wish some one had explained this to me earlier, I thought the mortgage insurance meant we could never lose our home.”
Contact Keith Hanslow today if you need some trusted advice.