The first search result for “why do borrowers pay pmi” on DuckDuckGo (fifth on Google) is this helpful page, which explains in as basic English as possible, why borrowers pay personal mortgage insurance and not the lender.
The reason I searched for this is because 1) I have a mortgage, 2) I pay for PMI, and 3) I wondered why I was paying for something that benefits someone else. It is basically to skirt the results of laws that were passed to fix a previous law to fix a previous law, an so forth. It’s shocking—utterly shocking—to me that a nonsensical situation is the end result of a paper trail of bureaucratic decrees.
It is all unnecessary.
If lenders paid for mortgage insurance, they would decide when to terminate it, based on whether or not they felt the insurance was still needed. Some lenders would probably reward borrowers after terminating the insurance. Borrowers could choose between two-tier rate plans and single-rate plans. The rules would be set in the market rather than by government.
It’s all unnecessary, yes, and vastly more confusing than if lenders and borrowers were only involved in the transaction, and not a third party that has no vested interest.
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Taxonomic commentary: The Caprifoliaceae is a messy household
in transition.