Mortgage Insurance as Credit Default Swaps

Mortgages and the stock market

Most people don’t think of Mortgage Insurance such as FHA’s MI or conventional loan’s PMI when they see they see the term ‘Credit Default Swaps’ but they are more similar than you think.

A credit default swap is a fancy finance term to describe insurance that covers the lender in the event that a borrower defaults on a loan.

Loan’s where the borrower puts down less than 20% of the home purchase are considered riskier in part because the borrowers has to pay more for the debt because they have more of it. So, to protect against a borrower from failing to pay, the lender requires that you, the borrower, actually cover the cost of insurance for the event where you stop paying on the loan.

Ironic isn’t it? Your paying to pay the lender if you can’t pay!

Don’t like that idea? We can help to remove your mortgage insurance.

Mortgage Insurance as Credit Default Swaps
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