OK, Erik, I just went and looked over some mortgage statements from when
we had our original house loan being serviced by Fleet and we were
getting wonderfully detailed statements. On our mortgage, we'd make a
payment; a chunk of it would go towards the interest, a chunk would go
into an escrow account, and the rest would be applied towards the
principal. The escrow account would them make payments that look to be
the sort of mortgage insurance you're talking about. (The other things
that the escrow account would take care of were the homeowners insurance
premiums and the taxes, county, school and, after we were annexed,
city.) The monthly insurance payments went down gradually over the
course of 7 years.
I don't think you can not pay into mortgage insurance, if it's
determined that you ought to have it. So the option of *not* having the
mortgage insurance may not be available in many cases.
And the consequences of default, besides making you a very unattractive
borrower for a number of years, may include the increasing in premiums
for other customers. Seems that's what insurers do on everything
*else*, anyway.... There are probably regulations on it preventing too
much of that, though; you might want to find out something about that
before you do anything.
If the mortgage insurance company is trading at a low price, it may be
that the market anticipates defaults on mortgages. Or, as I pointed out
earlier, it could say something about the people or institutions that
had been holding those stocks needing to liquidate assets for various
reasons. You might look at other companies in that business for
comparison. If they're all in the same boat, the market may be saying
that more mortgage defaults are expected. If the one you're looking at
is an abberation, find out why. And check analyses of the sector and
see if the current price seems to be an overcorrection. And *do* try
your best to understand the business before you put any money into it;
and use that rule of thumb for all your investments. :) (Although I
get the feeling that I'm probably preaching to the choir with that last
one.)
Julia
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