Mortgage insurance - insurance against losses for creditors, which may arise in case of default of mortgage borrowers, and the subsequent sale of mortgaged property.
What is mortgage insurance. Benefits of mortgage insurance to lenders and borrowers. Mortgage insurance - insurance against losses for creditors, which may arise in case of default of mortgage borrowers, and the subsequent sale of mortgaged property.
When buying an apartment with the help of a mortgage is always a risk the borrower defaults - when the borrower can not repay the loan to continue in force for any reason, which may depend on personal circumstances (eg divorce), and from external macroeconomic factors (job loss or decline salary during the crisis, a significant reduction in market value of the mortgaged home). Losses can occur if the lender of funds, the proceeds from the sale of the mortgaged property after the borrower defaults are not sufficient for full repayment of debt the borrower under the loan agreement.
In the mortgage insurance insures the specific bank, credit risk, a significant impact on macroeconomic factors that have (such as the cyclical nature of economic development, incomes and property prices), operating at both the regional and national level. Due to the cyclical development of the economy and housing market risk is catastrophic. This risk is long term and the contract of insurance in respect of him is not on an annual basis, once a long time. At the same sum insured remains constant for the entire term of the loan at a fixed value of the insurance premium. Risks within the insurance period unevenly distributed in time. According to statistics, the probability of breach by the borrower loan repayment schedule increases gradually, peaking at 3-4 years, credit life, after which the probability of an insured event is markedly reduced.
Mortgage insurance serves several important system functions that have, in particular, social importance.
First, it makes the mortgage more affordable for those who can take a mortgage loan, but could not save enough money for a down payment of 20-30% of the purchase price required to obtain a mortgage loan.
Second, the use of this type of insurance allows banks to reduce potential losses on a portfolio of mortgage loans and thereby establish a lower interest rate on the loan, which leads to a significant price reduction for its borrowers. This greatly expands the number of potential borrowers and increase the amount of the mortgage market.
Third, the mortgage insurance greatly increases the possibility of securitization of mortgages, thus helping to attract additional funds to finance the mortgage.
A brief history of mortgage insurance.
Development of mortgage insurance in most cases by the State. State participation in the establishment of insurance companies mortgage is a common practice in solving the problem of providing the population with affordable housing through mortgage arrangements (USA, Mexico, Netherlands, Canada, Philippines, South Africa, etc.). Existing U.S. and Canadian government mortgage insurers (FHA, Federal Housing Administration and the CMHC, Canada Mortgage and Housing Corporation) in the global financial crisis took part in the strategic objectives and helped restore roar mortgage.
In the U.S. mortgage insurance goes back to 1887, when New York created the first mortgage insurance company - Title and Guarantee Company of Rochester. By August 1933 the mortgage insurance company was already 14, but during the Great Depression, they all ceased to exist. A new stage of development of mortgage insurance began in 1934 with the creation of the state of the Federal Housing Agency (FHA), which was empowered to act by the insurer the risk of losses on mortgage loans of the bank in case of insolvency of the borrower after foreclosure sale. Banks, in the presence of mortgage insurance, could reduce the requirements for initial payment on mortgage loans, which immediately affected the growth rate of the mortgage market and housing in the United States. FHA and today is one of the largest mortgage insurer in the U.S., but its market share from its inception to the last crisis of 2008-2009. noticeably changed. Experience shows that in periods of economic growth and mortgage lending in the mortgage insurance market actively out private insurers, and the share of FHA mortgage insurance in the amount decreased. And in times of economic recession and crisis, when private insurers curtailed the volume of new business activities namely FHA provided the necessary insurance coverage to continue issuing banks mortgages with low down payment.
In Canada, in 1946, to provide housing for veterans of World War II, was also set up state-owned company - Canadian Mortgage and Housing Corporation (Canada Mortgage and Housing Corporation, CMHC). It quickly turned into a kind of "housing ministry" that is responsible for public policy and its implementation in this area. Mortgage insurance in Canada was introduced in 1954. For the sample was passed experience FHA, whose role was to play CMHC, which has since remained the main provider in Canada, not just mortgage insurance, and mortgage securitization program. Private mortgage insurers in Canada came later, but their market share of mortgage insurance is low. According to statistics, in February 2010 in Canada was 46% of the amount insured mortgage loans, 43% - insured CMHC.
In Russia, the mortgage insurance came in 2010 when for the formation and development of the mortgage insurance market of the Agency for Housing Mortgage Insurance Company was established AHML.
Mortgage insurance in Russia.
In Russia, the mortgage insurance is realized through:
· Liability insurance the borrower (the borrower's mortgage insurance)
· Insurance of financial risks the lender (lender's mortgage insurance).
And in the borrower's liability insurance, and insurance of financial risks insured by the same risk - the risk of a mortgagee of losses associated with lack of funds, the proceeds from the sale of the mortgaged property at foreclosure on such property, or the insufficiency of value left behind by the pledgee of the pledged the property secured by a mortgage to meet the requirements. Beneficiary in both types of insurance is the mortgagee / lender.
Liability insurance contract is a mortgage loan by the borrower and the insurance financial risk by the lender is the lender.
Borrower's liability insurance has a number of legal restrictions in accordance with Federal Law "On Mortgage (mortgage)" of 16.07.1998 N 102-FZ insurance amount is limited to 20% of the value of the mortgaged property, and the insurance premium must be paid in a lump sum, once for all term of the contract. In insurance, the financial risks of such creditor's no limit. Mortgage insurance and other insurance for a mortgage loan
Mortgage insurance (liability insurance the borrower) in Russia do not replace but rather complements existing market types of insurance protection provided by mortgage - property insurance, life and health titles. In this contract liability insurance to the borrower will need to enter only if he takes the bank a mortgage loan with a low down payment (less than 20-30%).
What is mortgage insurance. Benefits of mortgage insurance to lenders and borrowers. Mortgage insurance - insurance against losses for creditors, which may arise in case of default of mortgage borrowers, and the subsequent sale of mortgaged property.
When buying an apartment with the help of a mortgage is always a risk the borrower defaults - when the borrower can not repay the loan to continue in force for any reason, which may depend on personal circumstances (eg divorce), and from external macroeconomic factors (job loss or decline salary during the crisis, a significant reduction in market value of the mortgaged home). Losses can occur if the lender of funds, the proceeds from the sale of the mortgaged property after the borrower defaults are not sufficient for full repayment of debt the borrower under the loan agreement.
In the mortgage insurance insures the specific bank, credit risk, a significant impact on macroeconomic factors that have (such as the cyclical nature of economic development, incomes and property prices), operating at both the regional and national level. Due to the cyclical development of the economy and housing market risk is catastrophic. This risk is long term and the contract of insurance in respect of him is not on an annual basis, once a long time. At the same sum insured remains constant for the entire term of the loan at a fixed value of the insurance premium. Risks within the insurance period unevenly distributed in time. According to statistics, the probability of breach by the borrower loan repayment schedule increases gradually, peaking at 3-4 years, credit life, after which the probability of an insured event is markedly reduced.
Mortgage insurance serves several important system functions that have, in particular, social importance.
First, it makes the mortgage more affordable for those who can take a mortgage loan, but could not save enough money for a down payment of 20-30% of the purchase price required to obtain a mortgage loan.
Second, the use of this type of insurance allows banks to reduce potential losses on a portfolio of mortgage loans and thereby establish a lower interest rate on the loan, which leads to a significant price reduction for its borrowers. This greatly expands the number of potential borrowers and increase the amount of the mortgage market.
Third, the mortgage insurance greatly increases the possibility of securitization of mortgages, thus helping to attract additional funds to finance the mortgage.
A brief history of mortgage insurance.
Development of mortgage insurance in most cases by the State. State participation in the establishment of insurance companies mortgage is a common practice in solving the problem of providing the population with affordable housing through mortgage arrangements (USA, Mexico, Netherlands, Canada, Philippines, South Africa, etc.). Existing U.S. and Canadian government mortgage insurers (FHA, Federal Housing Administration and the CMHC, Canada Mortgage and Housing Corporation) in the global financial crisis took part in the strategic objectives and helped restore roar mortgage.
In the U.S. mortgage insurance goes back to 1887, when New York created the first mortgage insurance company - Title and Guarantee Company of Rochester. By August 1933 the mortgage insurance company was already 14, but during the Great Depression, they all ceased to exist. A new stage of development of mortgage insurance began in 1934 with the creation of the state of the Federal Housing Agency (FHA), which was empowered to act by the insurer the risk of losses on mortgage loans of the bank in case of insolvency of the borrower after foreclosure sale. Banks, in the presence of mortgage insurance, could reduce the requirements for initial payment on mortgage loans, which immediately affected the growth rate of the mortgage market and housing in the United States. FHA and today is one of the largest mortgage insurer in the U.S., but its market share from its inception to the last crisis of 2008-2009. noticeably changed. Experience shows that in periods of economic growth and mortgage lending in the mortgage insurance market actively out private insurers, and the share of FHA mortgage insurance in the amount decreased. And in times of economic recession and crisis, when private insurers curtailed the volume of new business activities namely FHA provided the necessary insurance coverage to continue issuing banks mortgages with low down payment.
In Canada, in 1946, to provide housing for veterans of World War II, was also set up state-owned company - Canadian Mortgage and Housing Corporation (Canada Mortgage and Housing Corporation, CMHC). It quickly turned into a kind of "housing ministry" that is responsible for public policy and its implementation in this area. Mortgage insurance in Canada was introduced in 1954. For the sample was passed experience FHA, whose role was to play CMHC, which has since remained the main provider in Canada, not just mortgage insurance, and mortgage securitization program. Private mortgage insurers in Canada came later, but their market share of mortgage insurance is low. According to statistics, in February 2010 in Canada was 46% of the amount insured mortgage loans, 43% - insured CMHC.
In Russia, the mortgage insurance came in 2010 when for the formation and development of the mortgage insurance market of the Agency for Housing Mortgage Insurance Company was established AHML.
Mortgage insurance in Russia.
In Russia, the mortgage insurance is realized through:
· Liability insurance the borrower (the borrower's mortgage insurance)
· Insurance of financial risks the lender (lender's mortgage insurance).
And in the borrower's liability insurance, and insurance of financial risks insured by the same risk - the risk of a mortgagee of losses associated with lack of funds, the proceeds from the sale of the mortgaged property at foreclosure on such property, or the insufficiency of value left behind by the pledgee of the pledged the property secured by a mortgage to meet the requirements. Beneficiary in both types of insurance is the mortgagee / lender.
Liability insurance contract is a mortgage loan by the borrower and the insurance financial risk by the lender is the lender.
Borrower's liability insurance has a number of legal restrictions in accordance with Federal Law "On Mortgage (mortgage)" of 16.07.1998 N 102-FZ insurance amount is limited to 20% of the value of the mortgaged property, and the insurance premium must be paid in a lump sum, once for all term of the contract. In insurance, the financial risks of such creditor's no limit. Mortgage insurance and other insurance for a mortgage loan
Mortgage insurance (liability insurance the borrower) in Russia do not replace but rather complements existing market types of insurance protection provided by mortgage - property insurance, life and health titles. In this contract liability insurance to the borrower will need to enter only if he takes the bank a mortgage loan with a low down payment (less than 20-30%).
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