In my previous post I described what IMIP is in regards to Reverse mortgages and that it is one of the fees listed as a Closing Cost for all borrowers.
Let’s pick up where I left off in the earlier post.
The other benefit to paying this insurance premium, is that in the event and if for any reason the Lender who is servicing the borrower’s Line of Credit should cease to exist and or are unable to provide funds to the borrower from their Line-of-Credit, the borrower is protected, because their loan and funds in the LOC are insured by FHA.
Any money left in the borrowers account will continue to be available to them regardless of whether or not the company servicing their loan continues to exist.
The IMIP protects the borrower, their funds in the Line-of-Credit and the heirs to the estate and that’s very reassuring and beneficial to everyone who has a reverse loan and to their family.
Sometimes the consumer is confused about what MIP and PMI are and there is a difference between them. PMI is used in conventional mortgage financing whenever a borrower will have less than 80% in equity.
This is typically seen when someone is buying a home and coming in with a small down payment. PMI protects the Lender in the event the borrower ceases to make mortgage payments on their loan and there is a foreclosure. PMI gives the Lender some protection by having the loan insured against this possibility.
PMI is for traditional financing and IMIP is for FHA government insured loans.
And there you have it.