Consider a borrower who purchased a $300,000 home using conventional conforming financing at 90% LTV. The underwriting approval requires private mortgage insurance (PMI) with 30% coverage. Suppose over time the borrower pays down the principal of the loan to a balance of $260,914, but is no longer able to make any additional payments and defaults. If the servicer were to foreclose on the collateral property and sell it clearing $159,356 in net proceeds, how much is the loss of principal taking into consideration the protection provided by the mortgage insurance policy? (Input your answer rounded to the nearest whole dollar and without the $ or negative signs, e.g.. input a loss of -$100,000 as 100,000)
Consider a borrower who purchased a $300,000 home using conventional conforming financing at 90% LTV. The underwriting approval requires private mortgage insurance (PMI) with 30% coverage. Suppose over time the borrower pays down the principal of the loan to a balance of $260,914, but is no longer able to make any additional payments and defaults. If the servicer were to foreclose on the collateral property and sell it clearing $159,356 in net proceeds, how much is the loss of principal taking into consideration the protection provided by the mortgage insurance policy? (Input your answer rounded to the nearest whole dollar and without the $ or negative signs, e.g.. input a loss of -$100,000 as 100,000)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Consider a borrower who purchased a $300,000 home using conventional conforming financing at
90% LTV. The underwriting approval requires private mortgage insurance (PMI) with 30% coverage.
Suppose over time the borrower pays down the principal of the loan to a balance of $260,914, but is
no longer able to make any additional payments and defaults. If the servicer were to foreclose on the
collateral property and sell it clearing $159,356 in net proceeds, how much is the loss of principal
taking into consideration the protection provided by the mortgage insurance policy?
(Input your answer rounded to the nearest whole dollar and without the $ or negative signs, e.g..
input a loss of -$100.000 as 100,000)
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