Question

7. Benny Fitz bought a house that costs $500,000 and appraised (was valued) at $495,000. Since the loan has at 92% LTV (Loan to Value), the lender demanded that Benny purchase private mortgage insurance (PMI) to insure the portion of the loan over 80% LTV. Suppose 5 years later, Benny's mortgage balance is $450,000. However, Benny defaults and his house sells for $385,000 in a foreclosure auction. How much will the PMI pay to Benny's lender? Assume PMI is still in place at the time of foreclosure. (A) $60,000 (B) $7,800 (C) $65,000 (D) $11,000 (E) $59,400

Answer 1

Answer:

Calculation of Amount paid to Mr. Benny.

Mortgage Balance =$450,000

Less: Sales Proceed =$385,000

Amount To be Paid =$65,000

Thanks .