Don't be surprised if next month D'Amato suggests a price ceiling on Nike Air Jordans and Whopper hamburgers. There is no more depressing example of the GOP's ideological drift than this. Now they propose new ones and justify their actions by resorting to Naderite rhetoric about price gouging and consumer protection. The underlying premise here is that mortgage insurance is simply a frivolous extra cost of a home loan. The truth is that without PMI protection some 20 million homeowners over the past 40 years might not have been able to obtain financing to purchase their houses in the first place.
Mortgage insurance protects the lender against default on low-downpayment mortgages.
The homebuyer pays a premium for that protection. There's no law that requires a prospective buyer to purchase mortgage insurance. And mortgage lending is a highly competitive industry. At that point the risk of default is extremely low, and the vast majority of homeowners does stop paying mortgage insurance. The mortgage insurance industry calculates that of the 5 million homeowners covered today by PMI, fewer than 250,000, or 5 percent, are still paying insurance costs after paying down 25 percent of the original house loan.