8. sam bought a house that costs $500,000. sam got a 96% ltv loan. the lender demanded that sam buy private mortgage insurance to insure the portion of the loan over 75% ltv. suppose 5 years later, sam’s mortgage balance is $400,000. however sam defaults and his house sells for $220,000 in a foreclosure auction. how much will the mortgage insurance company pay sam’s lender?

The insurance company will pay the mortage of $400,000

Explanation:

Loan value = 96%* $500000

                   = $480000

75% LTV value = $375000

Portion of loan over 75% LTV= $105000.

This is the amount insured.

5 years later, Sam needs $400000 more to pay. But he defaults.

And he has only paid $100000 of mortgage loan.

So, insurance company will pay the remaining balance of the amount insured to Sam's lender.

Therefore, The insurance company will pay the mortage of $400,000.

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Explanation:

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