PPI (Payment Protection Insurance) Policy ?

Question

Can BP experts educate me on PPI policy ?

How does this work ? Who does this protect ?

How the premium is calculated ?

I am trying to work with private lender and he needs me to buy PPI policy, before funding.

Is this normal for private lenders to require the borrowers to buy PPI policy ?

Any information on PPI policy and private lenders is appreciated.

Thanks

--uday

Jeff S. · Answer

"I told him my concerns, we'll see what he says."

We'll see what he says?  With due respect @Sherri Duncanson, your posts above have all the hallmarks of someone who is about to get their lunch eaten.

"I want to believe him because I really need the money…"

Please recognize that you're desperate.  Plus, your profile suggests you should know better than to perform this quality of due diligence.

Not a day goes by anymore that someone writes here how they were ripped off by an anonymous individual who either they contacted or who contacted them off this board or elsewhere.  LinkedIn is especially bad.  What exactly is a "credible account" on LinkedIn?  Does this make them a trusted lender?  Glad too he has given you "assurance after assurance" that he is credible and not just one assurance.  I know I'm being harsh and sarcastic, but it doesn't appear you've done any independent due diligence than accept his word, Sherri.

"He said that it was his bank requiring the PPI insurance which might make sense since FDIC doesn't insure investments."

Actually, this makes no sense.  FDIC is federal deposit insurance provided to guarantee bank deposits, not private loans.  Perhaps you confusing this with PMI, which is mortgage insurance available only to the GSE's (Fannie, Freddie, etc.).  PPI, as noted above and in the other thread you started, is British instrument not used here in the US.  There is no form of mortgage guarantee insurance available to private lenders beyond lenders title insurance and hazard insurance and these have different purposes.

"… oh, by the way, we tried to transfer the money but the bank requires this and it costs $3,560, but after this I promise to transfer the money." Not sure what to think."

Real estate is transacted through title companies using either neutral escrow companies or attorneys, depending your your state.

Borrowing should not be a crapshoot, Sherri.  Here's some specific, less cynical, advice:

• Lending is a business based on relationships, not online anonymity. Find your lenders face-to-face, locally at real estate clubs or through referrals, and get to know each other.  Go to their office if they have one. This is not to say that all out-of-state lenders are disreputable, they're not, but most here don't know how to tell the difference.  You certainly won't get the best deal or gain the trust of someone whom you've never met.  This is especially true if you need a loan extension or other accommodation sometime in the future.
• Make sure your potential lender is licensed in your state and/or has a broker-of-record who is.  Obviously state dependent, but you should understand what it takes to lend legally in your state and ensure your lender strictly complies. It should take no more than 30 seconds to look a license up online. Call this person to confirm his or her relationship with your lender.
• Ask the name your potential lender loans under and look up a few deeds-of-trust or mortgages to confirm.  If you don't know how to do this, any title company who wants your business will help you.  Read these documents.
• Ask for references and don't accept any excuse that they are private.  As noted just above, mortgages and deeds-of-trust are matters of public record.  It's easy to look up borrowers.  At worst, their contact address will be on these documents.
• Never send any personal information until you know with whom you are dealing.  Ask how they will protect this info. The consequences here could be much worse than losing $3560.
• Never pay up-front fees (except maybe directly to an appraiser) and always fund thru a title company you've also confirmed really exists. No excuses.

Good luck, Sherri.

Jay Hinrichs · Answer

Jeff S Na  Excellent post  a vote would not do it justice... I can't tell you the times I get calls from associates of mine that are very successful but not really clued into RE.. and they are talking with some off shore lender.. who only requires 2 to 3k up front etc.. I let them down as gently as I can.. these are folks that just don't really know how RE lending works .. I can't imagine how much money is scammed small dollars at a time.

then you have the RE dreamers who have been turned down everywhere really should know in their present financial condition they are not going to get a loan its those that are sucked into these deals left and right..

Jeff S. · Answer

It is absolutely NOT normal for private lenders to require borrowers to buy a PPI policy, @Udaya  P.  Are you borrowing money from a UK lender? Or, is the property in the UK? If so, that could be different since these policies are common there.

Sorry to be skeptical, but I've noticed a trend (spelled s-c-a-m) where unethical lenders are asking borrowers to pay an upfront fee to pay for some sort of lenders insurance policy. Your post was the first I've seen that actually named a specific type of insurance.

These scams tend to be from unknown lenders found on anonymous lender website lists.  Is that who you are dealing with? Have you personally met your private lender, Udaya?

The only insurance any credible US lender will ask for on a US property is lenders title insurance and a hazard policy.  You will pay for these only when you close your purchase and the money will go directly to the associated company, not to the lender.

Your prospective lender isn't asking you to sent him money before you close is he? If so, then this could be nothing more than a twist on the upfront fee scam, and I suggest you run for the hills.

Just speculating, but it would be interesting if the scammers found the name of a legitimate type of debt insurance, albeit only common overseas, and are now trying to convince naïve US borrowers to pay them up-front for these policies.

Of course, it could just be me that's naïve :-)

Jay Hinrichs · Answer

Jeff S Na  SCAM  ...

YOu have a bunch of scammers from over seas preying on US investors offering terms and conditions that are not real and US investors want it so bad they get sucked into sending small dollars thinking they are going to get loans that will never materialize..

I would be shocked... if this was for real.... US HML or private type banks are who you deal with .. you need not deal with anyone off shore.

The next thing they will want you to buy is a bond from some company in Thailand.. LOL.

The bigger the money commitment the bigger the scam..

Let us know if you actually get funding..  Not to be negative but having been around the lending world a little bit this is what I am seeing..

Sherri D. · Answer

Yep, he was a scammer, and he has played the game for a while too. Even when I caught him in the lie he refused to own up to it. Right now I'm telling him I want my money back. Don't think I'll get it back because I don't know who the guy's true identity. Oh well, live and learn. Can't beat myself up about it and wallow in self pity. I learn and move on.

Jeff B. · Answer

The common term is PMI Private Mortgage Insurance and is almost always required when the LTV is greater than 20% -- common conventional requirement.  At one time, PMI could be rescinded once the equity reached the 20% - - have also heard that some lenders stick it to you for the life of the loan.

PMI is create WITHIN the escrow process, not as a precondition. (how the heck can you insure a loan that has not finalized nor an escrow has closed????)

Bill Gulley · Answer

This is not a bank requirement, FDIC doesn't have any PPI, which sounds like PMI or MIP, and certainly not for a privte loan.

The guy is a HML most likely with a scam sideline it appears to me.

I'd say "next" and move on! Hope you didn't pay up front fees. If you did, demand it back and check to see if this guy holds a license. Good luck :)

Sherri D. · Answer

Unless it's coming from overseas. Rules are different in other countries. I agree that makes no sense here, but investments are not insured by FDIC, at least not at the US bank he's using. But even if that is true, I agree that a bank here would not require any insurance.

Kyle J. · Answer

Actually that makes no sense. Why/how would the bank require him to get insurance to loan/use his own money? If it's his money, he can do whatever he wants with it.

Sherri D. · Answer

Well, he didn't start out telling me he's a man of his word, this was after several emails of me questioning his integrity. I also brought up the fact that I know banks will let you do whatever you want with your own money as long as you're a signer on the account. He, according to him, has loaned out over $500 million dollars. I started doing more research on PPI and found that its mainly been the banks pushing for it, not the private lenders, but that this is usually an issue in the UK not the US. Given his wealth I wonder if the money is coming from overseas to a US bank and then to me. I told him my concerns, we'll see what he says.

PPI (Payment Protection Insurance) Policy ?

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