Hypothetical PMI Question

[Pride Davis]

In the How can a college student get started? discussion, the author asked "[w]hat would give the owner the security of knowing the transaction would be beneficial for both parties?" This got me to thinking. Can you get private mortgage insurance on a seller financing note. If yes, how and who provides the service. If not, why wouldn't someone  insure seller notes? 

[Joe Splitrock]

Originally posted by @Pride Davis:

@Joe Splitrock If you can not insure the note because of the lower underwriting and servicing standards, wouldn't that also make it nearly impossible to sell the note later on? 

I didn't say lower standards, just lack of standards, meaning everyone who issues a loan does it differently. It could be the first private loan someone wrote and the buyer could be high risk. If a PMI company wanted to offer this service to private lenders, they would need everyone conforming to the same rules, which would never happen. As @Steve Vaughan mentioned the risk premium is usually in the interest rate or it could be in fees or points up front. The property is what ultimately secures the loan.