Im currently working on my first short sale, but was curious what happens to the mortgage insurance on a loan that goes through a short sale? I intend to get something in writing from the bank that releases the homeowner from any deficiency. However, does the bank then file a claim with the insurance?
Residential Real Estate Agent · Chandler, AZ · Member since 2009 · 1k+ posts · 928 votes
16y
If the loan has PMI, the bank will need to have the PMI company approve the deal. In some cases, the PMI will ask for a contribution from the homeowner and in some cases they do not and in some cases they will squash the deal. It just depends. That is really all I know about them. But I do know it is another gate for approval.
Real Estate Investor · Ocala, FL · Member since 2008 · 742 posts · 463 votes
16y
Yes, Justin is right. PMI is yet another gate. I have found a few things about properties where PMI exists.
1) Make sure the HUD-1 is written so the Lender(s) net almost all of the contract price.
2) Be prepared for the property owner to be "asked" to bring funds into the deal. (We state this is impossible and show by way of the financial worksheet.)
3) PMI company to block deal. *Be prepared this will happen.
4) Lender(s) will come back for higher net, and blame the PMI company.