Can someone explain the Mortage Insurance side with Short Sale transactions.


I'm involved in a  short sale purchase and still pending a binding agreement on a second round offer I made for a property. BoA negotiator has indicated interest in approving my offer, but it is depending on the Mortage Insurance claim agreement. While I understand the process of banks claiming the insurance claims to protect themselves, why would the MI company be interested in doing this during a Short Sale-Preforeclosure situation - don't they normally get involved with claims after Foreclosure?


Does the bank actually negotiate a financial situation for the MI firm to want to settle up without going to Foreclosure process because I don't see what the incentive is without forcing the bank to move to the dreaded Foreclosure phase. How often do MI companies actually settle in SS process vs playing hard ball and forcing the bank to the next phase?






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MI is a term that gets mis-used by Short Sale negotiators at banks.

In my opinion, many short sales that were subprime or 80/20 loans do not have mortgage insurance products, like FHA or VA, these negotiators are referring to private credit insurance agreements that the Investors took out in the form of Credit Default Swaps.

In the event of default, the CDS pays off the investor and takes the note, so when a Short Sale goes to "MI" for final approval...they are looking at the same factors - offer net tangible benefit vs Foreclosure.

BOA asks for a Letter of Explanation, if the Seller's cannot pay a cash contribution or sign a Prom Note - FYI...its a negotiation based on the net proceeds cost benefit vs foreclosure.

Stay strong in your negotiation, don't let the negotiator out play you...its a card game...with peoples homes and futures hanging in the balance.
This partially true. There is MI, even on 80/20 loans. There are two types of MI, "borrower paid", which is the term most are familiar with. This is the extra cost that the borrower incurs in order to get any loan over 80% LTV, or on an FHA loan. Then there is "lender paid" MI. This is when the lender has taken out an insurance policy against default. Even if the borrower doesn't have that extra cost, the lender might have MI. Then there is the CDS scams that the lender ran. It all comes down to the fact that the MI company ultimately bears the loss and controls, at least in portion, the note. Therefore, they call the shots, and since most negotiators never get to talk to MI directly, they are much harder to negotiate with.
Joseph is right on. Try to find out about lender paid MI up front. I use a Declaration of Mortgage Insurance Form. It doesn't always work, but sometimes it does. Always ask! You never know who will feel generous with info when you call.
What is the form looks like?  Would you mind share the form with me?  My email address  "".  Thank you.
I too am waiting on the MI Company, Old Republic, to approve a short sale proposal. Fannie first, Securtized 2nd with MI. As Joe would say, Lender Policy meaning a policy that the trustee purchased for the trust, good decision no doubt. But, why wait to make the claim on the MI to the very end, after all other parties have approved? It's a bit dysfunction, the loss was known four months ago.
I think the MI company compensates after the loss has occurred, so the Servicer waits until the end. But, it's pretty stupid to wait, considering that the 1st is taking a $60K loss, so the 2nd was totally out of the money from the start.
The MI is the final step generally in the approval process and need all the information placed before them so they can make a decision. You can not put the cart before the horse unless of course your aim is to go nowhere fast. Look at it this way an auto insurer knows that your car is damaged as soon as you call them and tell them, try getting them to settle a claim for damage without inspecting it investigating liability etc - it isnt going to happen.
Good analogy.





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