If there's mortgage insurance, does this negate the chance of a short sale
I am very new at this and I have a homeowner who is in foreclosure and just wants to save his credit. I explained the short sale procedure to him and he asked, "If there's mortgage insurance, why would the bank accept a short sale? Why wouldn't they just get their money from the mortgage insurance company?"
I said, "That's a GREAT question. I don't know the answer, let me find out." 
Can anyone shed some light on this for me?
Thanks!
This was actually answered here by someone, but it went like this.
If the bank makes a claim against the PMI for the full amount, then their rates will go up, just like yours would. It is still in the best interest for the bank to accept a short and file only the difference (less $$$ equals less risk, equals less increase).
Of course, this assumes that the property is a good candidate for a short.
I know that your next question will be, 'why would the bank care what the PMI costs, the customer pays it?'
You would be right, but the customer can always go somewhere else to get the money, too. So if everything else being equal on 2 possible loans, a higher PMI rate would be the lender out of the running.
Hope it helps,
Roger