Private Mortgage Insurance - What Is Their Exposure?
What is the exposure in a foreclosure to the private mortgage insurance company? I had a short sale ready to remit, and the private mortgage insurance company sent the seller a workout proposal. Will they forgive any of the arrears and mess up my deal or will they buy the note from the lender out from under me for pennies on the dollar?
Well, what has been your experience?
Gary-TX
I thought I did answer this, perhaps on another board. Insurance companies are averse to loss. They hate paying claims.
If a loan carries PMI, the PMI company must approve the terms and conditions of a short sale since they will be asked to pay on a claim.
The terms of the insurance policy may differ from one servicer to another... from one portfolio of loans to another.
I've had experience with a PMI advancing money to bring a loan current, to purchasing the mortgage and restructuring/modifying the terms, to simply paying a claim for loss. But before they agree to pay on a claim, they'll conduct their own due diligence.
Hope that answers your question.
Short Sale Pro,
So what you are saying is that the insurance company intervenes in the process, and makes it nearly impossible to do a short sale?
Is it better to only negotiate on homes that have 80/20 loans with no PMI?
What % is the Insurance Co exposed to, and when do they cut their losses and run?
This house has an ARV of $200-220, depending on how fast it were to sell, and the people are out of bankruptcy and in arrears to the tune of $70K. The bal on original loan is $145K, and needs repairs (12-60K depending on how nice I would fix it).
Just guess here. Does this sound like something the Insurance Co will jump in to save?
Thanks,
Gary-TX
So what you are saying is that the insurance company intervenes in the process, and makes it nearly impossible to do a short sale?
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No, the PMI will ascertain and confirm that allowing the mortgagee to accept a short payoff and paying a claim to them is in their best financial interest. If your Proposal is sound, the PMI won't arbitrarily reject the Proposal.
Is it better to only negotiate on homes that have 80/20 loans with no PMI?
I carefully prequalify my short sale candidates, and make sure that the Proposals are realistic, and beneficial to the mortgagee. Apart from requiring another approval, PMI is of no consequence. I wouldn't reject a short sale candidate simply due to the presence of PMI. I'm just careful to include them in my Proposal....
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What % is the Insurance Co exposed to, and when do they cut their losses and run?
That depends upon the individual policy which is based upon risk, location, position, etc.
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This house has an ARV of $200-220, depending on how fast it were to sell, and the people are out of bankruptcy and in arrears to the tune of $70K. The bal on original loan is $145K, and needs repairs (12-60K depending on how nice I would fix it).
Just guess here. Does this sound like something the Insurance Co will jump in to save?
Wow. $70,000 in arrears? For the purposes of answering your question, ARV is meaningless to the SS equation.
What's it worth in it's as-is condition?
The house in its present condition might be worth $170K, and I offered $110K and turned in a contractors bid o $61K in repairs.
We have a contract, but is that worth anything? The seller wants to deal with the PMI CO, but if not, now she says she wants to do deed in Lieu of Forclosure.
With my contract, do I have anything? Can I hold the PMI Co's feet to the fire and make them buy me out of my position? Loss Mitigation Dept will get my paperwork today or tomorrow.
If it's really worth $170,000, and you can prove it... can you quantify the savings to the mortgagee for accepting your offer?
I doubt you'll be able to communicate directly with the PMI Company, since you are not the insured, but make sure they are presented with a copy of your proposal.... and clearly articulate the benefits to the PMI, as well as the mortgagee for accepting your most (from their perspective) generous offer.
Since MI companies have different criteria for loss mitigation, which MI Company is it?[ Edited by TheShortSalePro on Date 08/18/2003 ]
SSP,
If you are not able to communicate directly with the MI company, how will you get the short sale package to them.
Do you ussually present another entire package to the MI company?
When preparing a SS Proposal for Clients, I prepare at least five or six professionally bound and tabbed Proposals... sometimes more depending upon the number of people in the 'decision making body' since I want everyone involved to read my Proposal. I need as many people on my side as possible.
If there is a PMI involved, I make sure that they are presented a copy, as well.