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Short Sales In Palm Beach County Florida- PMI Warning!

By
Real Estate Agent with The Gasset Group & Get It Done For Me Virtual Services 13253167-SA00

Short sales in Palm Beach County Florida- Private Mortgage Insurance Can Be An Obstacle.

Homeowners- You need to check to make sure you do not have PMI insurance on your mortgage and if you do please tell your agent right away. PMI companies, ( Private Mortgage Insurance) can put a BIG damper on your short sale.

The most important thing for you as a homeowner to understand is that PMI insurance is not for YOUR benefit. It is solely for the benefit of your lender. This is insurance that is put in place in case you default on your mortgage and they must foreclose on your house. The PMI company covers the loss, that is, the amount of money the house ends up selling for less your mortgage amount. So let's say that you owe $200,000 on the mortgage of your house but then the lender forecloses on you and sells the house for $100,000. That means they just lost $100,000. So the PMI company will pay the difference to the lender who held your note on your mortgage.

We have found that many homeowners think that this PMI insurance is to benefit them and it does not.

When do you have PMI insurance on your house? Your lender will require you to pay for PMI insurance if you are putting less than 20% down on the purchase of your house. But during the loose lending days, many people were offered no PMI with 80/20 loans.

When prices were skyrocketing, a lot of people had their values going up very quick and then they could get their PMI insurance removed from their loans. This saves a fee of between $70 to $120 typically per month from off your mortgage payment. You had to prove that your house had equity of 78% or more in order to get the PMI removed.

We just had a seller who had done this. So when we asked if she had PMI insurance she said no, she had it cancelled in 2005. She was under the assumption that she had no PMI since she has a receipt of the cancellation and proof of a payment from the lender of a refund to her.

What a surprise it was when we had the negotiator on her file call us and tell us the PMI company wants a note for $10,000 or a cash contribution from the deal of $5,000!

When she called the insurance company to tell them she did not have PMI insurance, she was surprisingly informed that the lender had gone and got their own PMI and paid for it themselves as the market was going down. Hmmm, and she is liable and the lender did not have to disclose any of this to her.

Now we are in a pickle; scrambling around to find this money, maybe the buyer would want to bring some cash to close, probably not. The agents have already contributed and now here we are!

So just because you think you do not have PMI; you might just have it and not know you do. Make a call to your lender to see if you do have lender's placed PMI. The PMI company is in control! They want something from the deal. Be ready with a strategic plan of action. Knowing ahead of time what your agent is going to have to work with gives them more to work with, allowing them to come up with some plan that may just get your through this short sale process.

 

For more information about short sales and our short sales Series please click here.

 

Katerina Gasset Subscribe to my Blog

 

Contact Nestor Gasset and Katerina Gasset, CIPS, Realtors®, International Properties and Investments, Inc. Licensed Realtors® in Florida at 561-753-0135 to list your property for sale or to purchase a property in Wellington, Royal Palm Beach, Loxahatchee, Lake Worth, Hypoluxo Island, Lantana, West Palm Beach and the rest of Palm Beach County Florida and Port St Lucie Florida. We are accepting referrals.

Copyright © 2008 By Katerina Gasset, All Rights Reserved.*Short Sales In Palm Beach County Florida- PMI Warning!*

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P.S. If you are listing your home as a short sale in Palm Beach County Florida and Port St Lucie Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 561-753-0135 to find out more about Palm Beach County Short Sales and Port St Lucie Short Sales.

 

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Comments (19)

Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Katerina.  You are a veritable wealth of insight into the short sale details.  It goes into the memory banks if we need it.  Thanks.

 

May 28, 2008 11:14 AM
Alan 'AJ' Nisen California Contra Costa Mortgage Officer
A Large Bank in America - Lafayette, CA

Katerina, I can see the banks doing this as a CYA but how can they charge the borrower?  I did not know that this was an ongoing practice.  I will have to check with my bank to see if they have similar practices. AJ

May 28, 2008 11:39 AM
Kim Peasley-Parker
AgentOwned Realty, Heritage Group, Inc. - Sumter, SC

Wow, it seems in this day and age of disclose everything, the lender should have to disclose the PMI purchase.  Really I am surprised they didn't go back to borrower to get the money for the PMI they obtained.

May 28, 2008 11:46 AM
Mark Horan
Resident Team Realty, LLC & Toni's Property Management LLC - Saint Cloud, FL
"The Resident Chef" - Resident Team Realty LLC &

Katerina- Nice job with this post. What is going to happen as PMI companies fail? I was talking to another Short Sale expert. He expects this fall they will no longer agree to the short sale loss. Only time will tell...******Feature Post******

May 28, 2008 12:38 PM
Scott Cowan
RE/MAX Professionals - Olympia, WA

Katerina-   Another great post in the short sales series. I think it is a royal pain that PMI is not always disclosed!

Best,

Scott

May 28, 2008 12:53 PM
Katerina Gasset
The Gasset Group & Get It Done For Me Virtual Services - Provo, UT
Amplify Your Real Estate & Life Dreams!

Lenn- Thank you very much Lenn. We are in the trenches here in Florida.

 

May 28, 2008 12:58 PM
Katerina Gasset
The Gasset Group & Get It Done For Me Virtual Services - Provo, UT
Amplify Your Real Estate & Life Dreams!

AJ- I was very surprised because we read the mortgage and the note instruments and there was no place in any of those documents where it says the lender can get their own PMI without the borrower's knowledge and still hold the borrower liable for such.

May 28, 2008 12:59 PM
Katerina Gasset
The Gasset Group & Get It Done For Me Virtual Services - Provo, UT
Amplify Your Real Estate & Life Dreams!

Kim- It is very surprising to me that this is not a part of RESPA disclosures. It seems that there are still those things that happen without the knowledge of the borrower.

May 28, 2008 01:03 PM
Katerina Gasset
The Gasset Group & Get It Done For Me Virtual Services - Provo, UT
Amplify Your Real Estate & Life Dreams!

Mark- The biggest PMI company pulled out of Florida. It is anticipated that others will follow. I do not agree that lenders will stop accepting shorts. Shorts are good business, keep money flowing to the stockholders. When you study the asset and losses of financial institutions, the short sales is still profitable. The loss is not really all that much of a loss. It frees up money that can then be channelled for more loans, better paper, etc. It is a long story in and of itself. The main thing to always remember is that the bank's decisions are always based on what is in their best interest and those of their shareholders. Not the consumer. Not 'customers'.

May 28, 2008 01:08 PM
Maria Mastrolonardo, IL Probate Specialist
RE/MAX of Naperville & RE/MAX Enterprises - Naperville, IL
Illinois Probate Realtor

Katherina - Another great post! and you are so right, people are lead to believe that PMI is for them. I had a closing on a REO the other day and the asset management co. asked for a 30% referral from the L/A, that was a first for me.

May 28, 2008 02:27 PM
Susan Hilton
CENTURY 21 Beal, Inc. - College Station, TX
Texas Aggie Real Estate, College Station Bryan Texas Real Estate

Doesn't seem like that would be fair at all!

May 28, 2008 02:40 PM
Susan Davis
Austin, TX
Excellence Advocate

PMI can definately mess people up! I have heard of Loan Officers who dont even tell their people about PMI until they have gotten so far into it that they cant back out and then they are stuck with a huge payment!

Susan

May 28, 2008 02:40 PM
Katerina Gasset
The Gasset Group & Get It Done For Me Virtual Services - Provo, UT
Amplify Your Real Estate & Life Dreams!

Scott- thanks for commenting and yes, it is a pain about the PMI not being disclosed upfront or before the homeowner goes through the process, not to mention the buyer!

May 28, 2008 05:00 PM
Katerina Gasset
The Gasset Group & Get It Done For Me Virtual Services - Provo, UT
Amplify Your Real Estate & Life Dreams!

Maria- Thank You! WOW, that is news to me! How does the REO think they deserve 30% of the LA fee? Too many are out to suck money right out of the pockets of agents who put up all the money and all the work!

May 28, 2008 05:02 PM
Katerina Gasset
The Gasset Group & Get It Done For Me Virtual Services - Provo, UT
Amplify Your Real Estate & Life Dreams!

Susan Hilton- No, not from the borrower's perspective. I have never been much of an insurance fan.

May 28, 2008 05:04 PM
Katerina Gasset
The Gasset Group & Get It Done For Me Virtual Services - Provo, UT
Amplify Your Real Estate & Life Dreams!

Susan Davis- I totally understand why a lender would require PMI and you know, FHA has MIP which can be paid up front by the borrower or put into the loan. I think that buyers can always get out of a loan application no matter how far along they are in the transaction, well, here in Florida they can. I don't know Arkansas law. But we are a very consumer friendly state here.

The issue at hand that is not right is that the lender went and got PMI after the homeowner had it cancelled and she was not told that they had placed PMI on the house because they are paying for it, not her. It came at us like a curve ball in this short sale because now the PMI company wants to get a piece of the action.

May 28, 2008 05:09 PM
Terry & Bonnie Westbrook
Westbrook Realty Broker-Owner - Grand Rapids, MI
Westbrook Realty - Grand Rapids Forest Hills MI Re

I haven't run in to it here yet but it is great information. Thanks

May 28, 2008 11:25 PM
Katerina Gasset
The Gasset Group & Get It Done For Me Virtual Services - Provo, UT
Amplify Your Real Estate & Life Dreams!

Terry- Just goes to show you how really local real estate is!

May 29, 2008 01:39 AM
Palm Coast Homes
100 Plus Realty LLC - Palm Coast, FL
Palm Coast/Flagler County Real Estate, The Ross/Co

Great post....we need all of the truthful, educated information about short sales we can get here in Florida...ugh!!!

May 29, 2008 03:56 AM