Today, we would like to discuss mortgage insurance. We don't have the time to satisfy all of your needs on this topic. So, if you want more information on this important topic, check out our estore with our video package.
At the very basic level there are two types of mortgage insurance. There is PMI, private mortgage insurance. If the buyer goes out and gets a loan that is more than 80 percent of the value of the home, they have to get PMI. The other type of mortgage insurance is LPMI or lender placed mortgage insurance. This is where the lender looks at a pool of loans and decides that the loans seem a little risky. So, they place LPMI on the loans to cover their assets.
We understand that there is a risk, but it doesn't necessarily make sense for a bank to lend money to someone that they think is a risk to default. So, if the loan defaults, the lender or investor may or may not be responsible for the loss. It's insurance just like your car insurance or home owners insurance.
In a short sale, the bank has to go to the mortgage insurance company to get permission to execute a short sale. So, the mortgage insurance company has the priority interest in the loan. Essentially, the investor gives up their right.
In some states, like Arizona Short sales, at a certain point that money is maxed out. When the loss is so great, the insurance is maxed out. For example, with a $100,000 loss, the mortgage insurance company might have a $40,000 insurance policy. So, the mortgage insurance company can only collect $40,000. The mortgage company, in one specific case, is actually asking for $40,000 from the lender. The mortgage insurance company is actually demanding money from the bank or forcing the home to go to foreclosure.
One specific key to fighting the mortage insurance company is documentation of hardship. When there payout is the same with or without the short sale, you will find the short sale to be much more difficult. The mortgage insurance company is simply willing to take the home owner down with them.
Do you have questions? Read the Short sale FAQs.
Are you a Realtor? Then get free short sale training by Kevin and Fred at Free Realtor Training on ShortSalePowerhour.com
Comments(4)