The deeper I get into figuring out short sales, and how to sucessfully get them closed, the more I'm suprised how many people (including the "experts" that teach at our local board of Realtors) are unaware of how PMI plays into the equation. There are 3 questions you need to ask your loss mitigator during your first discussion that are critical to your success. 1) "Does this loan have PMI?" 2) "What is the loss ratio?" 3) "Who is the investor?"
While it's true that many borrowers were able to get around paying PMI due to the availablity of 80/20, 80/15/5, etc... products, there are still plenty of loans where this is a factor. So why does this matter? It's pretty simple. The bank that owns the note can be reimbursed by the insurer for a certain amount (loss ratio). Usually this is around 20%-30%.
Below is an example of how a loss mitigator can analyze your file and make a decision about which option is better for the bank.
(This formula is NOT how every bank makes their decision. This is just an example of how PMI can play a role...)
You'll notice that the Net Proceeds will be $3500 higher for the bank if mortgage insurance is not a factor. Normally this means you'll be getting a counter. But with this example, the insurance makes the offer a better deal for the bank. Knowing this can help you to work your offers in a more efficient manner.
For more information about real estate in the Northern Kentucky area, please visit www.NickDailey.com.