Short Sales and PMI

Real Estate Agent with RE/MAX Affiliates

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


Posted by


Nick Dailey (CDPE) - Short Sale & Investment Specialist - Northern Kentucky & Greater Cincinnati

Helping families in Northern Kentucky avoid foreclosure.  Northern Kentucky MLS listings of homes for sale.  


Mobile Site:


View Nick Dailey's profile on LinkedIn



This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
RE/MAX Active Rain Bloggers
Short Sales
Short Sales and Forclosures ONLY
Short Sales Specialists
Short Sale REALTORS®
mortgage insurance
short sales
short sale
getting short sales accepted

Spam prevention
Show All Comments
Tracey Shrouder
360 Realty - Greensboro, NC
Listing Specialist

Great info!  I am going to show this around my office.  We have been doing lots of short sales!



Jul 14, 2008 11:13 AM #1
Sheila Vardakis
Keller Williams Realty Partners - Overland Park, KS



I found out the hard way on the critical questions to ask FIRST of "Does this loan have PMI"  You simply can't rely on the negotiator to provide this or even to look it up.  I had a short sale within days of closing and just waiting on the preapproval letter from the bank.  Got the call from the negotiator of bad news.............there is MI on the property.  Not borrower bought but lender bought.  Here is the deal:  The bank can accept the offer all day long but if there is PMI or MI on the loan, then it has to be approved by that company before it can sell.  I question what figures the PMI or MI company look at when determining if the contract offer is good? 

Jul 15, 2008 10:28 AM #2
Nick Dailey
RE/MAX Affiliates - Union, KY
RE/MAX: Northern Kentucky Real Estate - NKY MLS - Short Sale

That's an unfortunate situation.  I've always gotten the information directly from the negotiator, and it's always been correct. 

But, you're right about who purchases the insurance.  I have run into loans that didn't seem to be insured based on the initial docs that I had, but ended up being insured through the bank.  Good advice!  Don't rely on your owner, always verify insurance, payoffs, and other liens.


Jul 16, 2008 03:35 AM #3
Kathy Torline
ERA Herman Group Real Estate - Colorado Springs, CO
Colorado Springs Real Estate Blog 719-287-1049

Nick:  Very helpful information.   I've always wondered how the MI entered into short sale acceptance.

Jul 22, 2008 11:33 PM #4
Lynn Pineda
eXp Realty - Boca Raton, FL
Real Estate Promises delivered in SE Florida

Nick, great detailed example. thanks for sharing. I'm working one now that this will be valuable for.

Jul 29, 2008 06:50 AM #5
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?


Nick Dailey

RE/MAX: Northern Kentucky Real Estate - NKY MLS - Short Sale
Ask me a question

Additional Information