Mortgage Insurance And Short Sale Folders
Short Sale Power Hour
Today, we would like to talk about mortgage insurance. We do not have the time to please all of your requests on this topic. So, if you desire more details on this important subject, check out our estore with our video package.
At the very fundamental level there are two kinds 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 worth of the property, they have to get PMI. The other type of mortgage insurance is LPMI or lender placed mortgage insurance. This is where the bank looks at a group of loans and chooses that the loans seem a little uncertain. So, they place LPMI on the loans to shield their assets.
We understand that there is a risk, but it does not necessarily make sense for a bank to lend money to someone that they feel is a risk to default. So, if the loan defaults, the lender or investor may or may not be liable for the loss. It’s insurance exactly like your car insurance or property owners insurance.
In a short sale, the lender has to go to the mortgage insurance business to get authorization to carry out a short sale. So, the mortgage insurance company has the priority interest in the loan. In essence, the investor gives up their claim.
In some states, like Arizona Short sales, at a certain spot that money is maxed out. When the loss is so great, the insurance is maxed out. For illustration, with a $100,000 loss, the mortgage insurance company may have a $40,000 insurance policy. So, the mortgage insurance business can just 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 property to go to foreclosure.
One specific key to fighting the mortage insurance business is documentation of hardship. When their payout is the same with or without the short sale, you will discover the short sale to be much more difficult. The mortgage insurance business is merely willing to take the property owner down with them.
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Tags: company, loss, Mortgage, mortgage insurance company, private mortgage insurance, property owners insurance
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