Private Mortgage Insurance and Short Sales
July 13th, 2009 | 
Author: I don’t just read my blog, I also try to keep up with other people in the Real Estate Industry that know what they are doing and talking about. One of the people that I follow on a regular basis is Todd Clark, a super Realtor in the Portland Oregon marketplace. Todd has good information, especially when you look at what he has to say about the Portland area. He is a real promoter of Portland and in turn Oregon.
His blog today had to do with a problem that his client was encountering on a short sale from the private mortgage insurance (PMI) company that insured the loan. You can read his post here and the huge number of comments that it generated. I have got to give Todd a lot of credit for putting his finger on one of the things that is causing a lot of problems with short sales. I recently posted about my thoughts about short sales in comparison with foreclosures and you can read all about it here.
There was also an interesting comment in the string of comments from William Archambault Jr., that said:
I disagree with Private Mortgage Insurance, tell me again why I paid it? PMI is very miss understood. PMI does not insure the home owner. PMI is used when the buyer doesn’t have the 20% equity required by depository lender. It insures the bank that in the event of default that the bank will never suffer a loss any larger than they would have if the original loan had been for 80% LTV of the original value. It should have been called HBPB for Home Buyers Performance Bound (sic) then there would be less confusion.
He was one of the few that commented on the fact that PMI was not designed to protect the buyer, but the lien holder. Now, the PMI companies are taking the hit on foreclosures and are trying to save some on the short sales also. If you think that PMI companies haven’t lost money, I give you three letters, AIG. Overall, it was and is an interesting discussion and I recommend that you read it. If you have questions about this or anything else in the mortgage arena, let me know. You can reach me at 541-342-7576/541-221-3455 Cell or e-mail at eugeneloanguy@gmail.com.
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I have mortgage inscurance and I am also in the process of a Short Sale. We have lost 3 offers in the past 9months because the Bank is not responding. We have confirmed with BofA that we have submitted accurate and complete paperwork on our end. In your openion is BofA just waiting for teh forclosure so the can collect on the insurance and then sell our home outright to make a profit. Is this legal?
Angie,
I can’t say what is going on with the lender. I do know that the mortgage insurance companies have often held things up because they want the seller to sign a note for the amount they are covering. In reality, you can’t blame either one of them for trying to cut their losses. Is it legal? Ask an attorney. Sorry but I can’t help you on this.