Mortgage insurace is paid by the borrower to insurance against the default. There are differnt amounts of coverage that the mortgage may request. If the coverage is low then the bank may incur a larger loss. If the coverage is high 20% + than the mortgage insurance may have the defeciency rights of the bank assigned to them so they collect it. It all depends on the state you live in and the indiviual deal that was negotated when you loan was underwriten.
But bottom line the bank can go after deficencies after a short sale. What do the short sale approval letter inidicate?
First Weber Group
Certifed Distressed Property Expert