You and your agent should keep trying - although your chances are low, especially if you can not contribute with anything. That is a typical first response from the insurance company (PMI). Many will readily accept the 10%, or request that from the beginning. On many cases we have been able to negotiate less than that. The final settlement will depend on the negotiations, the bank and what your agent can get.
If you can not contribute anything, it will not make any difference to the PMI if you go into foreclosure or not. $40k is what they will have to pay. If you give them something, they might be more willing to approve it. At this point is all how well this can be negotiated.
Carlos J. Ramirez, PC, ABR, CNE
Associate Broker/Realtor, HomeSmart -