How does PMI (mortgage insurance) affect short sale of foreclosure? will the bank still try for a judgement?

Asked by Jen, Miami, FL Thu Jun 4, 2009

My understanding of Foreclosure, is that the bank may still go after some of your other assets. What if there is PMI on the mortgage? do they get all of their money? will the insurance go after other property or my car?
Just got married and can no longer afford the condo (renters barely cover half of the monthly property costs)

Help the community by answering this question:

+ web reference
Web reference:


Lisa Jones, Agent, Mount Dora, FL
Tue Jun 23, 2009
In a recent transaction that I am handling, the lender approved the short sale, but they made it conditioned upon a payment to the MI company. The seller had to either had to agree to repay an amount of money in an interest free note or pay a lesser amount in a one time cash payment. My seller could not afford either as they are unemployed, so we managed to contact the MI company and got them to agree to having the amount added to the sale price. As long as the buyer agrees, we have an approved sale. One thing I have learned with regard to short sales is to be persistent and try to reach the decision makers to negotiate successfully. If you have the funds to agree to an interest free note to steer clear of a foreclosure, it is worth considering. The monthly payment that the MI company was looking for was less than the average cable bill. Best of luck to you.
0 votes
Keith Manson-…, , Milwaukee, WI
Fri Jun 5, 2009
PMI insured the againt the default and therefore if your property goes to foreclosure or there is a short sale they incurr a loss. So any attempt to mitigate the loss by the mortgage company needs to be approved by the PMI company. The mortgage company will get the coverage purchased from the PMI at the time the loan was originated when the mortgage company files a claim with the pmi company. The typical coverage use to be 20% of the loan originated amount or $20,000 on a $100,000 loan. If the insurance company takes a loss and you have assets they may go for a deficency and require you repay some of the loss they have to pay out. If you do a short sale they may require a note to repay them. Hope this help and will give you a general understanding and not necessary specific to your case.

Keith Manson
First Weber Group
Certified Distress Property Expert
0 votes
Search Advice
Ask our community a question

Email me when…

Learn more