Here’s your scenario:
PMI (Private Mortgage Insurance, also known as Mortgage Insurance) company has a policy on the shorted loan that says they will pay the investor 20% of the loan amount. So if you have a 400K loan, that’s $80K total payout. In order to pay this, the insurance policy has certain things in place to make sure, just like any insurance policy, it’s designed NOT to be paid out. Some of those actually related to short sales.
In a short sale, the investor would like to get the insurance to cover their loss on this. In most cases, 20% of the total loan PLUS whatever the investor gets through REO Sale = MORE THAN YOUR SHORT SALE.
That’s a big fail.
This is why you see Bank of America short sales getting so many complaints. The investor is saying, “I want to help you, but based on my due diligence and my insurance policy, you need to bring another 20K to the table.” Dead deal.
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