When you receive an approval letter on a short sale that includes a deficiency release, can the MI company come back to the borrower for a contribution or not release them from the deficiency?

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Vicki, Brian is correct, but to expand, here is how it worked for us on a California 2nd lien release with LPMI. We received an approval from the 1st and excuses and delays from the 2nd. Since our negotiator went MIA, we called in to customer service one Friday night and a friendly agent told us that the loan has MI and that they were waiting for a decision from them. We were floored as this was the first time we heard of this. Since we have never dealt with an MI company before, we did not know what to do, so we came to the wonderful SSS site and learned some valuable information. We bypassed our useless negotiator and are happy to announce that 1 month later, our SS was approved and is now closed.

Sorry got off track there! OK, bottom line, the MI company is the one who is the decision maker on the "approval/release". Since they are the agency paying the loss to the bank/investor, they must approve the SS, period! So if you have an approval, it came from them through the servicer or investor.

Good luck and keep us posted,

If the MI company does ask for a contribution OR doesn't release them from deficiency, it should clearly state that in the "approval letter" and then the seller can either continue with the short sale or bow out if it's not in their best interest (of course, after taking the approval letter to an attorney for review). 

You can sometimes figure out on a 1st mortgage up front if there is going to be an MI company involved by looking at the note or getting a copy of their statement.  However, we've had a few situations where the 2nd lender added MI without anyone's knowledge (they were paying for it) and these were the most difficult to deal with. 



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