So we have only ever seen MI on first loans. Suddenly I have a BofA 2nd with MI. The negotiator (first good one in a loooong time) says he's only ever seen MI on 2nds. What's your experience? Thanks!
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MI on 2nds.
I've encountered this scenario a few times. This servicer/lender bought and paid for MI type is generally "new" portfolio based default insurance for pools of high risk second liens. Reference the AIG secondary market re-insurance fiasco of 2008.
If this interferes with your short sale process it can be defeated as it is usually is a misinterpretation by that liens file negotiator. One opinion I heard was that a short-sale-default qualifies for policy claim and redemption.
As soon as you hear something like this you need to immediately escalate the file with specific written complaints and references.
There is a big chance that that 2nd mtg. re-insurance policy is illegal or invalid and was used to securitize a new investment portfolio after the 90 day expiration date of the that loans origination. Reference SEC rules for securitization under FASB.
I read via a legal list serve email group that PNC Bank bought 1000 tractor trailer loads of this bulk bad paper and their overzealous collection efforts in 2008 through 2011 created more than 10,000 civil law suits. Reference PNC Banks 10K filings.
You can win this battle but you will need to approach it aggresively.
I have chased this down over the years, including an associate whose father is a VP in a large bank. MI on the 2nd is illogical - how much would an insurance co have to charge to start with a loan that already charges a high percentage because it is insecure? According to this guy's father, there are very few insured 2nds and only at some banks where the bank had the 1st and the 2nd initially, pooled 2nd's and some other circumstances.
I have had BofA people pull that MI on the 2nd on me a few times. All but the last time, I called customer service (they can be much more forthcoming on some things) and they told me that there is no MI on the 2nd - so, it was a negotiator tactic to extort. The last time was a couple of months ago and the homeowner was very active, called the investor, called the MI - gee, NOBODY could find the paperwork - yet the SS sat. No paperwork? doesn't sound like a real deal. After a few weeks of calls and complaints, the sale got approved - so, was there an MI?
I'm pretty sure bigfoot is on the board of 2nd loan MI companies. ;-)
You're exactly right! The first was a BOA Fannie Mae loan and the second was a BOA "supposed" MI loan. The customer service department and short sale negotiator said they never heard of MI on the second. Finally, I contacted the MI company directly where I was informed that it was lender-issued MI not borrower-paid MI so that was the difference. Actually, they didn't call it MI but something else. However, in my mind it pretty much equates to the same thing: more money required to settle the debt.
Thanks Joe and Amanda! The first is being serviced by Wells Fargo but used to be a BofA loan. Hmmm. We are supposed to get an approval by Tuesday, I will let you know what happens. If the negotiator asks for a contributon I will dig deeper to see if this is an MI hoax. Really helps to know of your experiences. With the scramble to close by 12/31 this is gonna be close.....
I had the exact same situation with a Bank of America second. The borrower was not aware that there was ever MI on the property. The lender explained that the investors opted to put MI on the property for their own protection at no cost to the borrower. They intimated that it was a good thing since the borrower did not have to pay; however, at the end of the day the borrower obviously did have to pay in the form of a higher payoff to the investors to get out of the deal. Fortunately, we were able to close this loan. Please contact me directly via email Amanda@HomesbyAmanda.com or phone (954) 600-8339 to discuss how we resolved the situation.