Replies to This Discussion

Permalink Reply by Jeff Payne on August 17, 2011 at 6:26am

Jerri, you may be able to push back with the MI company but keep in mind that they may know something or think they know something about your sellers that makes them think the seller can afford it.

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Permalink Reply by Maria Evans on August 17, 2011 at 6:56am

Jerri, I had the same problem with MI Company demanding $12 K from my seller. So, I decided to study how mortgage insurance works in order to feel secure and talk to them. There is no reason for a MI Company to charge the seller.... The problem is, as per contract between bank (investor) and the MI Company, the bank can only file a complain with the insurance company after foreclosure. Well,on a short sale there is no foreclosure and the bank needs to get the OK from MI Company in order to approve the short sale. MI Company takes the opportunity to reduce its loses.

With market still going down in most areas, you have to show them (in writing, send comps or even better show market absorption rate.... "x" homes on the market, selling3/month, it will take.... x months to sell all houses) that it is in the investor best interest to approve the short sale. This is a very convince argument. By not doing the short sale the investor is going to lose much more than $17K. Bank has no leverage and should pay the MI Company to get the approval, not ask the seller to pay and pretend this is normal.  So, short sale is ALIVE and they will approve if you show them that you know what they are doing. It is very likely that even the negotiator doesnn't understand why the MI is demanding money. It will work,  Good luck!     

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Permalink Reply by Enrique Vasquez-Plaza on August 17, 2011 at 7:27am

I like MAria Evans answer, it makes sense.  I think the goal is to close the deal and have a happy seller.  I would fight hard to knock it down or wipe it out completely, but lets always have the seller know and see if he may be able to Ok the deal.  He is getting rid of a toxic loan (and probably thousands of dollars) just for 17K.  

 

Good luck!

 

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Permalink Reply by Jerri Schick on August 17, 2011 at 8:47am

Thanks Maria, that is just the information I need!  I will get some research together and talk to the negotiator about presenting it to the investor.

 

Thanks!

Maria Evans said:

Jerri, I had the same problem with MI Company demanding $12 K from my seller. So, I decided to study how mortgage insurance works in order to feel secure and talk to them. There is no reason for a MI Company to charge the seller.... The problem is, as per contract between bank (investor) and the MI Company, the bank can only file a complain with the insurance company after foreclosure. Well,on a short sale there is no foreclosure and the bank needs to get the OK from MI Company in order to approve the short sale. MI Company takes the opportunity to reduce its loses.

With market still going down in most areas, you have to show them (in writing, send comps or even better show market absorption rate.... "x" homes on the market, selling3/month, it will take.... x months to sell all houses) that it is in the investor best interest to approve the short sale. This is a very convince argument. By not doing the short sale the investor is going to lose much more than $17K. Bank has no leverage and should pay the MI Company to get the approval, not ask the seller to pay and pretend this is normal.  So, short sale is ALIVE and they will approve if you show them that you know what they are doing. It is very likely that even the negotiator doesnn't understand why the MI is demanding money. It will work,  Good luck!     

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Permalink Reply by Jerri Schick on August 17, 2011 at 8:49am

Me too Enrique, the loan is about $100,000 so $17k is a huge amount comparatively speaking.

Enrique Vasquez-Plaza said:

I like MAria Evans answer, it makes sense.  I think the goal is to close the deal and have a happy seller.  I would fight hard to knock it down or wipe it out completely, but lets always have the seller know and see if he may be able to Ok the deal.  He is getting rid of a toxic loan (and probably thousands of dollars) just for 17K.  

 

Good luck!

 

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Permalink Reply by Jerri Schick on August 17, 2011 at 8:49am

Thanks Jeff, I am going to try the push back with some market statistics.

Jeff Payne said:

Jerri, you may be able to push back with the MI company but keep in mind that they may know something or think they know something about your sellers that makes them think the seller can afford it.

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Permalink Reply by Richard on August 17, 2011 at 12:14pm

Harry,

 

Thanks for the in-depth and present day inner working knowledge of the MI negotiation process.  As a buyer, I'm learning this as I go.  It seems like the listing agents I've dealt with never shared this info even after requesting it and, maybe that's for fear of scaring potential buyers away.  Also, I would imagine that the MI questions don't normally come up until midway or later in the process after the 1st and 2nds have analyzed the heck out of the files.

 

This partially explains why some short sales are at the mercy of the buyer to unexplainably come up with a few more dollars at the end or, the transaction falls through.  But, how can the buyer know if the seller isn't just holding back?  It seems that the lenders/investors get to analyze tax and bank records but the buyer and their agents never have this information to my knowledge, (or) just maybe my agent is just lazy.  Perhaps, if I come into this situation as a buyer, maybe I should take the MI approach and say “prove it”.

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Permalink Reply by Jaryd Ruffner on August 18, 2011 at 6:51am

I agree with Harry based on my personal experiences. MI companies have been the decison makers on the short sales i've had that involved mortgage insurance nogotiations. I've had  them ask the sellers to sign a note at closing multiple times or come to a cash settlement at closing. I've never had a deal live without seller either signing the note or negotiating a cash settlement.

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Permalink Reply by jennifer mullen on August 21, 2011 at 1:36am

That's interesting about Radian.  I just closed one this week where Radian had demanded a $10K prom note with the original buyers (two) but when we presented the file for the third buyer they told me they were no longer allowed to ask for a prom note and we closed with nothing going to them at all.  Any ideas why that would have happened?  Not that I'm complaining...

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Permalink Reply by Sean Underwood on August 21, 2011 at 1:44am

I agree with all those that feel that the MI Company controls the outcome. However, these notes are a joke if you really look at the note itself. The note is unsecured, and interest free. In my eyes, it is much better than ANY cash contribution to close the deal. The MI companies know that they have a HUGE chance of the Seller not paying the note, so the note is a very high risk gesture from the MI Company. I just had clients that owed over $250,000 more than the home sold for.... ouch. The MI Company (United Guaranty) went ahead and presented their offer to close the deal. Their initial offer was $8,000 Cash Contribution AND $16,000 Promissory Note. My clients chose to keep their cash, so we countered the offer. My Sellers offered $10,000 Promissory Note ONLY. The MI Company re-countered with $20,000 Promissory Note with these terms ..... 200 Payments @ $100 each month, and NO PAYMENTS Until August 2012 .... So, there is the ability of negotiating. Any debt collector will tell you that these Promissory Notes are only as good as the paper they're typed on. I had a client 2 years ago that settled a $13,000 Promissory Note, (out of court) with an assigned credit debt collector, for $1500. That is the risk that the MI Company takes when these notes are unsecured. If the Maker of the note is not collectable, they will more than likely settle.

Happy negotiating :)

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Permalink Reply by Jan & Ron Zupko on August 21, 2011 at 1:52am

Wow Jennifer that is great news! I have worked several deals where the MI creates a problem but I've always been able to negotiate it down and convince the seller it's better to make no interest monthly payments than to have a foreclosure.  I now council at the listing appointment about the possibility of interest free payments or cash contribution to do a short sale.  Preparing the seller that this is strong possibility makes them much more likely to agree should it be necessary.

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Permalink Reply by jennifer mullen on August 21, 2011 at 2:17am

Yes, we were extremely happy about it but I don't know whether it had to do with the investor (FNMA) or the servicer (Flagstar) or whether that's a company-wide change for Radian.  All he told me was that the change was implemented at the beginning of June.  Definitely a good idea to prepare the seller for possible contributions though!

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