Replies to This Discussion

Permalink Reply by Bryant Tutas on March 17, 2010 at 12:39pm

Jennifer. To be honest it sounds like normal negotiations to me. MI companies almost always want a contribution from the seller. Especially if the seller has the ability to pay. Have the sellers make them an offer in writing. Offer a small amount of cash and a note over 10 years. A $10,000 note over 10 years is $83 a month. A very small amount to be done with a property. These can also be negotiated down after the closing as well.

If they truly don't have the ability to pay anything then that needs to be the counter. But you must be able to back it up with facts. Are you absolutely sure the seller doesn't have money somewhere? The MI companies are pretty smart and usually ask for amounts that they know they have a chance of getting.

The truth is your seller already signed a promissory note. They signed one when they purchased the property. Now they have the opportunity to exchange a large note with interest for a very small note with no interest.

The negotiator is pretty much telling you in his email to make an offer. That's a very good thing. Look for a solution. The negotiator is just doing his job. You need to get him on your side.

I hope this helps.

Permalink Reply by Claudine Ellis on March 17, 2010 at 1:21pm

Bryant is right. The MI company negotiated with me for $2500. I paid a $1000 and the buyer paid the rest. Thank God. You cannot add any money to the sales price because the money will go to the first lien holder. They want cash contribution only! You will have to pay something.

Permalink Reply by Katerina Gasset on March 17, 2010 at 3:00pm

When the market turned downwards many lenders purchased MI to protect their shareholders' assets, you know, the teachers, firemen, police officers, etc.
The lender nor the servicer are under any obligation to tell the homeowner they have purchased MI because the lender is paying that cost and not the homeowner in this situation. This is part of the note language when the mortgage instrument was created when the homeowner took out his/her loan. This is standard protocol. Nothing unusual about it.

In order to avoid such situations, you need to know who the note owners are and if there is MI from the beginning of the transactions. And are you sure that BofA actually owns both of the notes or are they the servicers for both notes?

Your seller can contact the MI company and try to get them to reduce the amount but unless you have something really good and emotional it is not likely going to change much other than a swap for a promissory note.

Permalink Reply by Jennifer James Team on March 18, 2010 at 3:17am

Katerina,

You are correct the lender in this case purchased MI without the homeowner knowing. I always ask the homeowner about PMI. They said "No, I would have never thought the lender would have paid for it." I learn something new everyday, and this has opened a new line of questions I ask lenders in the future. What obligations do they (the lenders) have to tell anyone about MI, if the homeowner asks are they required to disclose they have purchased MI on the loan. How can I get B of A to tell me or the seller who the MI company is? Could Banks lie about this...Cash? Are they expecting this NOT to be on the Settlement Statement? What else should I be looking at or asking...I want to to everything I can for my sellers...But I will need somewhere to start. Looking for help...please share if you have any tips or tricks.

On a side note:
What would a reasonble counter offer be for a 200,000 sales price and owed 274,000. My seller has limited cash...His 401K (value $8,000 before penalties & taxes) I have been over his documents and I have no idea where anyone could find access to $12,000 as requested.

Thank you for you input and suggestions!

Happy Short Selling,

Jenn


Katerina Gasset said:

When the market turned downwards many lenders purchased MI to protect their shareholders' assets, you know, the teachers, firemen, police officers, etc.
The lender nor the servicer are under any obligation to tell the homeowner they have purchased MI because the lender is paying that cost and not the homeowner in this situation. This is part of the note language when the mortgage instrument was created when the homeowner took out his/her loan. This is standard protocol. Nothing unusual about it.

In order to avoid such situations, you need to know who the note owners are and if there is MI from the beginning of the transactions. And are you sure that BofA actually owns both of the notes or are they the servicers for both notes?

Your seller can contact the MI company and try to get them to reduce the amount but unless you have something really good and emotional it is not likely going to change much other than a swap for a promissory note.

Permalink Reply by Harold Penner on March 18, 2010 at 7:41am

I recently had an MI company ask for a $75,000 promissory note from a seller. The seller has refused; she would rather have a foreclosure on her record for 7 years than be tied down to a promissory note.

When the negotiator gave me the response from MI she included the MI contact's name and phone number in here-mail. I was able to speak directly with the MI representative. He stated that the MI Company was not willing to reduce the amount of the promissory note; they would only be flexible on the terms (i.e. the length of time the note would span). On this particular note the seller would pay $250 per month for 25 years (no interest charged, which is the standard).

In my experience MI will usually settle for less cash up front. If you pursue the promissory note they will usually want more, although it is spread out over a long period of time. I advise my clients that cash up front is the best solution. If they do not have the cash, then they have to make a judgment call on whether a promissory note is worth tying themselves down to.

I do not like to find out that my short sales have MI as it usually lengthens the time it takes to get written approval and they almost always ask for some type of contribution.