Hi all!  I was wondering if you could help me with a mystery. 

I am negotiating a short sale with Nationstar.  The homeowner received a notice of cancellation from State Farm for their home insurance policy.  As the homeowner understands it, the premium for this policy is supposed to be paid by Nationstar from the escrow funds through their loan payments.  Does the premimum not get paid if the homeowner has stopped making payments due to hardship and short sale attempt?  Is the money that would normally go to pay the insurance premiums just applied to the principle balance to recoop some of the  losses on part of the bank?  We are trying to figure out why the insurance would be canceled.  I spoke with someone in the Insurance Dept at Nationstar but all she advised what that they probably received notice of cancellation because Nationstar did not have a copy of their current policy on file.  Does this sound right?