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MI Companies Blowing Up Short Sales

Posted by Leslie Neiss on March 22, 2011 at 4:53am in Short Sale Discussions

Within 24 hours, two short sales have blown up because the MI companies refuse to approve the sales. Much negotiating had gone on prior to MI companies jumping into the fray. After numerous calls to other agents and attorneys in Northern Virginia to discuss what can be done, they've all noticed a large increase of this occuring in the past several weeks. There appears to be some new financial incentive for the MI companies to force these short sales into foreclosure. Can anyone shed any light on this?  Is there anything that can be done to save these short sales? Help!

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Replies

  • Jeff Payne March 22, 2011 at 8:10am
    I agree, they should not be able to stop the sale.  They are an insurance company and just like your car insurance company, they should have to pay if you crash your car and not make you sign a promissory note for the difference.  What really burns me is that the lender took out this policy, not the home owner so in my opinion, it is still the lenders responsibility to approve the sale and work out their end with the MI company.
  • Leslie Neiss March 22, 2011 at 7:31am
    Jeff, negotiations took place between the lender, the investor, and MI company and the latter said not approving any deal. Your point made in the second paragraph is really at the crux of it all -- why does the MI company have the power to steer the direction of a short sale into foreclosure? The relationship, as you said, is between the lender and the MI company. And the lender has the relationship with my client.

    Jeff Payne said:

    Just some food for thought..........*****I am NOT defending MI companies*********

    Lets assume that you have a short sale that has LENDER placed MI on the loan and you bring an offer FMV and the lender approves the sale, KNOWING that they are going to get paid a claim from the MI company and KNOWING that the MI Company is going to want to recoup all of some of their claim, which is really the holdup, the lender or the MI Company?  If the lender would approve the sale and give the MI company some cash from it, the sale is approved and closed OR the lender could simply waive the MI claim and close the deal. 

    The part that does not seem right is the sellers sale is being held hostage by the lender and MI company when there issue was between them and had nothing to do with the seller because most likely the lender placed the MI on the loan to protect themselves from the chance the loan was not going to get paid back. (the reason they placed MI on the loan in the first place)   If the lender would not have made such a risky loan, they would not have placed MI on the loan.

  • Jeff Payne March 22, 2011 at 5:49am

    Just some food for thought..........*****I am NOT defending MI companies*********

    Lets assume that you have a short sale that has LENDER placed MI on the loan and you bring an offer FMV and the lender approves the sale, KNOWING that they are going to get paid a claim from the MI company and KNOWING that the MI Company is going to want to recoup all of some of their claim, which is really the holdup, the lender or the MI Company?  If the lender would approve the sale and give the MI company some cash from it, the sale is approved and closed OR the lender could simply waive the MI claim and close the deal. 

    The part that does not seem right is the sellers sale is being held hostage by the lender and MI company when there issue was between them and had nothing to do with the seller because most likely the lender placed the MI on the loan to protect themselves from the chance the loan was not going to get paid back. (the reason they placed MI on the loan in the first place)   If the lender would not have made such a risky loan, they would not have placed MI on the loan.

  • Jeff Payne March 22, 2011 at 5:26am
    I think from the MI company's point of view, they may not benefit from a short sale over a foreclosure.  They pay a claim either way.   If the lenders/investors really cared about getting the short sale done, they would negotiate with the MI company and reduce the amount the MI company is required to pay to the lender.   It is a never ending circle. Would love to hear from someone in the MI industry....
  • Leslie Neiss March 22, 2011 at 5:08am
    Julie, thank you for sharing that.  After all this time of going through the short sale process, homeowners are being forced into foreclosure and buyers who've waited patiently are stunned.   It feels like MI companies have made a sham out of the legitimate short sale process.  Last night in complete frustration, I created my first ever blog on this site about this issue. 

    Julie Cendejas said:

    Great post - I too would love to hear the answer as I've had the same issue. I'm hearing more and more of this and it's pushing my people into foreclosure over it. I have heard that the MI company would prefer a foreclosure as the bank will take longer to make a claim to them - over a year - vs if they do a short sale and the claim is filed quicker. 

     

     

  • Julie Cendejas March 22, 2011 at 4:56am

    Great post - I too would love to hear the answer as I've had the same issue. I'm hearing more and more of this and it's pushing my people into foreclosure over it. I have heard that the MI company would prefer a foreclosure as the bank will take longer to make a claim to them - over a year - vs if they do a short sale and the claim is filed quicker. 

     

     

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