Hi Broker Bryant. What does MI stand for? And why am I waiting on MI approval?

MI stands for Mortgage Insurance. The Mortgage Insurance Company is a major decision maker with a Short Sale. They are the ones insuring the loss. There are usually 3 entities involved in the Short Sale decision making process.

The Lender/servicer:

• The Short Sale request is submitted to the servicer (lender). This is Bank of America, Chase, Wells Fargo etc.. This entity is the one that lent the money or bought the servicing of the loan later. This is who Borrowers/sellers make their payments to. They take NO loss in a Short Sale as the loan was already sold to the Investor.

The Investor:

• The investor is Fannie Mae, Freddie Mac, Pension funds, Insurance companies etc.... To protect their investment they may purchase Mortgage Insurance based on the value of the promissory note. Or the Borrower may have purchased Mortgage Insurance when they took out the loan.

Mortgage Insurance Company:

• They insure the Investor's investment against loss. If the mortgage loan was for 200k then the promissory note is for 200k. The MI Company insures the investment for 20% to 35% or more of the original value of the Note. This figure depends on how much insurance the Investor or Borrower bought from the Mortgage Insurance Company.
  

Let's say the Mortgage Insurance is for 25%. The note is for 200k. Therefore, the Insurance will pay the Investor $50,000 (200,000 x .25) if the property is foreclosed on or the borrower does a Short Sale or Deed in Lieu. Plus, they may have conditions the Investor has to meet before they will pay at all. These conditions may be why the Borrower is asked to miss payments or participate in the loss by a cash contribution, promissory note or both.

So as you can see the Mortgage Insurance Company is a major player. They can make or break a Short Sale. I hope this helps.