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Mortgage Insurance - Is it a Scam? What does it really cover?

mortgage insurance what does it cover

Lance Owens (RS) Real Estate Agent Kailua-Kona, HI 808-936-8383 Contact Profile

I have a homeowner (condo) and this is her primary residence, and it is in foreclosure. Pay off is roughly about $300,000. The offer is for $195,000 - CASH. Which by the way is about 10,000 under fair market value - of course that is reason for a whole new blog - what is fair market value when you 848 active listings, with only 13 sales last month? Needles to say I think this is a very good offer and I let the bank know this also.

Here is there response to me - by the way the names have been changed to protect the guilty :)

Hello Lance,

I submitted the short sale to the MI (Mortgage Insurance) company for their approval.  I have received a response from them.  They said they would approve the short sale

but the seller will have to sign a 40,000 promissory note.  It is interest free and the payments will be for 25 years at 133.33 per month.  Please let me know if the sellers

are willing to sign the note.  If so then I will get the MI companies approval and submit to the investor for their final approval.  At which point, if I receive their approval then

I will have an approval letter for you and you can proceed to closing.  However if the sellers are not willing to sign the promissory note then I will have to let the MI company

know and see what they say.  More then likely they will not approve unless the sellers contribute towards the loss in some way.  Please let me know once you find out something.

Thank you.


US Bank Home Mortgage

My response back to them stated that my client is unemployed - how could any bank or person sign a loan knowing they could not repay - isn't that what got you in this mess to begin with?

They got back to me today with this response.

The Mi company has responded and they stated they will extend the start date for the promissory note to 11/01/2009 so she can obtain employment.

They stated they will not approve the short sale unless she participates in the loss by signing the promissory note.  If she still does not agree to sign

the note they have stated to proceed with foreclosure and they will seek deficiency once it goes to sale.  It really would be in her best interest to sign this, note since they have extended the start date, this gives her time to obtain employment.  Please let me know what she is willing to do.  Thank you!


US Bank Home Mortgage

I for one don't think anybody deserves a free ride, but when you have lost everything, and it's your primary residence, and you have been paying for your mortgage insurance - how can they expect you to pay another $40,000 - Why did you pay for insurance in the first place - wasn't it to cover you in this situation? I mean

when I paid my car insurance, and I got in an accident that caused $20,000 between to the 2 cars - they didn't come back to me and say - hey we will only cover it if you pay us back $10,000 - and by the way, we know you lost your job - just sign this promisary note - CRAZY isn't it?

Another lender - trying to still write another bad loan - what do you think?

UPDATE:  The owner emailed the bank and here is there response


The MI company holds the insurance on the loan for the investor.  They have to pay a claim on the loan to the investor if it were to go to foreclosure sale.  That is the only reason

they are on the loan and the only time they have to pay a claim.  Therefore they are in no way required to review or accept a short sale because they are not required to pay a claim

for a short sale.  So if they do review a short sale then they are going to mitigate their loss as well because they can and they do not have to review it at all.  If they request a promissory

note to repay some of the claim loss for them then they can do that and we can do nothing about it.  If they do not want to accept the short sale unless you sign a note then they are not required

to and we can not go any further without their approval.

In the letters you received from USBank it does state the investors because not every account has MI.  in no way does the letter state that we WILL DO a short sale on your property.

It is a lengthy process that has to be reviewed and has to go through several approvals.  Ultimately if everyone approves the short sale then it will be accepted as full satisfaction of the mortgage

debt and the short sale will be completed however if your account has MI and they want a promissory note that has nothing to do with the mortgage debt.  They are wanting you to sign the note to

mitigate their loss on the claim they are paying.  Your are not paying back on the mortgage.

A Deed In Lieu is also an option that we have however we have to obtain approval from the MI company for that option as well.  So more then likely if they are asking for a promissory note

for the short sale then they are for sure going to ask for one in order to approve the Deed In Lieu.  This option has not been mentioned for this reason along with we are still working on the

short sale.

The MI company is Radian and the processor is Pat xxxxx.

Their phone number is 1-800-xxxxxxx.

Please advise me ASAP what you are going to do that way we can either proceed with getting the investors approval or deny the offer.  Thank you so much!

Aloha, and have a great day

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