Mortgage insurance (MI) adds a level of complexity to short sale negotiations that we would all rather do without. If a home owner has a loan or refinance from the end of 2005 or newer there is a chance that the lender themselves took out their own mortgage insurance policy. Even if the home owner believes they are not paying MI, the bank may have their own policy opened on the loan.
When talking with a home owner on this topic it is important they understand that this policy is not typically known or disclosed to them. The difficult part is that the MI companies are the ones that most often ask for the home owner to give cash. So how do you manage this with the lowest exposure to the homeowner? You can do this with a QWR, Qualified Written Request. A sample used at our law firm can be found at http://www.nrelg.com/docs/request-for-contact-info.pdf. The home owner will complete this and it should be faxed & mailed to the bank(s). This form asks that the bank(s) send all the detailed information on the Investor behind the loan as well as the mortgage insurance company, if any.
So why do you need all of this? Having the direct contact details for the investor and MI company allows a short sale negotiator to go around the bank’s negotiator right to the source. The bank will play their games and tell you they never got the form so stay on them. It is a RESPA violation for them to not respond within 60-days of receiving the written request. So if you have an MI company and they ask for money from the home owner you can go directly to the MI company to try to negotiate a lower amount or complete elimination of the request.
Far too often in the past we counter back to the banks about an MI request for cash and they tell us the MI company said no to our request. When we started using the QWR we often found that the banks seldom actually contact the MI company at all with our counter. Recently we were able to negotiate an initial $50,000 request down to $5,000, quite a big difference!
One last alert, if the is a 2nd lien is over $200,000 it is possible that the 2nd lien holder also has MI.
Important Disclaimer – Read me!
Best of Luck!!!
