Short sale with PMI

I’m currently doing a short sale with HomEq! Today the LM said they could not approve my cash offer because the loan had PMI and would have to be forwarded to the PMI company for their approval. The upside down borrower owes $170k and the house is worth $140k as is. The PMI was for a 90% loan, so the PMI company has the coverage for the $17K over the borrower’s $17k down payment. I have offered $100k CASH, so what should I expect from here?

Correct, PMI needs to approve first. A short sale is still possible however, it affects the bottom line - usually in your favor. I had one that wouldn’t cover it because my house had extensive damage to it but the short sale was still approved. The insurance company should have sent paperwork to the homeowner and they are to handle this - (this was my case) but I would hold their hand through it just in case.

Thanks Cruz!

Just trying to understand your numbers. What was the seller’s purchase price and the original loan amount?

Hey Dave,
The guy refi’d the house in 03/05 for $166 which was 90% of the appraised value of $185k.

Hi TB,
How did you make out with the PMI approval? I’m doing a short sale and I was waiting for the payoff letter and then all of a sudden I was told that it needed to go to the PMI company for approval. Last night I was told that the PMI company will most likely require the homeowners to sign a promissory note. It looks like this may fall apart for me. Just wondering how you made out.

9 times out of 10 they will ask for a promisory note be signed however it can be negotiated. Usually they use 20% of the value as the amount of the note. They may also have a second option for the homeowner which is to come in with cash at closing. The way I worked my last PMI deal was this - the original note was for 85k and the second option was they wanted 40k at closing - we pushed for a 10k cash at closing and got it - 10k worked because it still left our numbers low enough - 45%. Your deal hasn’t fallen apart. Keep working on it and stick with the numbers that work for you and keep negotiating them. Call their bluff. It’s a game of chicken.

Also, in the future I would suggest you always ask the homeowners if they have PMI because it better prepares you and you can try to account for it in your offer. PMI also holds up the deal. I waited an extra 60 days. Good luck.

I’m assuming I can ask the bank if PMI insurance is involved? The homeowner has no idea what PMI is and never knew they had it. I don’t understand option 2, coming in with cash, do you mean a cash deal or do you mean paying off the note up front at a discount if you pay cash? You said they wanted 40k and you offered 10 cash. Is that 40k the promissory note or short sale payoff. If they accepted the 10k promissory note then your purchase price is the short sale payoff plus 10k for the promissory note. Did you deal directly with the PMI company? The bank negotiator I’m dealing with won’t give me their contact info.

I’m still waiting! HomEq told me that they had to pass my offer by the PMI company and based on their response, they may be able to deal with me!
Will keep you posted!

I just heard back from the bank on my deal, the PMI company wants the borrower to sign a 17k promissory. I asked the bank to ask the PMI company if they would accept 1k cash at the time of closing. I also asked if I were to get another buyer involved for 41k would that work and they said yes (24k bank payoff and 17k to PMI company). Problem with my deal is there is no cash investor who is going to pay that amount and I don’t think the property will pass a bank inspection. Ill let you know how I make out with my 1k counter