Jump to content

Mortgage Insurance Policy


echo1
 Share

Recommended Posts

My home just has a first mortgage on it with the lender paying for the PMI. Originally it was going to be two loans, but when my wife and I went to closing we learned it was going to be just one loan. I am wondering if I am foreclosed on or short sell it or do a deed in lieu, if the PMI company will sue me for a deficiency judgment.

Thanks in advanced.

Link to comment
Share on other sites

If you were to use the Home Affordable Foreclosure Alternatives (HAFA) plan, and are approved for a short sale or deed in lieu of foreclosure, then the PMI company will not be able to come after you for a defiency judgment, regardless of the state you live in. During this process, the PMI company must actually approve of the sale.

In order to get through HAFA, your mortgage servicer must attempt a HAMP modification first. If you are not approved for HAMP, then HAFA alternatives will apply.

Link to comment
Share on other sites

Your answer is no. The PMI company cannot sue you (at least in New York)

The mortgage insurance policy is written against the value of the house to the loan amount. As for the deficiency judgment - proceeds received by the lender from a PMI policy, if they do not offset any deficiency judgment against you, the borrower. The Lender can collect on the policy and still come after you.

It would depend on whether the loan secured by the mortgage is a recourse or non-recourse loan. If it is a recourse loan, then the lender would have the right to sue for any deficiency on/after the foreclosure sale; if the claim was paid by mortgage insurance coverage, the insurer would be "surrogated" to the lender’s right to sue for the deficiency.

There are exceptions, such as when the mortgage lender agrees to waive the deficiency by accepting a deed in lieu of foreclosure or in connection with a "short sale"; or sending out a 1099c cancelling the debt.

Be advised every situation is different. If this is a serious issue facing you. You best bet is to speak to a mortgage attorney.

:)

Link to comment
Share on other sites

It does depend upon the state you are in (where the property is located). Here in Fl, the MI co can come after you for the deficiency. The exceptions are for those that have been HAFA approved on a short sale as stated in an earlier post. Natually, another exception is if you have a BK discharge for the debt and no reaffirmation.

If you short sale your home you will usually know if the lender/servicer or the MI co will come after you for the deficiency as they will state if the release is just a release of lien or both a release of lien and a release of the debt right in the approval letter. If it is only a release of lien, then prepare yourself for a second set of negotiations to release the debt after the house is sold. Every state has a different amount of time they can come after you. Check your state's statutes. For Fl, it is 5 yrs.

That is why it is common for the MI co to ask for $X at closing in order to give you a full release. I have seen them settle for very, very small amounts in order to give a full release.

Link to comment
Share on other sites

  • 1 month later...
  • 5 weeks later...
Guest
This topic is now closed to further replies.
 Share

×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.. For more information, please see our Privacy Policy and Terms of Use.