So many people over the pastcouple years saved money getting a 100% loan rather than an 80/20 or 80/15/5 loan. But, those who got that 100% loan were stuck having to pay PMI on their loan, which in reality, if they paid it down below 80% loan to value ratio, the PMI would be taken off.
But, as many found out when the bubble started to burst, the 80% mark was going to be a lot harder to hit than they thought. With declining house values, that 80% value just wasn’t there anymore and they were stuck paying this PMI for a lot longer time than they had planned.
So, now they are stuck paying this insurance bill every month from anywhere between $100 and $200 a month, basically to protect the bank if the buyer should default. Just like in a car accident with a new car, the insurance is there more to protect the person who gave the loan rather than the person actually driving the car.
But, yesterday, I was being told by the negotiator of a short sale I’m doing, that they are willing to accept the terms the buyer has presented to the bank as long as the seller is willing to sign a promissory note for $25,000 with no interest at $101 dollars per month. I then asked for what? They said that is what the private mortgage company is requesting to pay them back for their loss on this transaction?
WHAT? Why has my client been paying the $176 per month for the past two and a half years for if the insurance company wasn’t going to actually pay if the home owner defaulted?
Isn’t that what that insurance was actually put in place for in the first place?
So, we have sent it back to the bank telling them to take a hike as that is what that insurance is for and why he has been paying. If they don’t want to accept that, then they can have the home back according to the owner. I’m hoping it doesn’t come down to that, because this seller really has done everything the bank has asked to get this home sold and I know these buyers have been waiting way longer than I expected anyone to have to wait to move in to their new home.
It really would be heart breaking to have to tell them the bank is not willing to do this deal because my client won’t pay the insurance company back something that he already has been… a premium every month for just in case something like this happened.
What are your thoughts on this? Any suggestions?