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Livermore Short Sale: Mortgage Insurance

by Scott Fuller on November 1, 2012
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Hi, everybody, Scott Fuller with East Bay Short Sale Group.  We are your Livermore short sale specialists.  Today is October 31st, 2012.  Happy Halloween to everybody, first of all. I wanted to take a quick moment to let you know something that is going to be effective tomorrow morning, November 1st with mortgages that are backed by Freddie Mac.
Let’s say, for example, if you put 10% down on your purchase, you have an 80% first loan with, let’s say, Bank of America.  There’s 10% that has to be insured by a mortgage insurance company, and in the process of a short sale what we do is we actually submit the file to Bank of America for them to approve the short sale.  Once they have the approval, they then have to send it off to the mortgage insurance company for them to give a separate approval.  Two issues that we have with that in short sales is first all, the mortgage insurance companies can take a long time to give an approval, we’ve seen anywhere from one, two, three months to get an approval from the mortgage insurance companies.  And secondly, there’s not a lot of incentive for a mortgage insurance company to approve a short sale because they actually make money if it goes into default.
So what’s actually happened is Freddie Mac, starting tomorrow, has been given delegated authority to act on behalf of the mortgage insurance company.  So if we send over a file, let’s say, if it’s serviced by Bank of America, but it’s a Freddie Mac owned loan and you have mortgage insurance on the property, what they’ll do is they’ll go through, they’ll issue the approval for Bank of America first, and they’ll also go through and they’re the ones that are responsible for giving the response, the approval from the mortgage insurance company.  They’ve been given delegated authority to approve that as well.
That’s great news for homeowners who have a first mortgage backed by Freddie Mac and may have mortgage insurance on the property because it allows the process to go much quicker.  So we’re definitely looking forward to that, helping out anybody that has mortgage insurance on the property. If you’re not sure if you have mortgage insurance on the property, you can contact your lender and find out if you do, if you put down less than 10% and you don’t have a second loan on the property.
If you have other questions on how that process works, contact us, We can talk to you about the process, how it works, what you can expect, and potential timelines.

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