[HopingtoFind]

I would highly suggest that you get everything from them in writing... if it is not too late. Signing the promissory note does not protect you from anything unless it explicitly states that this amount will completely satisfy your debt and they will not pursue you in the future.

Definitely consult with an attorney if it is not too late.

I guess it doesn't completely make sense to me that the insurance is the one standing in the way of a short sale. Because insurance co benefits the most from short sale... if the house goes into foreclosure insurance company would stand to loose a lot more.