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What rules govern PMI and deficiency judgements?

Discussion in 'Deed in Lieu of Foreclosure - Do You Need Help to ' started by SDUtah, Sep 7, 2010.

  1. SDUtah

    SDUtah LoanSafe Member

    We are well into our strategic default and our biggest concern in our PMI. I know they can and do collect deficiency judgments, but what rules/laws to they have to follow in doing so?

    I thought that I had it all figured out: The same rules apply to them as apply to the lender. For example, I'm in Utah so the lender has 3 months post trustee sale to pursue legal action against me, so the PMI company would only have 3 months as well. Also they can only collect 20% of the original loan amount that they backed.

    The reason I bring this up is I met with a foreclosure defense attorney today who told me that this was not the case. He said that while the lender could only get a deficiency judgement within 3 months, the PMI company typically has 4 years. He said they are 2 different contracts and therefore different rules apply. This contradicts what I previously thought as well as what another attorney told me.

    Can anyone clear this up or shed some insight? How much do PMI companies actually pay to the lender if someone defaults on a property, how much can they pursue you for and how long to they have to do it?

    Good luck everyone.
  2. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    Here is some info I found on this:

    I need to retract the statement above and say if it is a recourse state, then they can possibly go after you. Sorry about that. So if the underlying debt is "non-recourse," they are out of luck. On the other hand, if it is "recourse" the answer is yes.

    http://www.loansafe.org/forum/deed-...-legally-pursue-ex-homeowners-settlement.html

    You have to look at your own state's law. Texas for example allows lenders to get deficiency judgments after either a judicial or non-judicial foreclosure. California on the other hand will not allow a lender to get a deficiency judgment after the completion of a non-judicial foreclosure.

    You can look into bankruptcy and talk with some lawyers on this to make sure you cover your bases. A good attorney will provide the initial consultation free of charge..
  3. Nevada3

    Nevada3 LoanSafe Member

    Hi Evan -

    Can you address the question regarding the Mortgage Insurance company and whether they have the same statute of limitations as the lender when filing a DJ?
  4. SDUtah

    SDUtah LoanSafe Member

    Thanks for the reply Evan. I remember reading that thread a long time ago. I'm still a little in the dark with this whole PMI situation. I still don't know how long the PMI company would have to come after me for a deficiency judgement and how much they would be able to try and collect.

    Does anyone know how much PMI companies actually pay out when a home forecloses? Is it the difference between the value of the home and how much is owed on the loan, or is it a set % of the original loan?
  5. Nevada3

    Nevada3 LoanSafe Member

    As far as I understand, it depends on the percentage of their coverage and the difference between your loan balance and what the home sells for.

    You'll have to look up the statute of limitations for your state with a foreclosure. In Nevada, for your first loan, it's 6 years if you short sell and 6 months if you foreclose.
  6. SDUtah

    SDUtah LoanSafe Member

    Thanks for the reply Nevada3. In Utah the first lender has 90 days to file for a deficiency judgement or they waive their right to do so. I'm hoping that the PMI timeline is the same, but can't seem to find that answer.

    Here's a link that talks about how much a PMI company pays the lender if the borrower defaults:

    How much the PMI (private mortgage insurance) company pays the lender if the borrower defaults?

    So hopefully the max deficiency judgement the PMI company could obtain is 20% of the original loan.
  7. shortsale301

    shortsale301 LoanSafe Member

    Hi SDUtah,

    I know this is an old thread, but I thought this might be helpful to someone out there.

    Here's the thing: Although Mortgage Insurance is typically required if the loan is over 80% LTV, that does not mean that this is the limit of their coverage, it is more often 25% to 30% of the loan that is covered.

    There's another myth I have heard- That is - that MI will always jeopardize a short sale. That is often not the case at all - for example, MI will sometimes pay up to help get a 2nd lien released and/or mitigate the loss in a way that helps get an approval. It depends on the specifics.

    I've also heard people say that if PMI is involved, then a short sale approval will take much longer. However, depending on the numbers and the situation, often the loan servicer has the authority to approve the short sale and to receive a claim from MI without any specific approval on the deal from MI - and without any seller contribution or promissory note required. In other cases, the MI company will review all the documentation themselves, but even then, many respond within two weeks or less.

    As far as deficiency rights - again, it often depends on the specifics. There are some that will allow the servicer to waive the MI deficiency rights without any specific review by the MI company, but especially if your hardship / financial situation do not meet certain guidelines, then they will prohibit the servicer from waiving their deficiency rights through subrogation.

    -jon
  8. goodgrief

    goodgrief LoanSafe Member

    Wondering if anyone has current info on laws and limitations regarding deficiency judgements where PMI is involved in Oregon? So far I've been able to find ORS 88.070 in regards to collecting unsatisfied amounts. That section says they will expire when the sale is made if certain conditions are met. I'll have to talk with a lawyer to decipher it properly, but it looks like maybe there are some cases where a deficiency judgement may not be allowed in judicial foreclosure in Oregon.

    Nationally, does anyone know of a case(s) of someone being pursued yet by the PMI company for the amount they (PMI) payed out to the investor post-foreclosure?

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