For a short sale to proceed, every selected stakeholder must approve it: all the mortgage holders as well as any other lien holders.
Many loans have mortgage insurance (MI), which must also be taken into account. When the mortgage holder takes a loss on a loan, it will file a claim against this insurance policy, so the insurance company must agree with the terms of the sale. Sometimes, the terms of the MI policy itself makes it more advantageous for the mortgage holder to foreclose on the property rather than agree to a short sale. These are some of the variables your real estate agent must wrestle with to chart a successful course for you.
If all this sounds complicated, it gets even more so: many mortgage loans today are bundled into groups and sold as mortgage-backed securities (MBS), also known as collateralized debt obligations (CDOs). These securitized instruments are often covered by pool insurance—policies attached to the entire group rather than individual loans.
Where this type of policy exists, it must be included in the short sale negotiations just like normal mortgage insurance. But the presence of this insurance may not be immediately evident, even to the servicer of the loan. Determining that will require extensive investigation to avoid last-minute surprises.