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.

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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.



About Laurel Starks

Laurel Starks is a divorce real estate specialist. Trained in both mediation and collaborative divorce methods, she speaks frequently on real estate and divorce issues to legal and alternative disputes resolution groups.

A former host of the talk radio program Real Estate Matters, Starks also serves as an expert witness in real estate matters related to divorce cases, including the mishandling of procedural aspects therein. She handles the sale of real property in family law cases, and is one of the top producing realtors in the nation. She was nominated in 2016 for the coveted Innovator of the Year by Inman News, the real estate industry’s leading news source. Laurel lives with her husband and two sons in Southern California.

Starks is the author of The House Matters in Divorce: Untangling the Legal, Financial and Emotional Ties Before You Sign on the Dotted Line, published by Unhooked Books.

From “The House Matters In Divorce,” by Laurel Starks. View this book at this link: