Collecting on PMI as a factor during bidding process

[Andy Mirza]

Anyone have experience collecting on PMI (mortgage insurance) with a non-performing note? Would love to hear the good and the bad.

We kicked a loan out of the bidding process because the seller's price reflected a future pay out for PMI. We were prepared to bid $110k with collateral worth $150k according to the seller. The seller stuck with $132k as the price they would take indicating that we could make a claim with PMI. Total debt was approximately $200k.

Our research led us to believe that an insurance payout would be a lengthy, complicated process with a potential fight with the insurance company. We came to the conclusion that any bid we make on a note should not give extra value to PMI because of the uncertainty of a payout. What are your thoughts?