You would be paying down principal as well. 

Meaning they do their own deals and if they lost their licensing they are still okay with cash flow from properties owned.Brokerages that have built up considerable business do not want the liability of newly licensed agents especially ones doing riskier investment deals that involve strategies that open a brokerage up to E and O claims.As a brokerage and principal broker you still answer to clients and your state real estate commission.New investor, newly licensed = recipe for disaster for a brokerage E and O claim.I had agents years ago and got rid of all of them.

(no connection; I used to work for ML 12 years ago)It's interest only for 10 years (at an adjustable rate, LIBOR-1-mo + 1.625%), then is a 15-year amortization of the principal (at the same adjustable rate).Upside: They don't have to abide by the conforming mortgage limits as it's underwritten in-house.Downside: It's adjustable.

PURCHASE PRICE IS NET.EXISTING MORTGAGE (S):Existing financing on subject property will be current in all payments of principal, interest, late charges and escrow amounts required by the mortgagee.

At $200k, your family's property may not cash flow very much but you could still enjoy the principal pay-down and potential appreciation. 

You would need to wait till the loan is 80% of market value if this property is 2 units but if its a single family residence you could refinance up to 95% of the market value and not have to wait or pay down your principal balance.

The letter also states that the up front mortgage insurance would be returned to me by being applied to the principal and the monthly insurance premium charge is dropped.

In principal it is legal, but at some point you are likely to run afoul of the law. 

The notice of Seizure has the balance due on principal of fixed rate note at $116,781.32 with interest from June 1, 2011 until paid in full at 6.5% per annum to be computed interest.  

Or would it just be rolled into the principal balance on your loan?