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Lender says PMI company won't allow for a deed in lieu if property is vacant?

We've moved from Michigan and we have a home there that is now considered vacant and most likely will be going into foreclosure. After speaking to loss mitigation the guy is stating that they can't accept a deed in lieu of foreclosure because the PMI company has some issue with vacant property. The lender is pushing that we seek out a short sale. Is he just saying this because the bank doesn't want to own and market the property?

Public Comments

1. Talk with a local realtor about a short sale. Make sure you understand the implications if the property sells below the mortgage amount. Or ask about having an auction, you set a limit there. There are a few options you have instead of deed in lieu of. But don't wait too long to impliment one.
2. My son is currently going through this and has told us a couple of things that you might want to look into. It might change your mind about which way you want to go with this house. 1. If you do a deed-in-lieu, you owe the difference between the market and sale price of the house. For example, if your home is worth $200K and they sell it for $150K, you are responsible to pay the additional $50K. 2. If you do a short sale, you are responsible for the TAXES on the difference, because it is considered income. So if they short sale the house for $150K, you will have to claim $50K in income on next year's tax return and pay taxes. This may be different from state to state, so please don't accept this as fact - but check it out so you have all the facts before you make your decision.
3. Ok, I'm really confused, if you walk away (deed in lieu) then the foreclosure will still be on your record, for 10 years. A short sale is MUCH better, the lender settles for less than is owed, but you sell the house, some states, they can come after you for the difference, but selling it, is much better than just walking away. Why not list it with a local realtor, tell them you will consider all offers. The lender doesn't want your house, have you talked to them about a forebearance agreement, where they put the past due on the back of the loan (yes your payments are higher, but it will take you out of the foreclosure process) Is it possible you can rent it out? If you charge 1st, last and security, will it make up for the back payments? I would talk to a realtor in Michigan and ask them to pull comps, what do they think they can sell your home for (most real estate offices are property management companies too, ask them what rents homes in that area are receiving) you still have options, then after you decide what you are going to do, call your lender and make arrangements