How Can I Cancel PMI
by Juan from Miami, Florida, USA
How Can I Cancel PMI (private mortgage insurance): Hello Ms Kate. My name is Juan. I have a question about automatic cancellation of PMI that no one has been able to answer. I hope you will. In 2002 my wife and I bought our first house in Miami, Florida. A new one.
The sale price was $125,900. It was conventional and as the down payment was less that 20%, PMI was included. The first lender was a major bank and in 2010 they transferred the mortgage to another lender. Never a late payment with either of them.
Along these years we have been making extra payments. We reached a LTV (loan-to-value ratio) below 78% on August 2010 (balance = $97855). The PMI was not canceled automatically, as we expected. Their answer was that we needed an appraisal.
I have read the PMI Act and understand that the automatic cancellation is when LTV reaches 78%. I do not find any other requirement.
Other people have told me that the automatic cancellation is on the date LTV = 78% according to the amortization schedule I was given during the closing (That date would be 11/1/2014).
As you see I am very confused about this issue. Could you clarify it for me?
Sale Price: $125,900
Original Loan: $122.100
Current Balance: $96,675
Thanks very much for your help, Juan
Kate Answers: How Can I Cancel PMI
Dear Juan, Canceling private mortgage insurance has never been an easy feat.
With the Homeowners Protection Act of 1998, PMI removal was broken down into two main categories, Lender Automatic Termination and Borrower Requested Cancellation.
How Can I Cancel PMI - Automatic or Termination?
I've gone straight to the source for information. The Federal Trade Commission, Consumer Financial Protection Bureau, and MICA for clarification.
Federal Trade Commission on PMI Termination and Cancellation
"For home mortgages signed on or after July 29, 1999, your PMI must - with certain exceptions - be terminated automatically when you reach 22 percent equity in your home based on the original property value, if your mortgage payments are current. Your PMI also can be canceled, when you request - with certain exceptions - when you reach 20 percent equity in your home based on the original property value, if your mortgage payments are current.
One exception is if your loan is 'high-risk.' Another is if you have not been current on your payments within the year prior to the time for termination or cancellation. A third is if you have other liens on your property. For these loans, your PMI may continue. Ask your lender or mortgage servicer (a company that collects your payments) for more information about these requirements."
Source: U.S. Federal Trade Commission (FTC)
Consumer Financial Protection Bureau on PMI Termination and Cancellation
"How Do You Cancel or Terminate PMI?
Cancellation: Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80 percent of the original purchase price or appraised value of your home at the time the loan was obtained, whichever is less. You also need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years. Your lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.
Automatic Termination: Under HPA, mortgage lenders or servicers must automatically cancel PMI coverage on most loans, once you pay down your mortgage to 78 percent of the value if you are current on your loan. If the loan is delinquent on the date of automatic termination, the lender must terminate the coverage as soon thereafter as the loan becomes current. Lenders must terminate the coverage within 30 days of cancellation or the automatic termination date, and are not permitted to require PMI premiums after this date. Any unearned premiums must be returned to you within 45 days of the cancellation or termination date.
For high risk loans, mortgage lenders or servicers are required to automatically cancel PMI coverage once the mortgage is paid down to 77 percent of the original value of the property, provided you are current on your loan."
Source: Consumer Financial Protection Bureau
The Mortgage Insurance Companies of America on PMI Termination and Cancellation
You will find the wording changed in 2012 in the following quote from MICA, a trade association representing the private mortgage insurance industry.
"Borrower-initiated cancellation - For most loans originated on or after July 29, 1999, a lender must cancel PrivateMI at the request of a borrower whose mortgage balance is 80 percent of the original value of the house. The lender must be satisfied that the property value has not declined.
Automatic termination - For most insured loans originated on or after July 29, 1999, PrivateMI will be canceled automatically when the mortgage balance is at 78 percent of the original value of the house."
Source: The Mortgage Insurance Companies of America
How Can I Cancel PMI - Interpretation or Loophole?
So while the two federal institutions and MICA do not come out and say extra principal payments do or do not aid in automatic lender termination or borrower request for cancellation which requires an appraisal, they certainly interject enough ifs to take the zest out of paying down the balance! I insist this is not in the spirit of the law.
In fact, the way it appears to me is that there's some double dipping going on. Your mortgage company willingly accepts extra principal payments but doesn't necessarily terminate your PMI based on your actions to reduce the principal balance.
More on getting rid of PMI here at How Do I Cancel PMI
How Can I Cancel PMI - The Next Step
So request PMI Lender Termination in writing once more. Include pertinent details backed up with documentation - copies of the original appraisal and your current mortgage statement showing the balance is below 78% loan to value.
If you do not get a satisfactory response, write your state and federal representatives. After all, it was Congress who passed the Homeowners Act of 1998 to protect homeowners from paying unnecessary
private mortgage insurance.
Juan, one more thing. I'd like to hear back from you. Let me know if this page is helpful to you. Anyone can Comment on How Can I Cancel PMI
or ask Kate another question
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