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#20695 - 06/13/02 03:41 PM PMI
Buddy the Elf Offline
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Buddy the Elf
Joined: May 2002
Posts: 972
first lily pad on the right
This question relates to me personally. My husband and I have a mortgage with PMI that we opened in May 1998. I've been reading about how PMI can be terminated once the ratio is 80%-20% (or something like that- hopefully whoever answers my question will understand what I'm talking about!) So I called my bank yesterday to inquire about how close we were to being able to terminate the PMI. The gal I spoke with told me that it is required for the duration of the loan. Does this sound right? The material that I've encountered regarding PMI doesn't state that it's dependent on the type of loan in order to be terminated. Did we miss out on this new law because of timing? Any help you can give me would be appreciated.
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Lending Compliance
#20696 - 06/13/02 04:23 PM Re: PMI
RVFlyboy Offline
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RVFlyboy
Joined: Oct 2000
Posts: 5,976
Soaring over Georgia
The PMI coverage must be terminated by the bank no later than when your LTV reaches 78% or the mid-point of your amortization, whichever occurs first. You can request the coverage be cancelled (and it must if you meet all criteria) when your LTV reaches 80% and your loan is in good standing and you've made your payments on time. So it doesn't sound like you're getting the straight scoop from your bank. You may want to follow up in writing (this preserves your rights under RESPA to a timely response), and you may want to provide a copy of that communication to the bank's primary regulator (FDIC, FRB, OCC, or OTS).

The snag I ran into with my own loan was a little different. I wanted to get my PMI cancelled, because with appreciation, my LTV is now below 80%. However, the mortgage servicer will not cancel the PMI without an independent appraisal that I must pay $350 for. Needless to say, that's more than I'll wind up saving by having the PMI cancelled, so it's not worth doing.
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#20697 - 06/13/02 05:30 PM Re: PMI
Bartman Offline
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Bartman
Joined: Oct 2000
Posts: 1,191
Springfield
Since your loan closed in May 98, it was on the books before the effective date of the Homeowner Protection Act of 1998, which became effective 7-29-99. The HoPA defines 'residential mortgage transaction' as one that was entered on or after that date, so the 78% rule doesn't apply to your loan. However, the FHLMC and FNMA servicing guides suggest that pre-7-29-99 loans cancel on borrower request at LTV of 80% or less based on original value - automatic cancellation happens at the midpoint. Regardless, you should receive a notice from your servicer each year with an address you can write to. Do that, and see what the results are. Our mortgage department (we service FHLMC loans we originate) has taken the position that we'll treat pre- and post-7-29 loan customers the same way.
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#20698 - 06/13/02 06:38 PM Re: PMI
Richard Insley Offline
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Richard Insley
Joined: Oct 2000
Posts: 10,036
Toano, VA
Croak44- Get your unpaid principal balance from the loan servicer. Pull out your settlement docs & find the appraised value of the property. Your "LTV" equals today's principal balance divided by the original appraised value. If it's close to 80%, or you think your home has appreciated in value since 1998, consider refinancing the loan at 80% of the current appraised value (with 20% equity, you will avoid PMI.) Weigh the cost of the refi (minus any benefits you may realize from a lower interest rate) against the cost of the PMI premiums you would otherwise pay over the next few years.
Last edited by Richard Insley; 06/13/02 06:40 PM.
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#20699 - 06/13/02 08:28 PM Re: PMI
Princess Romeo Offline

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Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
Rememer this if considering refinancing - The INTEREST you pay on your principal balance can be deducted from your income at tax-time (consult your tax advisor on this!) while PMI CANNOT!

So factor in the tax savings especially if you would rather finance your closing costs rather than paying out-of-pocket.

(And who wants to start a pool on when Section 32 will forbid the financing of closing costs all in the name of protecting the consumer!)
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#20700 - 06/13/02 09:15 PM Re: PMI
redsfan Offline
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redsfan
Joined: Dec 2000
Posts: 3,455
The Pennant Race
I give it 18 months. Of course, after that, there will be no section 32 loans, because if people had the money for closing costs, chances are they wouldn't need the high-cost mortgage.
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#20701 - 06/14/02 07:22 AM Re: PMI
Princess Romeo Offline

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Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
Yeah - but I'm not happy about the fact that I would have to choke up that money up front rather then letting my house ease my tax burden.

But do politicians and activists ever think of how things work in the real world?

And while I'm on this subject, if they REALLY wanted to catch some of these predatory lenders, why don't they just let their mail stack up for a month, pull out all those mailers that have the "mock" checks (You are PREQUALIFIED for up to $70,000 - low rates, no closing costs!) and do an investigation on the loans generated by those folks.

Out of lazyness/tiredness, or just plain orneriness, I let my "junk" mail pile up for a month - I counted 22 "pre-approved" credit card offers and 15 mortgage refinance offers.

What was amusing was that there was more than one card offer from the same card issuer, and the rates and promo periods were vastly different. Also, some of the mortgage offers were to refinance loans I had paid off years back.

At any rate, I have two grocery bags filled with stuff waiting for me to sit down and shred. I'm thinking of buying an industrial wood chipper so I could throw the whole batch at once. 5 sheets at a time gets tiresome!
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Regulations are a poor substitute for ethics.
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