Thread Options
#1436113 - 08/30/10 03:48 PM Annual PMI notice
Many Hats Offline
Platinum Poster
Joined: May 2008
Posts: 915
Orlando, FL
I was asked today what our procedure was for ensuring that we are proving annual PMI notices to applicable loans.

(Lump in throat). We haven't been.

Can someone share what kind of notice is reauired exactly/sample, etc.?

Return to Top
Lending Compliance
#1436116 - 08/30/10 04:03 PM Re: Annual PMI notice Many Hats
Cowboys Fan Offline
Power Poster
Joined: Dec 2002
Posts: 4,597
SC
Written notice to borrowers that tell them they have rights regarding cancellation / termination of PMI and the address & phone number they can use to contact bank to see if it can be cancelled. You can include the notice on the annual escrow statement or provide a separate statement.
_________________________

Return to Top
#1437294 - 09/01/10 02:18 AM Re: Annual PMI notice Cowboys Fan
jlroberts Offline
Diamond Poster
jlroberts
Joined: Sep 2009
Posts: 1,573
Ohio
We include our notice with the escrow analysis. I found this in the BOL tools. http://www.bankersonline.com/tools/tools_compliance.html

[BANK NAME]
Important Information About Your Private Mortgage Insurance

Your mortgage loan with [Bank Name] required private mortgage insurance (PMI) at the time of your loan origination. The PMI requirement on this loan may be canceled if you qualify under the following criteria:

1. The private mortgage insurance may be canceled when:
a. The Outstanding Principal Balance has been paid down to an amount no greater than:
1. 80% of the original value based on your actual payment history, or on amortization schedules for your mortgage; or,
2. 80% of the current appraised value (determined by a new appraisal obtained by the customer, or BPO ordered by the lender, at the customers expense) provided five years have elapsed since the origination date of the mortgage;
b. For the above to apply, the loan payment history shows no payments 30 days or more past due within the preceding twelve months; and no payment 60 days or more past due in any 12 month period in the past 24 months.

2. Requests for release from the PMI requirement and cancellation of PMI insurance must be made in writing to:

Bank name
Bank address

3. If you are unsure whether or not you qualify for termination of your PMI, you may call us at (phone number) and ask for loan servicing for a determination.


Last edited by jlroberts; 09/01/10 02:21 AM.
Return to Top
#1437332 - 09/01/10 12:46 PM Re: Annual PMI notice jlroberts
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 46,710
Bloomington, IN
Notice for loans originated prior to 7/29/99 (we still have 4 or 5 believe it or not)

Notice Concerning Private Mortgage Insurance


Your mortgage loan has Private Mortgage Insurance (PMI). PMI protects lenders and others against financial loss when borrowers default. Charges for the insurance are added to your loan payments. Under some circumstances, you may be able to cancel PMI, either with the consent of the lender or in accordance with state law. For information about PMI cancellation, see the enclosed guidelines on how to cancel private mortgage insurance. If you have any questions please contact us at the address or telephone number listed below.

Since the conditions for canceling mortgage insurance for your loan is not statutory under federal law, they may be changed at any time (unless otherwise required by state law).


Notice for loans originated on or after 7/29/99

Private Mortgage Insurance Disclosure

Private Mortgage Insurance: Your mortgage loan requires Private Mortgage Insurance (PMI). PMI protects lenders and others against financial loss when borrowers default. Charges for this insurance are added to your loan payments. Under certain circumstances, federal law gives you the right to cancel PMI or requires that PMI automatically terminate. Cancellation or termination of PMI does not affect any obligation you may have to maintain other types of insurance.

Borrower Requested Cancellation of PMI: You have the right to request that PMI be canceled on or after either of these dates: (1) the date the principal balance of your loan is first scheduled to reach 80% of the original value of the property or (2) the date the principal balance actually reaches 80% of the original value of the property. PMI will only be canceled on these dates if (1) you submit a written request for cancellation; (2) you have a good payment history; and (3) we receive, if requested and at your expense, evidence that the value of the property has not declined below its original value and certification that there are no subordinate liens on the property. A “good payment history” means no payments 60 or more days past due within two years and no payments 30 or more days past due within one year of the cancellation date. “Original value” means the lesser of the contract sales price of the property or the appraised value of the property at the time the loan was closed.

Automatic Termination of PMI: If you are current on loan payments, PMI will automatically terminate on the date the principal balance of loan is first scheduled to reach 78% of the original value of the property. If you are not current on your payments as of that date, PMI will automatically terminate when you thereafter become current on your payments. In any event, PMI will not be required on your mortgage loan beyond the date that is the midpoint of the amortization period for the loan if you are current on your payments on that date.

To determine if you can cancel the PMI on your loan contact us at the address or telephone number listed below.


Cancellation criteria:


GUIDELINES FOR CANCELLING PRIVATE MORTGAGE INSURANCE (PMI)

You were required to obtain private mortgage insurance as a condition of obtaining your loan; you may cancel the private mortgage insurance if you meet certain conditions. Your request to cancel private mortgage insurance must be submitted in writing. There are several conditions under which you may qualify to cancel the private mortgage insurance. These conditions may change from time to time without prior notice, as the conditions are set by the secondary mortgage market agencies whose policies and procedures we follow. Please find listed four different categories that are reviewed when determining if PMI can be canceled. Your mortgage loan must meet the criteria in all four categories.

Cancellation Point

There are three options available:

1. Request based on Original Value – Your current loan to value must be 80% or less based on the original purchase price or appraised value, whichever was lower.
2. Request based on Current Value – Your current loan to value must be:
• 80% or less if five years or more have elapsed since the origination date of the mortgage OR
• 75% or less if two or more years, but less than five years have elapsed since the origination date of the mortgage.
3. Substantial Improvements – If substantial improvements to the mortgaged premised have increased the market value, we will allow cancellation of the private mortgage insurance at any time when the loan to value is 80% or less. For this purpose, the market value of the mortgage premises must be calculated using the current market value estimate in an appraisal that is prepared after the relevant improvements have been completed. The appraiser must state in the appraisal the specific nature, extent and cost of improvements made and the effect of the improvements on the estimated market value. The improvements must conform to local zoning and building codes.

Evidence of Value

You must warrant that the value of the mortgage premises, at a minimum, supports the loan to value ratio required to cancel the private mortgage insurance. The Peoples State Bank must order a current appraisal regardless if your request is based on original value or current value. You will be required to pay for the new appraisal.

Occupancy

You must still occupy the mortgaged premises as your primary residence or your second home.

Payment History

1. Request Based on Original Value – No minimum seasoning of the mortgage is required which means you can request cancellation at any time.
2. Request Based on Current Value – Your payment history must, as it applies to the age of the mortgage, show:

• No payments 30 or more days past due in the preceding* 12 months, and
• No payments 60 or more days past due in the preceding* 24 months.

* The reference to “preceding” period in the payment history requirements set forth above means the specified time period that immediately preceded the date on which we receive your requests to cancel private mortgage insurance.

Questions about canceling PMI? Contact our Mortgage Loan Department at the above address or telephone number.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#2229262 - 01/16/20 09:23 PM Re: Annual PMI notice Many Hats
Fitumi365 Offline
Junior Member
Joined: Jan 2016
Posts: 29
Dan - For loans originated after 1999, do you use the same ANNUAL notice for both fixed and adjustable rate loans? 12 USC 4903(a)(1) provides that the INITIAL disclosure for adjustable rate loans do not need specific cancellation/termination dates, but we must indicate that "the servicer will notify the mortgagor when the cancellation date is reached." That specific verbiage is not in your sample annual notice.

Return to Top
#2229336 - 01/17/20 10:44 PM Re: Annual PMI notice Many Hats
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 46,710
Bloomington, IN
All our ARMs are in-house and we limit the LTV to 80% so we don't write PMI on our ARMs.

Off the top of my head I don't think the annual notice for an ARM would be different than a fixed rate. The only possibility would be if the cancellation/termination date is affected by a rate change but the annual notice is fairly generic for the cancellation and termination dates.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#2234649 - 04/13/20 01:46 PM Re: Annual PMI notice Many Hats
fretzer Offline
Member
Joined: Dec 2008
Posts: 76
Pennsylvania
Good morning,

I have a question related to borrower-paid PMI upfront. Are annual notices still required for these cases? If PMI is not escrowed and a notice is sent to the borrower when the LTV is at 78%, is that sufficient?
The FRB Consumer Compliance Handbook, pages 4 & 5 seem to be contradictory. Appreciate any feedback. Thank you!

Pg.4: Annual Disclosures for Residential Mortgage Transactions
For all residential mortgage transactions, including high-risk mortgages for which PMI is required, the servicer must provide to the borrower an annual written statement that sets forth the rights of the borrower to cancel and terminate PMI and the address and telephone number that the borrower may use to contact the servicer to determine whether the borrower may cancel PMI.

Pg. 5: Disclosure Requirements for Lender-Paid Mortgage Insurance

Definitions
• Borrower-paid mortgage insurance (BPMI)—PMI that is required in connection with a residential mortgage transaction, the payments for which are made by the borrower
• Lender-paid mortgage insurance (LPMI)—PMI that is required in connection with a residential mortgage transaction, the payments for which are made by a person other than the borrower
• Loan commitment—A prospective lender’s written confirmation of its approval of a prospective borrower’s application for a residential mortgage loan (including any applicable closing conditions)

Initial Notice
In the case of LPMI that is required in connection with a residential mortgage transaction, the lender must provide a written notice to the borrower not later than the date on which a loan commitment is made. The written notice must advise the borrower of the differences between LPMI and BPMI by notifying the borrower that LPMI
• Differs from BPMI because it cannot be canceled by the borrower or automatically terminated as provided under the act,
• Usually results in a mortgage having a higher interest rate than it would in the case of BPMI, and
• Terminates only when the mortgage is refinanced, paid off, or otherwise terminated.

The notice must also contain
• A statement that both LPMI and BPMI have benefits and disadvantages,
• A generic analysis of the costs and benefits of a mortgage in the case of LPMI versus BPMI over a ten-year period, assuming prevailing interest and property appreciation rates, and
• A statement that LPMI may be tax deductible for purposes of federal income taxes, if the borrower itemizes expenses for that purpose.

Notice at Termination Date
Not later than thirty days after the termination date that would apply in the case of BPMI, the servicer must provide to the borrower a written notice indicating that the borrower may wish to review financing options that could eliminate the requirement for LPMI in connection with the mortgage.

Return to Top
#2234651 - 04/13/20 01:53 PM Re: Annual PMI notice Many Hats
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 78,958
Galveston, TX
I am not sure why, just because they paid an upfront premium, that the annual disclosures would not be required. They can cancel early and receive a refund.

For all residential mortgage transactions, including high risk mortgages for which PMI is required, the servicer must provide the borrower with an annual written statement that sets forth the rights of the borrower to PMI cancellation and termination and the address and telephone number that the borrower may use to contact the servicer to determine whether the borrower may cancel PMI (12 USC §4903(a)(3)).
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2234653 - 04/13/20 02:40 PM Re: Annual PMI notice Many Hats
fretzer Offline
Member
Joined: Dec 2008
Posts: 76
Pennsylvania
Thanks RLCarey! Stay safe during these unprecedented times.

Return to Top

Moderator:  Andy_Z