PMI Removal - Posted by Monica

Real Estate Investing
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Posted by JT-IN on May 23, 2006 at 20:41:13:

Monica:

Possibly you will want to re-read the restrictions and limitations that your Lender or Servicer has responded to you about. The one year deals with late payments within the past year… The two years has to do with appreciation only, vs. improvements plus appreciation in a shorter period.

What the gist of things are is this… A buyer invests X% out of pocket, and the lender has the balance of that % at risk. Just because the RE mkt may have risen drastically over a short period of time, (9 months), doesn’t necessarily erase the risk to the lender… What if in the insuing 9 months the value dropped back to where it began… only after they have relieved you of the requirement to pay PMI premiums. Your lack of premiums translates to their lack of coverage in the event of default.

In an upwardly trubulent RE market such as we have seen over the past few years, and now the liquidity seems to have tightened, as well as affordability having dropped due to higher rates. The two (or more) elements will (and is) putting downward pressure on prices, and who is to say what is going to happen.

What the two year requirement is designed to do is to put some space of time that insulates the lender against a short-term spike in the market, which COULD result in coming down about as fast as it went up… Now I am not predicting this, nor do I think that it will happen, but if I had money on the line and the option to either release PMI or restrict that release and require it to continue… why would I release it under current market conditions…? What you are tlaking about is 10 or 20% of the original loan amount, either continuing to be guarenteed to the lender, or not. I think that you can see that they will require this just as long as they can do so legally. I would if I were the Lender at-risk. I beleive that their period in which to restrict you from re-appraisal only to establish your LTV of 80% or less, is two years.

Not that this is what you wanted to hear, but I think that it is what you are facting. Think of this another way… Due to the tremendous availability of mortgage funding and easy qualify, largely driven by lenders being insured against default by PMI companies, is what has assisted the unbelievable demand for housing. This demand has driven prices SKY HIGH… such as a 98K increas in your SFH in just 9 months. So while you are paying some amount per month for PMI, it is peanuts compared to your astronomical appreciation. If you could buy another house today… (or 10 of them for that matter), knowing that you HAD to pay PMI for at least 10 years, not 2 years, but the value of the home(s) was going to appreciate just as your has done in the past 9 months, you wouldn’t squalbble one bit about paying the PMI… I would imagine, anyway. Just a counter point of view from the Lender side, as well as how buyers and owners DO benefit from PMI, even though many folks say it only protects the lender… Well it also drives the market, and that is good for everyone.

Just the way that I view things…

JT-IN

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PMI Removal - Posted by Monica

Posted by Monica on May 23, 2006 at 14:51:39:

Hello Everyone,

Would anyone of you know a way I can remove my PMI? I already contacted my lender and they’re indicating that in might take about year or more. I have above 22% equity on my property which I closed on about 8 months ago. I tried contacting a real estate attorney the other day but I kept getting their assistants saying they will call me back or that they would charge me a consultation fee. Anyone attorney you can recommend that would take the time to speak to me? Or any one of you who have had success eliminating PMI? Would be forever greatful for any advice.

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Re: PMI Removal - Posted by Dave T

Posted by Dave T on June 01, 2006 at 24:41:31:

I went through this exercise with CountryWide a couple years ago. I used 90% financing for a property that appraised higher than my purchase price. Even though my loan amount was 71% of the lender’s appraised value, I still had to pay PMI because my loan amount was 90% of my purchase price.

Their terms for waiver of PMI had two options. Pay down the original loan balance to 78% of the purchase price or less, OR, show that my current loan balance is less than 80% of the current appraised value.

There were stipulations attached to option two:

  1. 24 months of timely payments with no late payments in the 12 months prior to my request for waiver, and,
  2. The loan could not be a high risk loan (sub-prime borrower), and,
  3. A new appraisal at my expense would be required to establish the current value.

I reqested the waiver in my 23rd month of the mortgage, the appraisal was performed and the PMI was waived after I made the 24th loan payment.

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Re: PMI Removal - Posted by JT-IN

Posted by JT-IN on May 23, 2006 at 17:04:45:

You should be able to handle this process yoruself without the assistance of an Atty.

There is a recommended letter that you send your Lender or Servicer requesting the cancellation of PMI. You will find it at the link below:

http://quickval.com/cancel/sample.htm

If you have previously requested this information in writing and you would not be excluded from PMI cancellation due to one of the three conditions listed below, then you should file a complaint to several agencies… However, there seems to be some minimum time period for the loan to be in place, but I am not finding anything on that perameter, so maybe it no longer exists. I would make sure that the Lender responds in writing, and ask them to cite some specific requirement if they tell you you need to wait. Don’t just take their word for it… as Gospel.

Exceptions to PMI cancellation:
There are also some exceptions to the Lenders requirement under Federal Law, to cancel PMI upon your request and verification of equity upon appraisal.

Those exceptions are 1) if your loan is “high-risk.” 2) if you have not been current on your payments within the year prior to the time for termination or cancellation. 3) is if you have other liens on your property. For these loans, your PMI may continue, regardless of the LTV being less than 80%.

Complain to the Fed trade commission if the Lender refuses to cancel your PMI upon request:

https://rn.ftc.gov/pls/dod/wsolcq$.startup?Z_ORG_CODE=PU01

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Re: PMI Removal - Posted by Dan

Posted by Dan on May 23, 2006 at 15:09:54:

Monica,

Did your lender mention why it would take another year?

Typically, they won’t agree to cancel PMI until there’s a minimum 20% equity position based on an appraisal that they request…at your expense.

How did you conclude having a 78% LTV now?

Dan

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Re: PMI Removal - Posted by Monica

Posted by Monica on May 23, 2006 at 19:13:20:

Hello JNT,

I would like to thank you so much for responding to my question. I did receive a letter from the Lender citing their guidelines for PMI removal which are:

  1. no 30 day late payments in the last 12 months
  2. less than two years have elapsed since the origination date of my loan
  3. Order an appraisal showing the value of the structural improvements made to the property. If the improvements are the sole reason for the increased value of $345,272, your LTV will be 80% and the appraisal can be used to delete PMI. The appraisal must specify the improvements made and the value of the improvements must equal $53,598.

Looking at the above guidelines, I could see that I haven’t met the one year requirement yet but the requirement that I find unfair is the structural improvements,(i.e. adding a garage, deck, living space, in-ground pool, fence or remodeling a living space). Please keep in mind that the property is a brand new, built in 2005, and there is nothing that needs to be done, why would I need to make any structural improvements in order to remove PMI? (rhetorical question). In addition, I recently received comparables from a realtor showing that the property has gone up $98,000 in value in 9 months. I will keep on top of this and possibly wait for the one year anniversary. Thank you again for your time.