PMI insurance in California

[JSAautomotive]

Hello all. My question surrounds Private Mortgage Insurance that our finance Co. and the California Housing Finance Agency told us we must carry for 2 years. The loan we got is under the 1st time home buyers program here in California.

Here is my question.
I checked the laws concerning who must carry this insurance and it seems we do not need to have it because we had over 20% equity in the property the day we bought it. We paid $375K for the house in April of 05' and just had it professionally re-appraised for $600K. Even when we bought it, the house appraised for $545K.

I checked into the law Congress passed in the late 70's regarding PMI. At the U.S. Congressional website, from what I can understand it states that if the loan is an F.H.A. loan then it does not does not qualify to have the PMI removed. I asked the California HFA (housing finance agency) if this was an FHA loan and they said no.

I wanted to take the loan servicer (Guild Mortgauge) to small claims court and demand they remove the PMI and refund the $275 per month we've been paying for the nearly 1 year.


John

[jwolf]

Originally Posted by JSAautomotive

We paid $375K for the house in April of 05' and just had it professionally re-appraised for $600K. Even when we bought it, the house appraised for $545K.

Did you borrow the entire 375K? If you borrow more than 80% of the purchase price (as opposed to the appraised value) in a single loan PMI is usually required. Other than that, read the loan documents you signed. If you got the loan under a program that requires you to carry PMI regardless, then you are stuck with the contract you signed.

[JSAautomotive]

Pojo2??

I'm a spammer?? For offering my services in exchange for someone helping me..... I'm a spammer??

Pojo2... I know you don't know me from Adam, but I was only offering if anyone had a problem with their car and needed some professional help (the same way professionals here are willing to offer me legal help) was my sole intention. And that is it. My business does very well and I don't need to "spam" to get any. Hope you understand I was trying to offer a hand or free advice to anyone that needed it.

jwolf...
Thank you so much for responding.
The original purchase price was $375K. This particular loan offers a 3% down as a "soft or silent 2nd" which must be paid at the end of the 30years, or paid if property is re-financed or transferred. So in essence, this is a 100% loan. We had already known that this "fixer upper" was way undervalued for the area, which is why the tax assessors office already re-assessed our property tax value at $545K. We made it clear to our loan agent that we did not want to pay PMI because of the high appraised value of the house from inception, and our loan agent said that would be "do-able". But then after getting our information and after being 3 weeks into the loan process she told us we would have to carry PMI for 2 years. We agreed to it (now that our backs were against the wall to close the loan) and decieded we would take up getting the PMI removed later on. But here's my confusion after reading the "The homeowners protection act" passed by congress in 1998.

Much of the information I've read in regards to removing PMI has to do with the "appraised" value of the home. Our current Loan to value ratio is 69-63% depending if you use the current appraisal we just got, or just the finance co.'s appraisal. The whole concept of having PMI is if we default on the loan, the loan co still gets paid. With over $170K in equity in the home, the loan co will never lose in getting their monies even if we defaulted.

I guess I have trouble understanding the logic after talking to the loan servicer where in 2 years, they would accept the "appraised value" to remove the PMI from the loan, but currently, they will not. Doesn't make any logical sense. Plus according the what I've read regarding the Federal law, it talks about the "value" (which I'm assuming is the "appraised value") of the home and not the sheer "balance" of the mortgage in regards to "loan to value" (value being the key word here) ratios.

So.... finally. This question came up between me and my fiance'. Does Federal law overide any contract in regards to PMI if it violates that Federal statute considering the contracts drawn are supposed to conform to that Federal law.

Again... thank you in advance for yours and anybodies help on the matter.

John

[JSAautomotive]

I read a post made by Homeguru regarding the PMI issue and was impressed with the PMI website he referred to. If you read this... I was wondering what your thoughts were on this as well.

Thanks... John

[pojo2]

I do not make those decisions to edit your post, as Admin has now done, I only report things and ask their assistence in determining if leaving ones name and number for anyone needing automotive assistance is a breach of the agreement you signed when joining. Apparently they agreed with me.

(the same way professionals here are willing to offer me legal help) was my sole intention.

I think you miss the intent of the site because no one here (in the forums) is offering you legal help at all. Why? Because only a fool would offer a definitive legal opinion based on the SIDES of an issue posted here with out benefit of full access to all paperwork and conversations between parties.

[pojo2]

(which I'm assuming is the "appraised value") of the home

PMI is based on the purchase price or the appraised value which ever is less at the time of purchase.

One should never sign anything and expect to fix it up later on.

[jwolf]

The stipulations regarding PMI in your mortgage contract apply. The act passed in 1998 (Homeowners Protection Act) does not force a lender to remove PMI based on a new appraised value. The stipulations for automatic cancellation concern the loan balance in relation to the original value (the lesser of the purchase price or appraised value at time of purchase).

Your mortgage contract contains the guidelines for when(if at all) you are allowed to request the removal of PMI. You said you didnt want it. The lender came back later and said you had to have it to get the loan. You agreed to this. You may not feel it was fair, but you signed the contract, so abide by its terms. I'm not trying to be an a$$, but I dont see how or why (even if you dont like/understand the logic of PMI) you should be allowed to break the contract now.

Just pay the PMI, enjoy the house you now own (along with the substantial gain you seem to have made on your investment ), and get the PMI removed as soon as your contract allows.

[garrula lingua]

Check out whether re-financing would eliminate the PMI & still be cost-effective.

[JSAautomotive]

jwolf....
Thanks for your response. I noticed how you put in bold letters the word "request".

The contract states we can "apply" to have the PMI removed after 2 years as long as it still would appraise for more than 20% equity and our payments are on time and up to date. If an earthquake doesn't come along within the next 14 months, it should be a cinch.

Although... I still disagree on ethical levels regarding the PMI, especially in a case as ours. To me it's just another way for the finance industry to hook their talons into people when poor reasoning exists such as our case. Whereas if we defaulted on the loan, the loan co. would come out smelling like a rose. I think I'm still going to file in small claims and let a judge look at it. It couldn't hurt, and all I'm out is the filing and appraisal which I just got. The only difference I see between 2 years down the road and today is if the market took a huge dump. I just don't see it happening anytime soon.

Funny... when my Fiance' (a paralegal) asked her employer about it (an attorney at law) he said, "that's illegal". Never got a chance for him to clarify that to us. Plus my nieces husband is involved in the financing industry, and he's the one that said, "take them to small claims.... they'll remove it".

I guess I equivocate it to the automotive business. If say you own a new Mustang and install a supercharger. The engine blows up and the cust brings it back to the dealership. The dealerships says, "you voided the warranty via the contract..... no modifications allowed". This "excuse" has been defeated in the courts here in California and now the dealerships are required to find out what caused the pre-mature failure. The addition of the supercharger or the engines integrity itself. Then the customer is billed accordingly. So there's a specific example of where "the contract" breaks existing law.

I don't see why the same logic couldn't be applyed here in a court of law.

[jwolf]

My opinion isnt gospel. Just my advice based on my interpretation of the info you provided. I believe my opinion to be most likely correct vs. the other input you have received. You can always try and go to court and see what happens. Maybe they will remove it rather than deal with the hassle?

Enjoy the weekend. Started raining in Sacramento

[pojo2]

Originally Posted by JSAautomotive

jwolf....
I think I'm still going to file in small claims and let a judge look at it. It couldn't hurt, and all I'm out is the filing and appraisal which I just got. .

A total waste of court time. YOU signed a legally binding contract that is the ONLY relevant fact.

and decieded we would take up getting the PMI removed later on.

It is beyond my belief what people will sign a legally binding contract and think they can just get it FIXED later.

jwolf
I believe my opinion to be most likely correct vs. the other input you have received.

Huh?? It is almost identical to the advice others have given though it may be in different language.

[JSAautomotive]

Pojo2....
I thank you for your commnets, but, Respectfully...... I personally think it is NOT a waste of the courts time, because issues like this are EXACTLY why we as the PEOPLE have the courts available to us. Remember this funny phrase?.... "by the PEOPLE and for the PEOPLE?"

What I do think is a waste of the courts time is the thousands of so called "attorneys" out there that take on frivoulous lawsuits that bog the courts down. Although I know that these un-ethical attorneys are the huge minority out there, you know exactly what I am talking about. I even support legislation to make a person or attorney show merit in their case BEFORE they can apply to sue.... AND, bring sanctions to those that abuse the courts time over un-ethical and meritless cases brought before the courts. That would send a strong and clear message throughout the legal community that they better get their act together and stop abusing the courts which are paid for in whole by the tax payer dollars. A simple "test" as the Supreme or District courts use in certain legal cases would effectively accomplish this.

But please don't insult me by saying that my issue is "a total waste of the courts time". If you paid attention to the INTEGRITY issue I was making, this same logic has un-raveled MANY contractual ABUSES over the years as in the example I put forth earlier. Just because someone puts it in a contract does not mean it's ETHICAL nor does it mean it CONFORMS to State or Federal laws that may overide ones contract.

Another perfect example of this is when I took ESP (Environmental Systems Products) to court over a specific performance issue I had with a $45,000.00 Smog Machine I own. They tried to weasle out of having to replace my machine because they put in their contract that I signed away my rights to sue over the specific performance of their machine. They lost. They thought they could re-write Federal guidelines of how their machines were supposed to perform. Plus... I am currently working with Ca. Gov. Arnold and Rocky Carlisle of the Bureau of Automotive Repair to keep a class action suit from coming down the pike for another violation these Test Analyzer System manufacturers committed. Again... no contract can keep them from breaking the established laws on the books in which they must work within.

You and I got off to a bad start here. Your being a whistle blower from inception in regards to me offering anyone what little help I could offer speaks highly to me about your psychological state. You remind me of the kid in 3rd grade that always wanted to be the line monitor.

Learn to be nice and helpfull. You know the old saying, "you can attract more bees with honey than with vinegar".

Again... thanks for your input. But I think I will use the venues that are basically created for individuals like me, the Small Claims Courts. Hopefully my small claims issue doesn't bog down your muni or Superior case flow.

jwolf and garrula lingua.....
Thank you for your logical and kind input. I really do appreciate it. Jeeze it's cold!! And I have to work in the shop today. BRRRRRRRRR!!!! Hope the weather is a little better up north for you guys.

Peace... and have a great day!

[JSAautomotive]

jwolf....
I think I see a channel here in what you wrote.

"The stipulations regarding PMI in your mortgage contract apply. The act passed in 1998 (Homeowners Protection Act) does not force a lender to remove PMI based on a NEW appraised value. The stipulations for automatic cancellation concern the loan balance in relation to the original value (the lesser of the purchase price or appraised value at time of purchase)."

So correct me if I'm understanding this incorrectly.....

If the "original appraised value" (which was $545,000.00 that the finance company had done at the time of purchase) and the purchase price (which was $375,000.00), show more than 21% equity, then that would give us 45% equity in the property already at the time of purchase. So again... if I am understanding this correctly, should enact the "automatic cancellation" provisions in the Fedeal law.

So if I am to interpret "the original value" as the "appraised value" in which the loan company estimated using thier own appraisors, or is it the actual "amount" in which the property sold for. Because I think I have a copy of the loan companies appraisal still.

Once again... thank you for allowing me to understand these concepts.

John

[pojo2]

If you paid attention to the INTEGRITY issue I was making,

Integrity issue? Perhaps you do not understand the concept of PMI, it is really VERY SIMPLE, and how it is applied and it has nothing to do with integrity.

YOU signed a contract and in that contract the PMI issue was addressed, but YOU decided to sign and FIX it later.

[safeber]

jsaautomotive,

If you adjust your profile to accept PM's I will pass on more detailed info about PMI.