LTV dropped below 78% but mortgage company won't remove PMI

[AlanH]

What is the name of your state (only U.S. law)? Pennsylvania

We've been paying ahead on our mortgage, and we've reached the point where our LTV has dropped below 78%. We were under the impression that the law required the mortgage company to remove our PMI when that LTV level was reached. They are telling us that they will not remove it because our LTV was not scheduled to fall below 78 until 2020. My question is what does the law specify: that PMI be dropped when LTV falls below 78, or that PMI be dropped when LTV is scheduled to fall below 78, regardless of when it actually does.

I've been researching this issue online, and I've been surprised that this distinction is not really discussed, given that many people pay ahead on their mortgage, and this wouldn't seem to be an unusual issue. Any help or advice would be appreciated.

 

[adjusterjack]

Please read the following article about the federal Homeowners Protection Act of 1998:

https://www.federalreserve.gov/boarddocs/caletters/2004/0405/CA04-5Attach1.pdf

Note the following on Page 2:

A borrower may initiate cancellation of PMI coverage by submitting a written request to the servicer. The servicer must take action to cancel PMI when the cancellation date occurs, which is when the principal balance of the loan reaches (based on actual payments) or is first scheduled to reach 80 percent of the “original value,”

Understand that I haven't read the actual law, just the summary.

Here is the actual law:

https://www.law.cornell.edu/uscode/text/12/4902

And you will have to determine if your loan meets all the qualifications stated.

I suggest a written demand to your lender and include the wording of the actual statute.

If that doesn't get results, escalate with a written demand to the lender's corporate executives.

If that doesn't get results, you'll probably need a court order.

 

[FlyingRon]

You also have to read the previous section (4901) as it defines the terms, most importantly "termination date" in that statute.

But the summary is correct and so is the bank. It matters NOT what the LTV is. It is INDEED based on the date the loan was scheduled to fall below 78% of the original value. This means you get NO credit for either appreciation of the property nor you paying down the principal early.

The definition (bolding added by me):

(18) Termination dateThe term “termination date” means—
(A) with respect to a fixed rate mortgage, the date on which the principal balance of the mortgage, based solely on the initial amortization schedule for that mortgage, and irrespective of the outstanding balance for that mortgage on that date, is first scheduled to reach 78 percent of the original value of the property securing the loan;​

4902 also says that if you're not in good standing on the loan, the PMI also is not required to be cancelled.

 

[AlanH]

Thank you

Thanks to both of you for bringing clarity to this issue for me. The odd thing is that when I called them, they never brought up this issue specifically. And also, considering that a not-insignificant number of people do pay down their mortgage ahead of schedule, that this is not brought up more in articles or made more clear in official documents (aside from the law itself) seems odd to me.

I wonder if it makes any sense to try to ask them to cancel it anyway. When we wrote them a letter asking for PMI to be canceled, when LTV dropped below 80%, they sent a form letter telling us we could obtain a new appraisal. That seemed like too large an investment to save a few months PMI. Now, we're looking at paying out nearly $3,000 in PMI before it's automatically canceled so I wonder if there's anything we should do.

At any rate, thank you both again.

 

[FlyingRon]

As far as the bank is concerned, there's no need for them to inform you of the law at all.

You can certainly make an request that PMI be cancelled if you've paid down the loan. You can also intimate that you're considering refi-ing with someone else where you won't be subject to the PMI gouge.

 

[adjusterjack]

Thanks to both of you for bringing clarity to this issue for me. The odd thing is that when I called them, they never brought up this issue specifically.

That's because the customer service people don't know anything more than the bosses tell them. And what the bosses tell them is limited.

they sent a form letter telling us we could obtain a new appraisal. That seemed like too large an investment to save a few months PMI. Now, we're looking at paying out nearly $3,000 in PMI before it's automatically canceled so I wonder if there's anything we should do.

It's up to you to decide whether to bet $400 to $500 on an appraisal on the chance to win $3000.

But ask yourself this:

Would you buy $400 to $500 worth of lottery tickets at one time?

Would you bet $400 to $500 on a horse at 6 to 1 odds.

Would you bet $400 to $500 on the spin of a roulette wheel or drawing to an inside straight.

 

[Taxing Matters]

But ask yourself this:

Would you buy $400 to $500 worth of lottery tickets at one time?

Would you bet $400 to $500 on a horse at 6 to 1 odds.

Would you bet $400 to $500 on the spin of a roulette wheel or drawing to an inside straight.

If were your logic instructor Jack, I’d flunk you. The odds of each of those things happening are all different, and importantly have no relationship at all to the chances of the OP getting the lender to drop PMI if they have the appraisal done. So implying that these are somehow the same thing just doesn’t work.

 

[adjusterjack]

If were your logic instructor Jack, I’d flunk you. The odds of each of those things happening are all different, and importantly have no relationship at all to the chances of the OP getting the lender to drop PMI if they have the appraisal done. So implying that these are somehow the same thing just doesn’t work.

I know that.

 

[AlanH]

My sense of things is that requiring a re-appraisal is, for the mortgage company, a stalling technique and throwing up an obstacle, as well as an opportunity for them to hold off longer on dropping the PMI if the value of the house rises, taking the LTV up with it.

I wonder what the right wording might be to suggest to them that it might be worth it to them to cancel my PMI.

I'm curious ... do any of your folks know if loan companies will ever remove PMI if they aren't legally required to? It seems like a long shot.

Thanks again for all of your help!

 

[FlyingRon]

You are correct, there are only two things that incentivize them to remove PMI: the law makes them -or- they think you'll dump the loan if they don't.

 

[MuDoggie1]

Really??

You are correct, there are only two things that incentivize them to remove PMI: the law makes them -or- they think you'll dump the loan if they don't.

Greetings from a mortgage service person who works at a financial institution that does NOT hold your loan.

Contrary to the statements in this thread, we get absoluteley no thrill, commission, or incentive to retain PMI longer than necessary. Unfortunately, people read and believe the 80% statement and assume it applies to all mortgages. While true in many cases, there are federal regulations for retaining and releasing PMI. Each loan with PMI is reported and evaluated regularly. There are different rules for FHA and other government backed loans. There is age of loan and payment history to consider. There are frequent audits toe ensure we follow these regulations.

Where I work, a simple written request to evaluate PMI removal along with a handwritten signature is always considered. If the mortgage does not meet requirements, a response is given to the loan holder as to why and how to meet the conditions. Balancing PMI payments and dispersing the funds is tedious, time consuming, and part of my job. I am very happy to release your PMI obligation when requirements are met.

Oh, and if we have factual and concrete knowledge or threats that you will abandon your loan if we don't realease required PMI, you won't get the outcome you desire.

 

[quincy]

Greetings from a mortgage service person who works at a financial institution that does NOT hold your loan.

Contrary to the statements in this thread, we get absoluteley no thrill, commission, or incentive to retain PMI longer than necessary. Unfortunately, people read and believe the 80% statement and assume it applies to all mortgages. While true in many cases, there are federal regulations for retaining and releasing PMI. Each loan with PMI is reported and evaluated regularly. There are different rules for FHA and other government backed loans. There is age of loan and payment history to consider. There are frequent audits toe ensure we follow these regulations.

Where I work, a simple written request to evaluate PMI removal along with a handwritten signature is always considered. If the mortgage does not meet requirements, a response is given to the loan holder as to why and how to meet the conditions. Balancing PMI payments and dispersing the funds is tedious, time consuming, and part of my job. I am very happy to release your PMI obligation when requirements are met.

Oh, and if we have factual and concrete knowledge or threats that you will abandon your loan if we don't realease required PMI, you won't get the outcome you desire.

Did you have a legal question? If so, you will want to start your own thread.

This is an old thread you have revived.

Thanks.