Wednesday, March 5, 2008

PMI update

When I woke up this morning there was an email from the FTC regarding my PMI complaint. I was surprised how quickly they responded. They basically said they understand the importance of my concern and that I should talk to a lawyer. Grrr. How frustrating! So the whole thing was pointless. I mean, no point in seeing a lawyer to avoid a $130 fee.

So my husband called the mortgage company and did some more research. Here is what he found out about why they can charge this stupid fee.

He Googled the Homeowners Protection Act and found this...

the principal balance of the mortgage is first scheduled to reach 78 percent of the original value of the secured property (based solely on the initial amortization schedule in the case of a fixed rate loan or on the amortization schedule then in effect in the case of an adjustable rate loan, irrespective of the outstanding balance) if the borrower is current.

Which means that the fact that we are over the 22% equity in our house based on the original value of the property means nothing since we got there early by paying extra. Those dirty filthy [enter bad word here].

So that is where we stand.

Oh, and the $130 is a fee for someone to go online and research the value of our house. They don't even come out to the house. A $130 fee for someone to look us up on Zillow? Shoot...


Ben Dinsmore said...

We can't wait to drop PM off of our mortgage either. Hopefully, it will be gone in another year!!

Good luck!

Mike said...

What happens if you refi with 78% equity... do you avoid PMI altogether at that point?

Anonymous said...

Hi, I work at a small community bank and we will cancel PMI insurance once a person has fallen below 80%. We just require a letter in writing requesting it be cancelled. Otherwise we have to cancel it, at I believe 78% by law. At loan origination, requiring PMI is based on the lower of the purchase price or appraisal value and if the LTV is below 80% - No PMI. I don't exactly know the specific laws, but since PMI is to protect the bank, it probably depends on your banks specific policy on how they handle cancelations between 80 and 78%. Some are probably more lenient while others must use it as a way to generate some fee income.