The Lender Won’t Terminate My PMI

Q: I am being denied automatic termination of my PMI, with the reason being that, “i made additional payments to reduce my balance ahead of time, thus i am not qualified for automatic termination of my PMI.” My loan information shows my LTV at 76%, and a Scheduled 78% LTV date of 07/01/09. Is that right? Please advise. Thank You.

A: It sounds silly, but the lender may have a point. The 1998 The Homeowner’s Protection Act that governs PMI termination offers two scenarios for termination:

1. AUTOMATIC TERMINATION once the mortgage balance is down to either 78% LTV (Prime loans) or 77% LTV (Subprime loans). The LTV is calculated by the lender/servicer by assuming you are making the payments called for – not more and not less.

2. REQUESTED CANCELLATION of the PMI once the LTV is down to 80%. In this scenario, it is up to you (and not the lender) to provide proof that your loan is down to 80% or less LTV. This method is quite useless during periods of real estate slump, when values drop.

Now, let’s go back to the first scenario. If I understand you correctly, you’d be at 78% LTV even if you hadn’t made additional payments. If your loan is not a high-risk loan, the lender should terminate your PMI now. On the other hand, if your loan IS a high-risk loan, they may prevail in an argument and force you to wait a few more months before they remove the PMI. In that case, I would file a complaint with the regulating agency, with the hope that such a complaint would get the lender to move faster.

Lender Tricked Her Into PMI

Question:

I have been tricked into refinancing to a new loan that has PMI.  My loan prior to refinancing did not carry a PMI but I had two loans, a first loan w/ 80% and the second loan w/ 20%.  I decided to refinance to combine two loans into one. My mortgage broker told me that I was paying PITI.

None of the closing documents from the lender indicate or disclosed any PMI.  THey used the word ‘Escrow’  instead of PMI.  A month later I got a bill for my insurance and taxes. I called the mortgage broker and she told me that she was going to check and the letter did not make sense. She never contacted me. Her assistant called back and told me that it is not Escrow, rather it’s PMI.

I already lost the ability to compare loans but I also lost the 3 day period where I could have canceled the loan if I had known that it will carry a PMI.  My loan interest rate is fixed and I recently receive a letter from the lender that my monthly payment is going up. When I called, even the customer service agent was confused and she thought I have an escrow account. I had explain to her everything. Then she took the time to review all my documents to find out the reason for the increase in monthly payment. After reviewing, she told me that I have a negative PMI account. That some type of money should have been collected upon closing to go the the PMI account and it was never collected.  With that, I have a negative balance and they need to adjust the amount of PMI that I would have to pay monthly.

This explanation even reinforced to me that there was an intent or malicious act to hide the truth about the PMI on my account, both on my mortgage broker and at the same time the representative from the lender who should have reviewed the documents before closing. What are my options?  This unscrupulous practice should not be tolerated in any way, shape or form.

Answer:

Even though the 3-day rescission period has expired, you can still rescind the loan if:

1. You did not refinance with the same lender who held the previous loans.

2. There was a Truth-in-Lending violation in the disclosures you received from the lender, such as non-disclosure of PMI.

3. The property is owner-occupied.

Most real estate attorneys will offer a free consultation to review your situation. If it turns out that your loan can be rescinded, you will receive back from the lender all interest you’ve paid to this point, as well as the loan fees you paid to obtain the loan; however, you will have to go through another refinance to replace the current lender with a new one.