An act of Congress.
In 1998, Congress
passed the new Homeowner's
Protection Act to prevent loan servicers from collecting unnecessary PMI premiums
and to protect borrowers from being overcharged. The new PMI Act took effect on
July 29, 1999. There's one catch. The law applies only to homeowners with new
loans originated after July 29, 1999 (and who meet specific requirements to have
their PMI cancelled).
If you took out your home loan prior to July 29,
1999, the new law does NOT cover you.
Read Your PMI DisclosureIt
may have answers.
For every loan made after July 29, 1999, loan providers
must provide homebuyers a PMI disclosure statement, including the following:
� Written initial amortization schedule (timetable for paying off your loan)
� Written notice of the date on which the homeowner may request cancellation,
based on a standard amortization (paydown) schedule for the loan
3 � For
fixed-rate loans, a written notice that you can request early cancellation based
on making accelerated payments (adjustable rate mortgage servicers must notify
homeowners when the cancellation is reached)
4 � That there are circumstances
that might prevent cancellation or termination which must be spelled out
� For high-risk loans, notice that PMI will not be required beyond the midpoint
of the amortization period
6 � Annual statement of your rights as a homeowner
under the new law (PL 105-216), and an address and telephone number you may use
to contact the loan servicer to determine the status of your PMI
to Your Lender
Now that you've read the Act and know your rights, learn
how to read the Riot Act to your lender and cancel your PMI.
PMI Under the New Law How do you spell RELIEF?
For Those Who
Qualify What the law allows.
For loan transactions that were completed
July 29, 1999 or later, the law provides two situations in which borrower-paid
PMI may be cancelled.
What's a Good Payment History?
To a lender, that is. Make your loan
payments ON TIME, especially during the first 24 months of your loan repayment
schedule. A good payment history means not making a payment 60 or more days past
due. During the second 12-month period, the homeowner must not make a payment
30 days or more past due.
That's how to spell RELIEF! At some point,
It might take a while to reach 20 or 22 percent equity but it's
never too soon to start marking your calendar for canceling PMI!
you ARE covered by the new law...read on! You need to know how to request cancellation
Cancelling PMI... For Loans Originated BEFORE July, 29,
The Fannie Formula for Canceling PMI... It's NOT by the seat of
Fannie and Freddie Call the Shots.
Mae (FNMA) and Freddie
Mac (FHLMC) guidelines control the majority of conventional mortgage loans
and these include loans made prior to July 29, 1999. Under Fannie Mae and Freddie
Mac guidelines, the loan servicer MUST cancel PMI if the homeowner requests it,
and the balance of the loan has been paid down to 80% or less of the original
value of the property.
So, how do you find out if you're ready to cancel?
And then how do you do it?
Crunch the Numbers and Get to 80%
a step-by-step approach.
Formal Requests Here's
how to write your letter requesting cancellation of your PMI.
QUALIFIED WRITTEN REQUEST TO LENDER
Attention Customer Service
[Your loan number]
Names on loan documents
Property and/or mailing
To Whom It May Concern:
This is a "qualified written request"
under Section 6 of the Real Estate Settlement Procedures Act (RESPA).
wish you to cancel my Private Mortgage Insurance because the balance of the loan
has been paid down to 80% or less of the value of the property.
Purchase Price _____Original Loan Amount _____ Current Loan Balance _____
Current Property Value _____ Current Loan to Value Ratio: (example: 78%)
I understand that under Section 6 of RESPA you are required to acknowledge my
request within 20 business days and must try to resolve the issue within 60 business
Sincerely, [Your name]
List a daytime telephone number in case a customer service representative wishes
to contact you.
Other Hints They can make a difference...
copies of any supporting information, including printouts of comparable homes
that have sold in your neighborhood, or a current property appraisal, if done
within the last 6 months. Describe any conversations with customer service regarding
the issue and to whom you spoke to obtain the necessary paydown figure. This letter
should not be included with your mortgage payment, but should be sent separately
to the customer service address.
Get to the Magic Number
cancel that PMI! It will save you. Now let�s look at some pitfalls to avoid...
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