PRESIDENT SIGNS BILL SUPPORTED BY AMERICAN HOMEOWNERS ASSOCIATION Bill to Save Homeowners Millions on Insurance Overcharges

WASHINGTON, D.C., July 29, 1998 - President Clinton signed a bill today that makes it easier for homeowners to eliminate unnecessary monthly charges for private mortgage insurance (PMI). According to a homeowner's guide to PMI published by the American Homeowners Association (AHA), up to a million homeowners with mortgages are currently overpaying $200 to $600 per year in unnecessary PMI premiums.

"This brings homeowners the full disclosure on PMI they deserve," said Richard Roll, President of AHA. "Homeowners who now pay PMI for no good reason will get a break. This is a long time coming." In February 1997, Roll testified in support of the legislation before the Senate Banking Committee.

PMI serves a very useful purpose for buyers who can't afford to make he standard 20% down payment on a home purchase, by insuring lenders against a loss in case the borrower defaults. The overcharge problem occurs when homeowners continue to pay unnecessarily for PMI after their loan balance declines below 80% of their home's value - as the homeowner pays down the mortgage, or as the home's value increases to the point where the homeowner's equity exceeds 20% of market value.

The new law, Public Law 105-216, allows homeowners to cancel PMI once they have paid off 20% of the house's value. Mortgage companies have to cancel the insurance once a homeowner's equity reaches 22%. High-risk borrowers will still have to pay PMI until they reach 50% equity, but the bill directs the General Accounting Office to perform a study of lender behavior to determine if mortgage companies are using this exemption to get around the law.

Homeowners will still have to be patient, however. The law does not go into effect until one year from today.

AHA, with membership in 50 states, is a national consumer membership organization representing the interest and concerns of America's 62 million homeowners. Membership in AHA, at $89 per year, provides over 35 benefits and services which guarantee to save time, money, and hassles for consumers at every stage of buying, selling, financing, repairing, maintaining and improving their home.

AHA membership information is available toll-free at 1-800-470-2242.