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
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
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.