How to remove PMI insurance...20% equity or 20% loan paid off???

Question

My girlfriend doesn't want to pay her $200 monthly PMI insurance payment anymore. She's been there 3 years, the house has appreciated significantly, and she now has 20%+ equity in the house.

But her bank, Huntington Bank, won't re-appraise the house and remove the PMI. They tell her she needs 20% paid off from the mortgage. I asked my realtor and she confirmed this.

Is this correct? Is this the new way of doing business for banks since the recession? If so, what are her options? Re-finance into another loan, with a slightly higher interest rate (currently) and pay more closing costs rolled into the payment? That probably wouldn't save her much.

Are all banks doing this now?

Todd Moriarty · Answer

Thanks everybody. You guys rock!

My GF will probably refinance with a different lender. Or move.

David Dachtera · Answer

@Todd Moriarty,

She'll likely have to refinance through another lender to get out of paying PMI. The current lender has no incentive to make her life easier or cheaper. All you can do is take the interest income away from them and give it to someone else.

Chris Mason · Answer

Hi @Todd Moriarty,

Loan servicers (Huntington Bank it appears, in this case) have a perverse incentive to make dropping PMI hard (or impossible) without a refinance, because they want a refi out of it (a shiny new product to sell on the secondary market for $$ as part of a MBS).

Your GF can refinance to drop PMI if Huntington Bank will not simply allow her to drop it with an appraisal, but I'd suggest that you don't reward bad behavior: refinance with a different lender so HB doesn't make money out of this de facto forced refinance.

If she doesn't want to reset to year 1 of 30 again, have her inquire about either a 25 year fixed mortgage, or paying extra to still be debt-free 27 years from now on a 30 year fixed.

Bill Gulley · Answer

Can't tell you how many bank policies are in violation of law, but believe me, many are. Did you go to those links and read them? You have the right to reviews and to drop PMI according to the schedules and federal law, who gives a flip what some guy behind the loan officer's desk says, he doesn't likely know.

Don't talk, use a letter, certified mail return receipt requested, you can show contact was made, keep all correspondence, conduct business in writing by mail, you have several options for enforcement, might begin with the CFPB, your attorney general, FDIC, your state banking authority as to the servicer. Some due diligence and not taking hearsay excuses can save you or your GF some money. Good luck :)

Bill Gulley · Answer

Well, no one is completely right, it's not really a bank policy unless it is a portfolio loan and it will fall under federal law concerning homeowner's rights. It's also not contained in a standard deed of trust, might be state specific, and may be on a commercial loan. It has nothing to do with the beginning balance except to set the premium as you'll see in these links.

FHA is different and you'll find those requirements as well. (MIP, not PMI)

USDA goes along the Fannie Mae guidelines, VA is irrelevant as the guarantee is the VA which builds coverage into the rate.

http://www.ahahome.com/mem/resources/top10/drop_pm...

https://www.fanniemae.com/content/guide/selling/b7...

Happy reading and learning! :)

Jeff B. · Answer

RULE 1: READ the Deed of Trust. Some allow removal at 20% equity, others 20% value of the note and the nightmare is NEVER- - it runs for the life of the loan.

So find out from the horses mouth what the specifics are you're trying to solve before you do anything else.

I was luck and only needed 20% equity and wrote to the lender justifying the current LTV of the loan. Took a bit, but it was removed.

Todd Moriarty · Answer

I just filed a complaint with the CFPB.

Todd Moriarty · Answer

We did send a letter. I said that earlier in my posts. I don't believe what someone over the phone tells me, so we sent an "official" letter to their PMI department and they mailed us back that she needs 20% paid off the original loan.

Todd Moriarty · Answer

I wish Huntington would do that, but that's not their policy. I figured it was because of the housing crash, they're more cautious now with deadbeat homeowners.

In the past you just needed 20% equity in the house, but some banks are not doing that anymore.

How to remove PMI insurance...20% equity or 20% loan paid off???

How to remove PMI insurance...20% equity or 20% loan paid off???

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