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Requirements to remove PMI?

My wife and I purchased a home last August using a conventional loan.  We live here and this is not as an investment.  We're currently at 88% LTV.  The loan is with Fannie Mae and is serviced by Wells Fargo. 

I've contacted Wells Fargo a few times this year regarding the requirements for removal of the PMI.  I've received different answers at different times when posing the same two questions to different customer service representatives. 

The problem is, I've had contradictory information regarding:
1) Whether or not we must wait 24 months before requesting removal of PMI
2) If the appraised value must consist of exclusively being home improvements and how market value appreciation factors into this

One agent told me home improvement and market value appreciation could be combined (which the appraisal of course would factor in).  Another told me it has to be from home improvements exclusively.  While we've done some improvements to the home over the last year, it wouldn't be enough to reach 75% LTV (we'd have enough with market value). 

Once again, I had one representative tell me I must wait two years, while others (I've made a total of three calls, all different information) told me there is no 24 month waiting period. 

I received the PMI removal requirements in a letter from Wells Fargo and I took a picture of the front page with the requirements:

I don't want to pay for an appraisal and learn later on that we possibly didn't meet requirements because of a lack of 24 months of payment history and/or the appraisal value and how much of it is because of home improvements.  Any advice here is greatly appreciated. 
  • September 12 2013 - US
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Answers (8)

Best Answer

If your current rate is 3.5% I doubt if removing MI would lower payment with a refinance to current 30 yr rates. Your MI is likely .65% or less and new rate would be higher than 4.25% plus cost of refinancing.  You may be stuck with the Wells Fargo 2 yr rule, but next August would be time to challenge "improvements vs appraisal" for 78% loan to value.
  • September 13 2013
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Just found this website with the following post I can relate to quite a bit:

"I am in the same boat.  I bought a house that was in forclosure and got a sweet deal deal.  I paid 60k for a house that appraised for 78k.  I got a letter that said my escrow was going up so I did some investigating. The escrow was increasing due to a hike in my insurance, so while investigating I noticed I was wasting money on PMI.  I called and sough how to eliminate PMI.  I was told that I had to pay for an apprasal and the value of my home had to be 74k.  I told the person on the phone that when I bought the home it already appraised for more that the 74k required.  That didnt matter, I had to pay their approved vendor for an apprasial.  I played the game and paid for an apprasial and it came back that my house was valued at $90k.  Today I got a letter in the mail telling me that eventhough my loan to value was at 62%, they could not remove PMI unless I could show receipts that showed what structural improvements were made that totalled $14K.  In shock, I called.  They were pointing the finger at Fanny Mae.  I too did not get my loan from Wells Fargo, they bought it.  In shock and very upset that a hard working American can be subject to this treatment.  I to will join any class action law suit against this injustice!!"

http://www.ripoffreport.com/r/Wells-Fargo-Home-Mortgage/Des-Moines-Iowa-50328/Wells-Fargo-Home-Mortgage-Wont-Cancel-PMI-Des-Moines-Iowa-909445

Like this person, we didn't initially go through Wells Fargo.  It's looking more and more like this bank, who I've banked with since age 16, is playing quite dirty, unless I'm mistaken on some facts here?


  • September 12 2013
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Thanks all for your replies.  I'll go ahead and type out the requirements for Wells Fargo here since that image is too small to read.

"Requirement 1
* You have no 30-day late payments in the last 12 months, no 60-day late payments in the past 24 months and your loan is paid current with no past due payments owed.

Requirement 2
* Your loan has aged less than two years.

Your loan must meet the required LTV ratio based on one of the following options:
     HPA Requirements
          Make principal curtailment to 78% in the amount of $xxx

Investor requirements

A. Order an appraisal to verify the current value of your property.  The appraisal must show the value of the structural improvements made to the property.  If the improvements are the sole reason for the increased value of $xxx, your LTV will be 75% and the appraisal can be used to delete PMI.  The value of the improvements must equal $xxx 

Please be aware that proof of the cost of any structural improvements may be required via receipts/work orders in adition to the completed appraisal order."

Also, I'm not sure if a refinance makes sense considering we locked in at 3.5%/30year.  I feel like I've received the run around from Wells Fargo because some agents have told me market value (up 25% conservatively since we purchased) can go towards the LTV of 75%, while this letter says otherwise.  I get the impression there is grey area.  
  • September 12 2013
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Absolutely look to refi if you can. Another lender would be happy to earn your business but the 24 month is typically the magic number if you stick with your current lender. I would contact your original loan officer directly for answers, not some mortgage customer care line with Wells.
  • September 12 2013
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Sorry, I don't think anyone can read that image even though we wish! You will not likely be able to "drop" your PMI with your current lender when you have less than 2 years from the purchase date. If you feel confident that the Current Value (yes, appraisal required), will put you outside of PMI, meaning you have 20% or more equity in your home - then you can refinance without PMI - with another lender/new loan.
  • September 12 2013
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Anthony,

You're covered under the Homeowners Protection Act.  Please copy and paste this link for great information: portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/res/respapmi. 

Also consider starting over, replacing existing loans on the property with a new loan.  If you have good income and really have value exceeding an 8/10, debt/value, ratio you're good.

Alex
  • September 12 2013
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Lenders are likely to require PMI when the person purchasing a home cannot put 20% down in the beginning. It is important to know that every lender has its own rules and restrictions regarding PMI and its removal. Some lenders are more flexible about removing PMI than others.

The first step to take is to formally request written information concerning your lender's policy regarding PMI and its removal. Sending a letter to your lender, or faxing it if possible, is one way to get the process started. Ask for a prompt response to your letter in writing. If possible, call ahead and ask for the name of the individual who is likely to receive your letter so you may call and confirm it was received.

Some questions I would recommend asking in your letter are as follows:

1. What is the company's policy concerning the removal of PMI?
2. Is there a waiting period to petition to have PMI removed? If so, what is that time period?
3. What steps are needed to begin the process for requesting to have PMI removed?
4. How does the company calculate whether a person is eligible to have PMI removed and how will I know if I qualify?
5. What documentation and information will I need to provide to support my petition to have PMI removed?

The second option, as recommended in the first response to your question, is to refinance. It is always important to proactively examine a lender's policy concerning PMI, but so many people do not know this when they purchase a home. However, you are asking good questions and will some persistence you will get the answers you need. Do not be afraid to ask questions if you are provided with information (even in writing) that is unclear. Stress in your letter that you do want a written response and a direct point of contact to refer to with further questions or concerns. Good luck in your efforts.
  • September 12 2013
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Hi Anthony,

You may want to look into possible refinance options to eliminate the mortgage insurance.  This would only require you to have 80% LTV.

Often servicers are reluctant to removing PMI, because it opens them up to a different degree of risk with investors.  You may have to jump through some hoops to get it removed, but refinance may be a quicker solution.

Best of luck,

Bryan
  • September 12 2013
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