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calif mortgage. can i pay the mortgage down to get pmi canceled based on the original home value?

  • June 15 2011 - Fontana
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Answers (5)

drcu, The answer:  Call your loan servicer (who you make the payment to) and ask them what you have to do...if you can do it.  Usually:  a nominal fee ($250 or so), appraisal and money to reduce balance.

However, every lender varies and, unless you fit the exact guides of HPA (as Shane has meticulously explained), there is no requirement of the lender  removing pmi.

Bear in mind one thing no answer has addressed thus far:  Two things come into play besides equity:  1). What kind of loan to you have and 2). How long have you had it.  Be prepared to take about this with your servicer.

Generally, FHA requires 5 years AND 20% equity, Conventional 2 years minimum (though this is not as hard coded).

What is your current interest rate?  Would it not be just as easy to refinance out of the pmi?  I am in California if you would like to look at all of your options.
  • June 15 2011
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Conventional mortgage insurance automatically drops off when your loan balance reaches 78% of the original purchase price as long as you've paid mortgage insurance for at least two years.

On a conventional mortgage you are allowed to request the lender remove mortgage insurance after the loan balance reaches 78% of the value, however the lender is not required to remove it until the loan balance reaches 78% of the purchase price.

If you want to request the PMI be removed, you need to contact your lender.  They will order an appraisal that you will pay for.  If the value supports your request, they have the option to remove it, but are not required to do so.

If you have an FHA mortgage, the mortgage insurance will automatically drop off when your loan balance reaches 78% of the original purchase price as long as you've paid mortgage insurance for a minimum of five years.

FHA does not remove mortgage insurance based on the value of the home in any circumstances.
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Under HPA you are stuck with the original amortization schedule.My homes value has declined but I would be willing to pay the loan down to get to 75% of the original value if that would mean automatic cancellation of pmi.  I am trying to get automatic cancellation based on original value under california law.

I cannot get a straight answer to the question?

  • June 15 2011
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Automatic Termination

Under HPA, mortgage lenders or servicers must automatically cancel PMI coverage on most loans, once you pay down your mortgage to 78 percent of the value if you are current on your loan. If the loan is delinquent on the date of automatic termination, the lender must terminate the coverage as soon thereafter as the loan becomes current. Lenders must terminate the coverage within 30 days of cancellation or the automatic termination date, and are not permitted to require PMI premiums after this date. Any unearned premiums must be returned to you within 45 days of the cancellation or termination date.

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http://www.frbsf.org/publications/consumer/pmi.html

Cancellation

Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80 percent of the original purchase price or appraised value of your home at the time the loan was obtained, whichever is less. You also need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years. Your lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.

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