Zillow Advice: Loan Modifications - Is a lender allowed to stipulate: market appreciation is a disallowed basis on which to cancel PMI? http://www.zillow.com/advice-thread/Is-a-lender-allowed-to-stipulate-market-appreciation-is-a-disallowed-basis-on-which-to-cancel-PMI/512341/ Zillow Advice | Zillow Real Estate In checking FDIC's Home Owner's ... http://www.zillow.com/advice-thread/Is-a-lender-allowed-to-stipulate-market-appreciation-is-a-disallowed-basis-on-which-to-cancel-PMI/512341/ In checking FDIC's <a rel="nofollow" href="http://www.fdic.gov/regulations/compliance/manual/pdf/V-5.1.pdf">Home Owner's Protection Act</a>, the conditions (although there are the ever-present exceptions) are...<br/><br/><strong><em>"A borrower may initiate cancellation of PMI coverage by submitting a written request to the servicer. The servicer must take action to cancel PMI when the cancellation date occurs, which is when the principal balance of the loan reaches (based on actual payments) or is first scheduled to reach 80 percent of the "original value,"6 irrespective of the outstanding balance..."<br/></em></strong><br/>HOPA goes on to define "original value" in footnote #6...<br/><br/><strong><em>"Original value" is defined as the lesser of the sales price of the secured property as reflected in the purchase contract or, the appraised value at the time of loan consummation. In the case of a refinancing, the term means the appraised value relied upon by the lender to approve the refinance transaction.<br/></em></strong><br/>What seems to jump out at me is that one can refi to get out from under PMI based solely on appreciated value as established by an appraisal, but there does not seem to be any similar mechanism in place for the purchase loan.<br/><br/>Again, YMMV and check withe a RE attorney familiar with your locale and applicable law. Sun, 22 Sep 2013 02:30:00 GMT http://www.zillow.com/advice-thread/Is-a-lender-allowed-to-stipulate-market-appreciation-is-a-disallowed-basis-on-which-to-cancel-PMI/512341/ 2013-09-22T02:30:00Z Per the HoPA Act, and via ... http://www.zillow.com/advice-thread/Is-a-lender-allowed-to-stipulate-market-appreciation-is-a-disallowed-basis-on-which-to-cancel-PMI/512341/ Per the HoPA Act, and via a little interpretation for simplicity sake, so don't crucify me if I am not precise, but this is pretty much the way it goes...: You can make a written request that PMI be dropped 1) If your LTV "naturally" reaches 80% LTV based on the original amortization schedule, or 2) If your LTV is paid down in advance (like a lump sum payment). Here's the detail: Must have good payment history / Satisfies the lender's requirements that there has been no decline in value (Appraisal), / and no Subordinate lien.<br/><br/>You can find very good links/tables regarding MI Cancellation via MGIC and other PMI companies, such as United Guaranty, Radian, etc. Great source for cancellation info.<br/><br/>The problem seems to occur when the lender/servicer has the discretionary time (prior to 78 LTV) to use their own guidelines. And they can do this, unfortunately. The HoPA rules are what they are.<br/><br/>So_Cal, your info is good, but the very first paragraph in your CA link refers to overriding regulations... but I don't think that CA or any other State "rules" override HoPA - Federal regulation. Sun, 22 Sep 2013 00:44:00 GMT http://www.zillow.com/advice-thread/Is-a-lender-allowed-to-stipulate-market-appreciation-is-a-disallowed-basis-on-which-to-cancel-PMI/512341/ 2013-09-22T00:44:00Z There is definitely a grey ... http://www.zillow.com/advice-thread/Is-a-lender-allowed-to-stipulate-market-appreciation-is-a-disallowed-basis-on-which-to-cancel-PMI/512341/ There is definitely a grey area in the law (thanks SoCal_Engr for sharing the link so I didn't have to find it) and I don't think it will ever be a black and white thing, in California at least, until it is challenged in court.<br/><br/>If it was me I would contact Kamala Harris' office for assistance. She's no joke when it comes to these things (especially with mortgage companies) and it might actually go somewhere.&nbsp;<br/><br/>In the meantime most lenders will use the new appraised value eventually. I don't know of any that will make you wait more than 24 months after the current loan was originated. And it will automatically drop off then it gets to 78% of the original appraised value of the loan based on the regular payment schedule. Sun, 22 Sep 2013 00:32:00 GMT http://www.zillow.com/advice-thread/Is-a-lender-allowed-to-stipulate-market-appreciation-is-a-disallowed-basis-on-which-to-cancel-PMI/512341/ 2013-09-22T00:32:00Z California code would seem ... http://www.zillow.com/advice-thread/Is-a-lender-allowed-to-stipulate-market-appreciation-is-a-disallowed-basis-on-which-to-cancel-PMI/512341/ California code would seem to be on your side. <a rel="nofollow" href="http://law.onecle.com/california/civil/2954.7.html">Section 2954.7(a)(4)(B)</a> seems to support your general argument for dropping PMI based on appraised value, but a cursory review did not show anything regarding the legality of a specific stipulation against using appraised values for this purpose.<br/><br/>However, the <a rel="nofollow" href="http://www.ag.state.mn.us/consumer/fraud/Fraud_PMI.asp">Minnesota AG's site</a> brings up an interesting distinction between federal and state chartered lenders. In short, federal chartered lenders appear to only use the original purchase price, and explicitly ignore subsequent appraisals...by law.<br/><br/>It seems your best recourse is to ask an attorney versed in California law. There also seems to be varying policy based on purchase-v-refi loans.<br/><br/>Good luck...<br/><br/>BTW - If I were a lender, I'd be less inclined to release PMI based on "market appreciation", given the recent reminder of bubble values. Sat, 21 Sep 2013 23:20:00 GMT http://www.zillow.com/advice-thread/Is-a-lender-allowed-to-stipulate-market-appreciation-is-a-disallowed-basis-on-which-to-cancel-PMI/512341/ 2013-09-21T23:20:00Z I believe it's probably lender ... http://www.zillow.com/advice-thread/Is-a-lender-allowed-to-stipulate-market-appreciation-is-a-disallowed-basis-on-which-to-cancel-PMI/512341/ I believe it's probably lender discretion, since it's really a servicing question. It's very difficult to find guidance when we're originating PMI loans as to what conditions will be allowed but I've typically most often heard that appreciation is not a valid reason - this is particularly true of FHA, is my understanding. So it wouldn't be a surprise if conventional followed. I'm fairly certain you'd be wasting your money on an attempt at legal redress. <br/><br/>I'm guessing the rate you got last January is lower than what you could get now, or you don't want to go through another loan submission, but you always have the option or refinancing. Sounds like you'd have less rate adjustments now than you did so you might do OK, and there are plenty of no-cost options out there. Sat, 21 Sep 2013 23:18:00 GMT http://www.zillow.com/advice-thread/Is-a-lender-allowed-to-stipulate-market-appreciation-is-a-disallowed-basis-on-which-to-cancel-PMI/512341/ 2013-09-21T23:18:00Z If you want legal advice ... http://www.zillow.com/advice-thread/Is-a-lender-allowed-to-stipulate-market-appreciation-is-a-disallowed-basis-on-which-to-cancel-PMI/512341/ If you want legal advice you would need to speak with an attorney.&nbsp; To be a little bit of Devil's Advocate ....&nbsp;Would you be OK with a lender adding PMI if values decreased? Sat, 21 Sep 2013 23:00:00 GMT http://www.zillow.com/advice-thread/Is-a-lender-allowed-to-stipulate-market-appreciation-is-a-disallowed-basis-on-which-to-cancel-PMI/512341/ 2013-09-21T23:00:00Z