Stuck in a pmi nightmare

[Maggie'sMom]

If you get an 80/20 (Two loans) one for the 80% and one for the 20%. (I don't think they offer them much and more).

Mortgage lenders used to do this regularly before the housing collapse. Lending standards have tightened considerably and many lenders no longer allow these piggybacked loans.

 

[Maggie'sMom]

Your PMI assumption is correct. It's your assumption on the mortgage that is most likely wrong. They need to pay an additional $22,000 to have 20% equity NOT 20% equity=$22,000. For example, they could have a house valued at $500,000 and have $78,000 in equity already.

This is correct. Based on the original post, they need to pay an additional $22K to get the loan to 80% of the original loan amount. They've had the loan for 5 years so they are counting the principal payments from the last 5 years plus whatever their original down payment was towards the 20%.

 

[angwill]

If you get an 80/20 (Two loans) one for the 80% and one for the 20%. (I don't think they offer them much and more).

Ah, good thinking I would never have thought to do that. I bet they did crack down on it now though too. I will keep it in mind when we move but then again we should have more than 20% to put down then anyway.

 

[helloirishkitty]

PMI is based on the equity in the home, not the loan amount.

DH works for a mortgage company and deals with this almost everyday. Before the housing collapse it was reasonable to think in 5 years you'd have enough equity in your home to remove the PMI. Now it's not the case and sadly a lot of homeowners will have it until they sell/pay off the loan. If your loan was previously modified, they had to get the permission of the MI company to modify it, so I would read into your modification with a fine-tooth comb. They may have added stipulations to the PMI requirement.

 

[EMAW_KSU]

PMI is based on the equity in the home, not the loan amount.

PMI premium is based on the loan amount. The PMI rate is based on the loan to value ratio.

 

[helloirishkitty]

PMI premium is based on the loan amount. The PMI rate is based on the loan to value ratio.

Should have worded it better! Whether or not you can get rid of existing PMI is based on your loan to value ratio or the equity you have in your home.

 

[kyra's mommy]

Just to clear up a couple questions. Yes, we would be paying an additional 22k. We bought the house for $410k but now it's only valued at exactly what we owe which is around $350k. Therefore, we want them to remove the pmi based on purchase price and not current value.

 

[mistysue]

This may be worth looking into for you- I had PMI when I bought 8 years ago. I think about 2 years ago now, my loan was down enough to get 80% of the original value. I called to get PMI removed and they gave me this whole big talk about how I had to get an appraisal and prove 80% of current value- then somebody let it slip that if I ignored it and waited until 78% of the appraisal they had on record (which was the original one) there was a rule that they HAD to remove the PMI.

I thought she said it was a law, so I don't know if that is local or if it was their own bank rule or whatever. But if I had tried to do what they told me at first not only would I have not had enough equity, the appraisal of record would have had a lower home value... and I would still be paying the PMI I got out of back then. When they told me it would disappear in 2% I just made an extra principle payment and got rid of it. So make sure you find out exactly what their policy is on when it will go away just to see if it helps you.

 

[kyra's mommy]

This may be worth looking into for you- I had PMI when I bought 8 years ago. I think about 2 years ago now, my loan was down enough to get 80% of the original value. I called to get PMI removed and they gave me this whole big talk about how I had to get an appraisal and prove 80% of current value- then somebody let it slip that if I ignored it and waited until 78% of the appraisal they had on record (which was the original one) there was a rule that they HAD to remove the PMI.

I thought she said it was a law, so I don't know if that is local or if it was their own bank rule or whatever. But if I had tried to do what they told me at first not only would I have not had enough equity, the appraisal of record would have had a lower home value... and I would still be paying the PMI I got out of back then. When they told me it would disappear in 2% I just made an extra principle payment and got rid of it. So make sure you find out exactly what their policy is on when it will go away just to see if it helps you.

WOW! That's really interesting. Thanks so much for telling me. I will look into it!

 

[Juliet25]

Like pp mentioned, your pmi might get dropped when you reach 78% of the purchase price. Ours just dropped over the summer. I didn't do anything; a letter just showed up that our PMI was no longer required. I knew the terms of the loan required such, but I thought it would be a big hassle since our mortgage is still (probably) slightly underwater. We paid PMI for 7 years.

 

[DisneyBill]

Actually the Homeowners Protection Act passed in the late 1990's clarified this exact PMI (abuse/confusion) issue. It requires lenders to release PMI once LTV is 78% of original purchase price. That is not optional, provided the borrower is current with monthly payments. If the borrower is behind on payments, then the lender must release PMI 30 days past the time borrower becomes current with payments. I think there is also a stipulation that the loan in question must be the one secured for purchase, not a refinance, but I'm not 100% sure about that part. If I were the OP, I'd find someway to come up with the amount needed to hit that 78% and kill that PMI. Another way to think about that $300 monthly premium is that it is interest being paid on the 2?,000 difference between current balance and 78% LTV. A personal loan at your bank or credit union for that needed amount divided by the $300 monthly pmi is likely a less costly path than present situation. Read your mortgage closing documents, I'm sure this is in there somewhere, then don't take any lip from Citi or whoever holds your mortgage.

 

[kyra's mommy]

Actually the Homeowners Protection Act passed in the late 1990's clarified this exact PMI (abuse/confusion) issue. It requires lenders to release PMI once LTV is 78% of original purchase price. That is not optional, provided the borrower is current with monthly payments. If the borrower is behind on payments, then the lender must release PMI 30 days past the time borrower becomes current with payments. I think there is also a stipulation that the loan in question must be the one secured for purchase, not a refinance, but I'm not 100% sure about that part. If I were the OP, I'd find someway to come up with the amount needed to hit that 78% and kill that PMI. Another way to think about that $300 monthly premium is that it is interest being paid on the 2?,000 difference between current balance and 78% LTV. A personal loan at your bank or credit union for that needed amount divided by the $300 monthly pmi is likely a less costly path than present situation. Read your mortgage closing documents, I'm sure this is in there somewhere, then don't take any lip from Citi or whoever holds your mortgage.

I absolutely agree with you and that's why we are so frustrated and working really hard on this. I think your numbers on right on and it's like throwing money in the garbage.

The tricky part is that it's LTV- Loan to Value, not loan to Original Purchase Price and that's where the bank has wiggle room. If we absolutely can't work with them and they won't agree to drop PMI then I think we are going to give up, refi and come up with 70k which is painful.

 

[emmababy]

I absolutely agree with you and that's why we are so frustrated and working really hard on this. I think your numbers on right on and it's like throwing money in the garbage.

The tricky part is that it's LTV- Loan to Value, not loan to Original Purchase Price and that's where the bank has wiggle room. If we absolutely can't work with them and they won't agree to drop PMI then I think we are going to give up, refi and come up with 70k which is painful.

It's 78% of purchase price. It will be documented on your truth in lending in your closing packet. The new lender can't input their own rules. Wen your loan is sold, nothing about your loan can change.

 

[kyra's mommy]

It's 78% of purchase price. It will be documented on your truth in lending in your closing packet. The new lender can't input their own rules. Wen your loan is sold, nothing about your loan can change.

Are you sure about this? We've been arguing this point and they keep saying no. Mind you, we have NEVER been late on a payment. None of the rules that prohibit people from getting it removed apply to us.

 

[DisneyBill]

Are you sure about this? We've been arguing this point and they keep saying no. Mind you, we have NEVER been late on a payment. None of the rules that prohibit people from getting it removed apply to us.

Google Homeowners Protection Act

 

[TheRustyScupper]

WARNING --- WARNING --- WARNING

1) The government is running out of money.
2) Duh !
3) To shore-up govt loans, there are new PMI rules proposed for 2013.
4) PMI can no longer be removed from the mortgage - even if in mortgage papers.
5) The PMI funds will help bring money into FHA, Fannie Mae, Freddie Mac.

NOTE: THIS IS THE CURRENT BANKING PROPOSAL. No telling if it will
become law, but my guess is that it has a huge probability.

 

[Brer Shay]

Check the wording on your loan documents. The majority of them state that PMI will be removed when the loan to value ratio is SCHEDULED to reach 78%, not when it actually reaches it OR if you pay for an approved appraisal of your home to demonstrate below 78%. Generally, if you make additional principal payments to reduce your mortgage amount, that's great, but it won't get you ahead on the PMI. The removal date (scheduled) should be shown in your loan documents on the amortization schedule.

 

[GusGus77]

I was bummed we put 20% down because we lost a lot of that money when the housing market crashed, but after reading this post I am glad we did so we don't have to deal with all this pmi stuff. Good luck op!

 

[michelleh1]

I don't think so....

A home in Arizona, purchased or refinanced 5 years ago, is almost certainly worth much less than what it was worth in 2007. A quick Google-ing shows that homes prices are still down 40% or more from five years ago.

Sorry! My bad. I just couldn't figure out why they said she needed so much more money. Now that she has posted numbers it makes sense.

 

[timmac]

This is standard in the mortgage industry. You have to have 20% equity in your home in order to drop PMI. 10 years ago when home prices were increasing quickly, this worked to the borrower's advantage because they could have their home reappraised and get to the 20% using the increase in market value in addition to the payments made. Unfortunately, in a down market, you are experiencing the flip side. I've be shocked if there was a single mortgage lender that would base the 20% amount off the original loan amount and not the current value of the home.

It's probably easier to think of it in reverse, sort of... a bank will require PMI if the amount of the outstanding loan is >80% of the current value of the home (since that's when they're at risk).