Washington Post
Web Site to Offer Advice on Ending PMI Payments
By Kenneth R. Harney
May 19, 2001
As many as 50,000 American homeowners who are eligible to do so have not asked to cancel their monthly private mortgage insurance (PMI) payments, which often cost them $1,000 a year or more.
Why? Some of them may not be aware of their legal rights to stop paying the premiums. Others may not know how to start the cancellation process or may fear the paperwork and expense.
Whatever the case, here's a message for them: Do it. Why pay good money every month for something you don't need? Now more than ever, there are PMI-cancellation resources to help guide you through the process, step by step. Some of the resources are free. Others will cost you a chunk of money but guarantee the results.
At the top of the list of free resources is a new online service that helps you calculate whether you're eligible for premium cancellation, explains your legal rights and answers the most common questions raised by consumers seeking to get rid of PMI.
The sponsor of the service is the PMI industry's own trade group, Mortgage Insurance Companies of America. After Wednesday, you'll be able to get practical and authoritative advice -- including a PMI cancellation calculator and model letters to send to your mortgage servicer to initiate cancellation -- at the Web site.
The free service is being launched, according to an industry official, to 'make the whole process as consumer-friendly and understandable as possible. We really would like to reach out to those people who may be eligible' for premium cancellation, but who have not done so.
These are primarily homeowners whose loans are owned by giant investors Fannie Mae and Freddie Mac, and whose equity level in their property exceeds 20 percent of the house's current market value. The online resource walks consumers through the key threshold requirements to pass muster for cancellation.
The industry said that 30,000 to 50,000 borrowers nationwide meet all the requirements for cancellation because of high appreciation of home values in their area and capital improvements they've made to their homes.
Under federal legislation enacted more than two years ago, home buyers paying PMI can request cancellation of premiums at the 20 percent equity level, provided they have paid their loans on time. For mortgages less than five years old, Fannie and Freddie may require a higher equity threshold -- 25 percent. Neither company permits cancellations on loans less than two years of age, no matter what equity level the borrower has attained.
On the key test of 'good payment history,' the new online service details what standards mortgage servicers expect homeowners to meet:
- Payments current at the time of application for PMI cancellation.
- No payments more than 30 days late in the last 12 months.
- No more than one late-payment penalty in the last 12 months.
- No notice of default recorded against the property.
On the subject of property valuations for PMI cancellation, the new privatemi.com service notes that a new appraisal may be necessary. Certain servicers will settle for broker price opinions or comparative market analyses, which are far less expensive than full appraisals.
Can you order your own appraisal and use it to get your PMI canceled? The new advisory service's answer is emphatic: You can't. 'Your servicer will arrange an appraisal from a qualified and approved appraiser. If you get an appraisal that is not from an approved appraiser, you will have to pay the additional cost for a second appraisal from an appraiser who is on the servicer's list of approved appraisers.'
At the other end of the spectrum for PMI cancellation advice is a commercial service that charges $499 to handle the entire transaction for you. A Massachusetts-based firm (with a Web page at www.pmiremovalandrecovery.com) promises to take care of all correspondence, escrow account analyses and disputes with servicers should you prefer not to get involved. When visited in mid-May, the firm's Web site offered a complete cancellation package for '$199,' but chief executive Kevin Heffernan says 'that needs to be updated,' and the standard fee is now $499, including an appraisal.
Heffernan says the company requires a $100 deposit at application and guarantees a full refund if the homeowner turns out to be ineligible for PMI cancellation. He says the substantial cost of his basic package is worth it because lenders 'know we are PMI-cancellation professionals and we know how the game works.'
The choice for PMI cancellation strategy is up to you: Get free advice and do it yourself, or pay for somebody else to do all the paperwork. But if you're one of the thousands of homeowners who could get rid of PMI right now, go for it.
© 2001 The Washington Post Company