PMI stipulation seems dubious

MAILBAG

February 06, 2005

Last year my wife and I refinanced my townhouse for $262,800. We are paying $135.78 each month for private mortgage insurance (PMI).

Townhouses in the area are now selling for $350,000. I wrote my mortgage company about terminating the PMI because we had more than 20 percent equity in our home. We were willing to pay for an appraisal to substantiate the value. We thought we met all of the requirements outlined by the mortgage company. However, the company said we do not qualify because we have had this mortgage less than two years. I have read and reread the private mortgage insurance form we signed at closing and a two-year waiting period is not mentioned.

Do I have a case under the Homeowners Protection Act of 1998, which you wrote about in a recent Mailbag? If so, is there a federal or state agency I can contact?

The Homeowners Protection Act of 1998 applies to loans made on or after July 29, 1999. The act allows you to request termination of PMI when you reach 20 percent equity in your home based on the property value at the time of your loan. There are certain exceptions. One is if your loan is "high risk" because your credit scores are not A-1. Another is if you have not been current on your payments within the year prior to the time for termination of PMI. A third exception is if you have other liens on your property. For these loans, PMI may not be canceled.

I do not believe a two-year requirement exists before PMI can be canceled for loans made on or after July 29, 1999.

I suggest you ask to speak to a supervisor in your lender's customer service department and ask for written proof that a two-year waiting period is required. If you do not get satisfaction, enforcement of the Homeowners Protection Act is within the jurisdiction of the Federal Trade Commission.

To file a complaint or get help, call 1-877-FTC-HELP. You can also check with the Maryland Division of Financial Regulation at 888-784-0136.

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