Private Mortgage

A FINAL resolution to the long-running Capitol Hill controversy about homeowner overpayments of private mortgage insurance premiums appears to be in sight.Republicans on the Senate Banking Committee have reached a consensus on a reform bill that would offer significant new consumer protections to all homeowners paying for private mortgage insurance (PMI).Besides benefiting from mandatory disclosures about premium costs and the rights of cancellation of insurance, new borrowers nationwide would be guaranteed automatic cancellation of premium payments whenever their equity in their home reached 22 percent.

If you bought a house in recent years without a big down payment or without a second mortgage, you're probably paying for private mortgage insurance every month. But you don't have to forever. You can qualify to cancel it if you've made enough payments, raised the value of your property with home improvements or (rarer and rarer nowadays) live in an area that is seeing strong gains in sales prices. One or more of those options can get your loan balance down to 80 percent of the value of the home when you got the loan, the magic number.

A reader asks if there is a standard rate for mortgage insurance and how to calculate it. Dear Reader: Mortgage insurance protects a lender against loss if the borrower stops making mortgage payments. Most lenders or investors require mortgage insurance when the mortgage amount exceeds 80 percent of the property value. FHA loans are covered by a mortgage insurance program administered by the federal government. Private mortgage insurance is sold by a number of companies - Mortgage Guaranty Insurance Corp.

First it was the lenders. Now it's the mortgage insurance industry: Entire product lines are being yanked off the real estate financing shelf, potentially squeezing large numbers of buyers and refinancers out of the market. On Feb. 6, the oldest and largest private insurer of home loans -- MGIC -- issued a bombshell warning that, in large parts of the country, it would no longer provide coverage on cash-out refinancings, reduced-documentation loans, mortgages with down payments less than 5 percent, loans for rental houses or other non-owner-occupied investor properties, and mortgages with negative amortization features, such as payment-option loans.

My wife and I purchased a home in April of 2002 for $84,500. It also was appraised for the same value. We obtained a mortgage for $78,350. To eliminate the private mortgage insurance monthly premium, we decided to pay down the loan. By June, we had lowered the principal to $60,789 and we were current in our payments. I was under the assumption that the law mandated the automatic cancellation of the PMI when the loan balance reached 78 percent of the original value. After waiting two months and the insurance was not automatically dropped from the monthly statement, I wrote my mortgage company.

Higher loan limits on Federal Housing Administration loans may become a reality after the U.S. House of Representatives passed legislation Wednesday.The legislation raises the FHA's mortgage insurance limits for single-family homes to a higher range, beginning at $109,032 up to $197,620. The current range is $86,317 to $170,362.The Senate approved the FHA measure July 17 as part of its appropriations legislation. A compromise bill must be approved by Congress before it goes to President Clinton to sign into law.The Department of Housing and Urban Development wanted to raise FHA-insured loans to a single limit of $227,150, which would put it on a par with Fannie Mae and Freddie Mac loan limits.

Earlier this year, Congress passed a law requiring lenders to notify homeowners when they have built up enough equity to cancel their private mortgage insurance (PMI). Now, there is a business that can help Maryland homeowners through the process.Mortgage Insurance Consultants will provide a homeowner with a market analysis and an appraisal and will submit all documents to the lender for a base fee of $395."That bill basically only applied to people currently getting mortgage insurance," said Barry Nabozby, a consultant to the company, which has opened an office in Pikesville.

If you bought a house in recent years without a big down payment or without a second mortgage, you're probably paying for private mortgage insurance every month. But you don't have to forever. You can qualify to cancel it if you've made enough payments, raised the value of your property with home improvements or (rarer and rarer nowadays) live in an area that is seeing strong gains in sales prices. One or more of those options can get your loan balance down to 80 percent of the value of the home when you got the loan, the magic number.

WASHINGTON -- A monthly mortgage insurance product unveiled yesterday by GE Capital Mortgage Insurance Corp. -- and expected soon to become standard in the industry -- could reduce home closing costs substantially for borrowers nationwide.Under the program, a borrower would pay a one-month mortgage insurance premium, rather than the traditional 12-month premium, when closing on a home sale. The borrower would thus reduce the private mortgage insurance premium paid in advance.Private mortgage insurance protects a lender in the event that a homeowner defaults on a conventional mortgage -- one not backed by a federal insurance program.

My problem is that I have a private-mortgage holder and I am refinancing and want to pay off this bill. But I have been unable to get him to send me a payoff amount. My lender and I sent requests but we have not received a response. During the 10 years I have had the mortgage, I have never received any type of balance or amortization schedule. I also have never received a statement of interest paid at the end of each tax year. I have had to rely on my own calculations. Do you know how this will be handled if he has not provided the information by my settlement date?

Home loan industry competitors are searching for hidden gimmicks, but Bank of America insists that its "No Fee Mortgage Plus" plan announced Tuesday delivers exactly what the name implies - without raising interest rates to applicants. The new program comes with none of the traditional mortgage and settlement charges - application fee, appraisal fee, credit, underwriting, processing, title insurance, title search, private mortgage insurance, flood certification or closing fees, among others - and offers "competitive" interest rates.

Wall Street is sounding the alarm on one of the most popular ways to buy a house in many high-cost areas around the country - so-called "piggyback" programs that mesh simultaneously closed first-lien mortgages and second-lien credit lines or mortgages. As of July 1, the most influential ratings agency in the mortgage arena, Standard & Poor's Corp., has upped the ante for lenders who seek to fund piggyback deals through capital market financings. The move is likely to raise interest rates and fees for some homebuyers this summer, mortgage experts say, and could reduce the volume and availability of piggyback programs overall.

My problem is that I have a private-mortgage holder and I am refinancing and want to pay off this bill. But I have been unable to get him to send me a payoff amount. My lender and I sent requests but we have not received a response. During the 10 years I have had the mortgage, I have never received any type of balance or amortization schedule. I also have never received a statement of interest paid at the end of each tax year. I have had to rely on my own calculations. Do you know how this will be handled if he has not provided the information by my settlement date?

My wife and I purchased a home in April of 2002 for $84,500. It also was appraised for the same value. We obtained a mortgage for $78,350. To eliminate the private mortgage insurance monthly premium, we decided to pay down the loan. By June, we had lowered the principal to $60,789 and we were current in our payments. I was under the assumption that the law mandated the automatic cancellation of the PMI when the loan balance reached 78 percent of the original value. After waiting two months and the insurance was not automatically dropped from the monthly statement, I wrote my mortgage company.

HOMEBUYERS WITH high credit scores but minimal down payment cash are about to get a new, potentially helpful mortgage option. It comes with a catchy name - the "SingleFile" low down-payment mortgage. But it also comes with some wrinkles you need to know about upfront. SingleFile loan down payments can go all the way to zero. Maximum mortgage amounts can extend well into the jumbo category: $650,000. However, you need to have a FICO credit score of 700 or higher - a tough hurdle for some buyers short on cash.

YOU CAN call them liar loans. You can call them NINAs. But whatever you call them, two of the country's largest private mortgage insurers have their own word for them: trouble. NINA is the lending industry's acronym for No Income, No Asset verification home mortgages, a fast-growing segment of the high-froth real estate market of the past three years. NINAs are the ultimate form of "limited documentation" lending. You basically show nothing. In exchange for an interest rate 1 1/2 to 3 percentage points above the going market rate, the lender asks for almost no personal information about you at application.

HOMEBUYERS WITH high credit scores but minimal down payment cash are about to get a new, potentially helpful mortgage option. It comes with a catchy name - the "SingleFile" low down-payment mortgage. But it also comes with some wrinkles you need to know about upfront. SingleFile loan down payments can go all the way to zero. Maximum mortgage amounts can extend well into the jumbo category: $650,000. However, you need to have a FICO credit score of 700 or higher - a tough hurdle for some buyers short on cash.

Q: Can you obtain a CDA [Community Development Administration], VA or other government-backed mortgage loan for a house through a private mortgage broker or lender?Yolanda Lomax, BaltimoreA: Any private mortgage broker or lender would be ready, willing and able to help you obtain a CDA, VA or other government-subsidized mortgage loan for the purchase or refinance of a house.It is not necessary to apply directly to the government agency involved. Talk to your local savings institution or look in the yellow pages for the phone number of a mortgage broker.

TO DEDUCT or not to deduct? Congress is about to answer that question for an estimated 12 million-plus American homeowners who pay either FHA or private mortgage insurance premiums every month. With a bipartisan list of 161 co-sponsors in the House, a companion bill in the Senate and strong support from a diverse political coalition of business, labor and public interest organizations, you would think that a bill allowing federal income tax deductions for mortgage insurance premium payments would be a slam-dunk.

How you can avoid the hassle of private mortgage insurance Buying a house by making a down payment of less than 20 percent can add an extra $10 to $200 to the monthly bill if you have to obtain private mortgage insurance. There are strategies, however, to avoid private mortgage insurance. Consider a "piggyback" loan. If you can come up with a 10 percent down payment, the other 10 percent can be supplied through a private loan - giving you the 20 percent down payment. The smaller piggyback loan often comes with a higher interest rate, but it can be a better deal after tax considerations.