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PMI removal at 80% loan to value-Homeowners Protection Act

Posted in Credit Notes,Financing- Loss Mitigation,Lender News Reports,Real Estate by Administrator on the September 21st, 2012

PMI removal at 80% loan to value-Homeowners Protection Act

PMI removal is only one of the many laws to be aware of when buying a home.  Most of these laws require the Loan Officer or Lender to take action. Rarely are there laws that allow the borrower to take action and get direct benefit. That is what the Homeowners Protection Act, also known as the PMI Cancellation Act, is for.

The Homeowners Protection Act is all about private mortgage insurance( PMI) and when it can, and when it will, be removed. It’s important to remember about PMI removal that the Homeowners Protection Act does not apply to government loans like FHA, VA or USDA
loans or loans with no PMI.

For conventional loans, PMI applies when the LTV is over 80%. The Homeowners Protection Act says that mortgage insurance cannot remain on loans for the duration. Once a borrower’s principal balance reaches 80% of the original value the borrower can request that the PMI be removed. Most of the time lenders will use the original appraised value of the property, however, they can use the current value if it has gone down or if the borrower pays for the appraisal and did improvements to justify an increase in value. When requesting PMI removal at 80% the lender can say no but when the LTV reaches 78% of the original value the PMI is required to have the PMI removal be automatically done.  Lenders are required to notify the borrower of the details of their PMI at closing, when the LTV reaches 80% and if the PMI has not yet been removed, when the LTV reaches 78%. This way the borrower doesn’t “forget” about their PMI and can have their monthly mortgage payment reduced when their loan to value qualifies.

Remember, when you are working with your loans that are required to have PMI, remember what the Homeowners Protection Act does for you. You will be one of the few borrower’s who know the details of the law and how it can help save money later.

Knowing the laws of the mortgage industry is not only required under the NMLS in order to become a licensed Loan Officer, it also helps realtors to provide a better service to our clients. Real Estate professionals who know about the laws and regulations in their industry tend to have more repeat clients and referrals. Therefore, there’s no better time than the present to get more familiar with the laws and regulations that affect our clients most. With our newsletters, we will continue to assist you in becoming an authority on housing so you have confidence based upon competence!

Read the full ACT here courtesy of the federal reserve at http://www.federalreserve.gov/boarddocs/supmanual/cch/200711/hpa.pdf

PMI removal-opening the door to more informed home ownership

PMI removal-opening the door to more informed home ownership

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