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Private Mortgage Insurance

Trevor Theelke
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There are no hard and fast rules for PMI cancellation, since there are many different property types, loan services, and loan types. To find out the specific requirements for a given PMI, buyers should contact their loan servicer. However, typical requirements may include one or more of the following:

– Private mortgage insurance payments have been made for a specified minimum period of time.

– The outstanding mortgage balance is below 75 – 80 percent, due to paying down of the principal through regular payments, added value because of structural improvements, sharply increased property values in a neighborhood, or other conditions.

– The borrower’s payment history is good, with current payments, no payments more than 30 days past due in the past 12 months, no more than one late payment penalty in the past 12 months, and no notice of default recorded against the property.

The first step borrowers should take to cancel their private mortgage insurance is to figure out if they qualify for a PMI cancellation. The mortgage needs to be paid down to 80 percent LTV (loan-to-value – the ratio of the amount of the loan to the appraised value or sales price, whichever is less, expressed as a percentage, figured by dividing the loan amount by the appraised value). Structural improvements increasing the value of the home should be factored in, and if homes in the area have increased dramatically in value, that should play a role in the home’s current value as well. If the LTV is 80 percent, or if the home has gone up markedly in value, it may be time for the borrower to get in touch with the loan service with the following information: name, social security number, property address, and loan number. This information can be found on the most recent monthly payment coupon or invoice.

While most loan servicers require PMI cancellation requests in writing, the borrower will want to call on the phone to request the servicer’s specific instructions to cancel. There may be added requirements, such as supplying additional information about the home or loan or having an appraisal, a Broker’s Price Opinion (BPO – a less-detailed appraisal, also performed by a licensed professional), or Comparative Market analysis (CMA – a property value established for listing a home for sale based on comparative prices by a licensed professional).

Once all requirements are met, the borrower can send a written cancellation request. Items to include in the cancellation request letter include the loan number, property address, borrower’s name and phone number, and the borrower’s intention to cancel PMI. It’s also a good idea to request that the loan servicer follow up with the details and status of the cancellation request.

Disclaimer: This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal or accounting advice or other expert assistance is required, the services of a competent professional should be sought.

For more information about this or other title related issues please contact Bob Rulon, brulon@ltgc.com or Trevor Theelke, ttheelke@ltgc.com at Land Title Guarantee Company, (970) 328.5068 or check the website at http://www.ltgc.com


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