Bank not discharging PMI?

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futurehermit
Posts: 3
Joined: Wed Apr 13, 2016 6:41 am

Bank not discharging PMI?

Post by futurehermit » Thu Oct 26, 2017 7:18 pm

Hello,

My wife and I recently bought a house. Not knowing if we would be able to sell our previous home in a timely fashion, we only put 10% down, obviously incurring PMI. The terms of our contract state that PMI is discharged if the loan is paid down to less than 80% loan to value and we request it to be, or is discharged automatically if paid to less than 78% loan to value. The plan was to pay down the mortgage on the new home in order to discharge the PMI after selling our other home. We closed on the sale of our prior home, and soon after closing paid the loan down on the new home to less than 80% loan to value, and requested discharge of PMI. Our banker called me the same day to state that this was uncharted territory for their regional bank (to be able to discharge PMI so soon after closing). After back and forth with the back office, they have decided that the loan needs to be paid down to 75% loan to value to have PMI discharged.
Can they contractually do this? We can easily pay the loan down to less than 75% LTV, but feel as though the contract is not being honored. (email to lawyer pending.)

Thank you,
John

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StevieG72
Posts: 574
Joined: Wed Feb 05, 2014 9:00 pm

Re: Bank not discharging PMI?

Post by StevieG72 » Thu Oct 26, 2017 7:30 pm

I would push back for them to follow the contract.
Fools think their own way is right, but the wise listen to others.

sc9182
Posts: 69
Joined: Wed Aug 17, 2016 7:43 pm

Re: Bank not discharging PMI?

Post by sc9182 » Thu Oct 26, 2017 7:45 pm

Consider not a bad deal in your case. In some of stories I read- PMI is not removed until first 2-years term finished without any late payments (if you keep that mortgage of course). At that point if you put in request for PMI removal - then bank needs to get an appraisal done (you pay for that: $500 or so) - then, add any extra necessary monies to get equity up to 22%.

Sorry you are being asked 25% - but very least they are entertaining within first two years !?

If you are going with 25% (or 20% if allowed), but have it in writing - then, request them for escrow waiver option during that transaction - if that possibility appeals to you.
Last edited by sc9182 on Wed Nov 01, 2017 8:25 am, edited 5 times in total.

runner3081
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Joined: Mon Aug 22, 2016 3:22 pm

Re: Bank not discharging PMI?

Post by runner3081 » Thu Oct 26, 2017 8:43 pm

As someone else mentioned, the one time we had PMI (a few houses ago), the contract stated that 2 years must elapse before PMI can be dropped. It is a seasoning requirement, I believe.

No surprises they said no, assuming that is in your paperwork.

ThreeBears
Posts: 78
Joined: Mon Nov 28, 2016 11:13 am

Re: Bank not discharging PMI?

Post by ThreeBears » Thu Oct 26, 2017 8:46 pm

Bleh. I have answered this question in detail before . . . and i find that people either can't grasp it or don't care to follow through.

1. Contracts that violate the law are not enforceable.
2. There is a federal statute that governs PMI . . . it's called the Homeowners Protection Act (HOPA).
3. You can read about it here: https://consumerfinance.gov/about-u ... rmination/
4. Short version: Paying down the mortgage early does NOT help you with regard to the 78% number, as that's based on the amortization schedule and not actual LTV.
5. However, paying down the loan early should help with the 80% rate. But, I think the bank could argue that it wants an appraisal to confirm that the value of the house hasn't declined.
6. Here's the kicker: many smaller banks do not know the regulatory limitations on their discretion with regard to HOPA. One option, if they don't follow the law, is to contact their federal regulator.
(if you would like to know your legal rights for removing PMI, please read this: http://files.consumerfinance.gov/f/2015 ... nation.pdf)
7. Good luck. Please read the above link, and it would be great if you report back
Last edited by ThreeBears on Fri Oct 27, 2017 4:55 pm, edited 1 time in total.

Ztx
Posts: 7
Joined: Thu Jul 21, 2016 9:54 pm

Re: Bank not discharging PMI?

Post by Ztx » Thu Oct 26, 2017 10:32 pm

Had a similar issue: during refinancing my appraisal came in lower than expected and that put me above 80% LTV. The loan officer said (in writing) that they'd remove PMI (which I didn't have on the previous loan) after I pay it down to <=80% LTV based on the new appraised value. Later, once I paid it down, they refused to remove it citing "it's tied to the amortization schedule etc and that I would have to pay it for several more years". It took many many emails and phone calls and supervisor escalations (thankfully I had a proof of the promise to remove the PMI in writing) to get it removed. You milage may vary.

JGoneRiding
Posts: 986
Joined: Tue Jul 15, 2014 3:26 pm

Re: Bank not discharging PMI?

Post by JGoneRiding » Thu Oct 26, 2017 10:59 pm

runner3081 wrote:
Thu Oct 26, 2017 8:43 pm
As someone else mentioned, the one time we had PMI (a few houses ago), the contract stated that 2 years must elapse before PMI can be dropped. It is a seasoning requirement, I believe.

No surprises they said no, assuming that is in your paperwork.
This is what my paperwork on PMI clearly stated, 2 years of ontime payments and then if paid down to 78% of original LTV it would be removed, or possible at 80% on banks prerogative. or after x total payments (it was about 5 years in my case )

ThreeBears
Posts: 78
Joined: Mon Nov 28, 2016 11:13 am

Re: Bank not discharging PMI?

Post by ThreeBears » Fri Oct 27, 2017 3:39 pm

This is not primarily a contractual matter . . . it is a statutory matter.

The CFPB has written --- " For example, a servicer imposed an additional requirement that the loan had been originated at least
two years ago, when the HPA does not permit such a requirement." http://files.consumerfinance.gov/f/2014 ... r-2013.pdf

If a bank attempts to enforce a two-year seasoning requirement consumers need to (1) tell the bank they are violating the law and (2) report the bank to their regulatory.

I do not care what the underwriting or contract language states. Banks are not allowed to require a two-year seasoning period.

ThreeBears
Posts: 78
Joined: Mon Nov 28, 2016 11:13 am

Re: Bank not discharging PMI?

Post by ThreeBears » Fri Oct 27, 2017 3:41 pm

JGoneRiding wrote:
Thu Oct 26, 2017 10:59 pm
runner3081 wrote:
Thu Oct 26, 2017 8:43 pm
As someone else mentioned, the one time we had PMI (a few houses ago), the contract stated that 2 years must elapse before PMI can be dropped. It is a seasoning requirement, I believe.

No surprises they said no, assuming that is in your paperwork.
This is what my paperwork on PMI clearly stated, 2 years of ontime payments and then if paid down to 78% of original LTV it would be removed, or possible at 80% on banks prerogative. or after x total payments (it was about 5 years in my case )
I see you posting this a lot. Have you ever read any of the posts or links I've posted? I don't know why you ignore them. But worse, your comments mis-guide people who would like to know their legal rights for removing PMI.

I should add this link, as it summarizes consumer's legal rights: http://files.consumerfinance.gov/f/2015 ... nation.pdf
Last edited by ThreeBears on Fri Oct 27, 2017 4:54 pm, edited 1 time in total.

DavidRoseMountain
Posts: 61
Joined: Sun Nov 30, 2014 3:27 pm

Re: Bank not discharging PMI?

Post by DavidRoseMountain » Fri Oct 27, 2017 4:46 pm

Thank you Three Bears for posting this information. It's very important for people to know their legal rights in this regard.

futurehermit
Posts: 3
Joined: Wed Apr 13, 2016 6:41 am

Re: Bank not discharging PMI?

Post by futurehermit » Fri Oct 27, 2017 6:08 pm

Thank you all for your replies. The contract has no stipulation as to any time frame that has to elapse prior to the ability to discharge PMI.

There is a requirement of "good payment history," which is probably written intentionally vaguely. I have also seen this included in the list of potential criteria allowed by federal law. Also bantered about is the fact that they may require a new appraisal, however the current one should suffice as the closing is not even a month out.

We are probably going to pay the loan down to 75% even though we do not feel required to, in order to discharge the PMI. We will also explain to our banker how subsequent business will probably be done elsewhere.

ThreeBears
Posts: 78
Joined: Mon Nov 28, 2016 11:13 am

Re: Bank not discharging PMI?

Post by ThreeBears » Fri Oct 27, 2017 7:08 pm

I would at least ask the question --- why the bank thinks they are legally allowed to require a LTV of 75% given the limits imposed by Homeownership equity protection act?

It's worth asking, even if you just get a "huh?"

People often think that banks make money off of PMI. Often that is not the case. But, they sell those loans to large investors who in turn try to dictate what the bank's do. Therefore, the bank is sometimes more worried about pleasing the investors than doing right by the consumer.

Cyclone
Posts: 244
Joined: Sun Jan 10, 2010 9:48 pm

Re: Bank not discharging PMI?

Post by Cyclone » Fri Oct 27, 2017 7:22 pm

In addition to the Homeowners Protection Act, Fannie Mae and Freddie Mac have their own rules, in case the loan was sold to them.

staythecourse
Posts: 4963
Joined: Mon Jan 03, 2011 9:40 am

Re: Bank not discharging PMI?

Post by staythecourse » Fri Oct 27, 2017 8:37 pm

Why all the discussion? The OP wants to do x and the other side won't let him/ her do x. So just call the AG office or find the state regulatory board who deals with this issue and ask them. They should be able to tell you if there are statutes backing what you want to do or not. If there is then call the bank mortgage supervisor and tell them you have called the regulatory people and confirmed that they are doing something illegal. If they still don't change their mind then file a grievance/ report with the regulatory folks. Simple as that.

I am not sure why we have so many of these type of questions. Who cares what anyone of us think. The only reasonable question is to find out WHO to contact to take the next step. Not what any of our opinions are. Doing the latter just asks for misinformation as none of us are experts in the field (unless the person actually are working in said field).

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

JGoneRiding
Posts: 986
Joined: Tue Jul 15, 2014 3:26 pm

Re: Bank not discharging PMI?

Post by JGoneRiding » Sat Oct 28, 2017 6:41 pm

ThreeBears wrote:
Fri Oct 27, 2017 3:41 pm
JGoneRiding wrote:
Thu Oct 26, 2017 10:59 pm
runner3081 wrote:
Thu Oct 26, 2017 8:43 pm
As someone else mentioned, the one time we had PMI (a few houses ago), the contract stated that 2 years must elapse before PMI can be dropped. It is a seasoning requirement, I believe.

No surprises they said no, assuming that is in your paperwork.
This is what my paperwork on PMI clearly stated, 2 years of ontime payments and then if paid down to 78% of original LTV it would be removed, or possible at 80% on banks prerogative. or after x total payments (it was about 5 years in my case )
I see you posting this a lot. Have you ever read any of the posts or links I've posted? I don't know why you ignore them. But worse, your comments mis-guide people who would like to know their legal rights for removing PMI.

I should add this link, as it summarizes consumer's legal rights: http://files.consumerfinance.gov/f/2015 ... nation.pdf
I have. And your link is great. The very first bulleted point says

"Borrower must have good payment history "

as far as I can tell from reading it at no point defines exactly what that is. Having read the very dense Fannie provided housing info which is what they give to banks to make loans that Fannie and Freddie will buy I can assure that it DOES define on time payment history as 2 years. Have you looked at that? It's very long but not vague when all is said and done, and neither was the written contracts I have seen which agreed with every single other point you have listed. edited to add: In fact the contracts I have seen (which I believe to be boilerplate for my state) are in fact BETTER than your posted link because they have agreed to remove PMI when the loan is paid down to 78% of original loan value without a further documentation where as the link you provided seems to say that they only have to remove it when the original amort schedule would get to 78% of LTV (provided that 2 years of on time payments requirement has been met). I fully agree with you that at 80% you can ask the bank to remove PMI and they are required to give you a list of requirements to do so, I just don't agree with you that they CAN NOT require you to have first made 2 years of payments but IANAL (are you?) I don't get paid to interpret fine print. I do however think the government (who wrote the regs) does and that Fannie is a subsidy of the government and it is their job to write out the fine print in really really long form for banks so that banks do not have to go to court over it and I can tell you (because I did read it all) that the Fannie docs say 2 years very clearly.

Edit: I read the really tiny fine print I think it could be interpreted as the last 12 to 24 months but not less than 12 months. And the op is talking about 1 month payment history if that.

ThreeBears
Posts: 78
Joined: Mon Nov 28, 2016 11:13 am

Re: Bank not discharging PMI?

Post by ThreeBears » Mon Oct 30, 2017 10:51 pm

JGoneRiding wrote:
Sat Oct 28, 2017 6:41 pm
ThreeBears wrote:
Fri Oct 27, 2017 3:41 pm
JGoneRiding wrote:
Thu Oct 26, 2017 10:59 pm
runner3081 wrote:
Thu Oct 26, 2017 8:43 pm
As someone else mentioned, the one time we had PMI (a few houses ago), the contract stated that 2 years must elapse before PMI can be dropped. It is a seasoning requirement, I believe.

No surprises they said no, assuming that is in your paperwork.
This is what my paperwork on PMI clearly stated, 2 years of ontime payments and then if paid down to 78% of original LTV it would be removed, or possible at 80% on banks prerogative. or after x total payments (it was about 5 years in my case )
I see you posting this a lot. Have you ever read any of the posts or links I've posted? I don't know why you ignore them. But worse, your comments mis-guide people who would like to know their legal rights for removing PMI.

I should add this link, as it summarizes consumer's legal rights: http://files.consumerfinance.gov/f/2015 ... nation.pdf
I have. And your link is great. The very first bulleted point says

"Borrower must have good payment history "

as far as I can tell from reading it at no point defines exactly what that is. Having read the very dense Fannie provided housing info which is what they give to banks to make loans that Fannie and Freddie will buy I can assure that it DOES define on time payment history as 2 years. Have you looked at that? It's very long but not vague when all is said and done, and neither was the written contracts I have seen which agreed with every single other point you have listed. edited to add: In fact the contracts I have seen (which I believe to be boilerplate for my state) are in fact BETTER than your posted link because they have agreed to remove PMI when the loan is paid down to 78% of original loan value without a further documentation where as the link you provided seems to say that they only have to remove it when the original amort schedule would get to 78% of LTV (provided that 2 years of on time payments requirement has been met). I fully agree with you that at 80% you can ask the bank to remove PMI and they are required to give you a list of requirements to do so, I just don't agree with you that they CAN NOT require you to have first made 2 years of payments but IANAL (are you?) I don't get paid to interpret fine print. I do however think the government (who wrote the regs) does and that Fannie is a subsidy of the government and it is their job to write out the fine print in really really long form for banks so that banks do not have to go to court over it and I can tell you (because I did read it all) that the Fannie docs say 2 years very clearly.

Edit: I read the really tiny fine print I think it could be interpreted as the last 12 to 24 months but not less than 12 months. And the op is talking about 1 month payment history if that.
You wrote a reasonable response, so I will try again.

1) Contracts that violate the law are not enforceable.
2) The main law governing when consumers can discharge PMI is the homeownership equity protection act.
3) The primary interpreters of that law are banking agencies (FDIC, OCC, Federal Reserve, and CFPB).
4) The CFPB has said that the "two year" seasoning requirement is not consistent with the law. (See this: The CFPB has written --- " For example, a servicer imposed an additional requirement that the loan had been originated at least two years ago, when the HPA does not permit such a requirement.")
5) This means, if your servicing bank is regulated by the CFPB and they are trying to make you wait two years, you need to report them to the CFPB.
6) You can submit a claim here: https://consumerfinance.gov/complaint/
7) Since the CFPB has some discretion to interpret the law, the servicing bank will be forced to listen to the CFPB.
8) The illegal guidelines that you may have signed will be thrown out as . .. well, illegal.
9) You will be able to cancel your PMI.
--Do you see why the Fannie Guidelines are not relevant?

-Even if the CFPB does not regulate your bank, it's worth pointing out to the bank that at least one major regulator considers their practice to violate federal law. I would report the two-year seasoning practice to any of the above bank regulators. I agree that the statute is vague. But, that two-year requirement still seems fabricated.

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