Homeowners Protection Act of 1998

September 5th, 2008 | 5:29 am | Posted in PMI - Mortgage Insurance |

Butch, a reader who has been following my PMI removal problems while going through the same routine himself, emailed me on Wednesday evening with a link to the full text of the Homeowners Protection Act.

He wished to highlight the very last part of Section 2 which defines “termination date”:

(16) TERMINATION DATE.–The term “termination date”
means–
(A) with respect to a fixed rate mortgage, the date on which the principal balance of the mortgage, based solely on the initial amortization schedule for that mortgage, and irrespective of the outstanding balance for that mortgage on that date, is first scheduled to reach 78 percent of the original value of the property securing the loan; and

(B) with respect to an adjustable rate mortgage, the date on which the principal balance of the mortgage, based solely on amortization schedules for that mortgage, and irrespective of the outstanding balance for that mortgage on that date, is first scheduled to reach 78 percent of the original value of the property securing the loan.

In Butch’s words, it’s “as though the FTC website is missing a crucial tidbit.”

You know what?

He’s right.

The FTC’s “Alert” curiously omits any reference to paragraph 16A or 16B of Section 2.

They simply state:

If you put less than 20 percent down on a home mortgage, lenders often require you to have Private Mortgage Insurance (PMI). PMI protects the lender if you default on the loan. The Homeowners Protection Act of 1998 - which became effective in 1999 - establishes rules for automatic termination and borrower cancellation of PMI on home mortgages. These protections apply to certain home mortgages signed on or after July 29, 1999 for the purchase, initial construction, or refinance of a single-family home. These protections do not apply to government-insured FHA or VA loans or to loans with lender-paid PMI.

For home mortgages signed on or after July 29, 1999, your PMI must - with certain exceptions - be terminated automatically when you reach 22 percent equity in your home based on the original property value, if your mortgage payments are current. Your PMI also can be canceled, when you request - with certain exceptions - when you reach 20 percent equity in your home based on the original property value, if your mortgage payments are current.

One exception is if your loan is “high-risk.” Another is if you have not been current on your payments within the year prior to the time for termination or cancellation. A third is if you have other liens on your property. For these loans, your PMI may continue. Ask your lender or mortgage servicer (a company that collects your payments) for more information about these requirements.

This “crucial tidbit” must have fallen under their “certain exceptions” or something… In my opinion, it shouldn’t have.

Anyway, I was aware of this section of the law. Before I even called Countrywide, I wanted to make sure I wasn’t missing anything.

Hard to believe, but I did actually read all 15 pages — though much of it does not apply to my situation.

I was even prepared for Countrywide to respond with something very similar, half expecting them to, but they didn’t.

That’s why I, again, resorted to Jedi mind tricks with my last online request.

Okay, maybe I didn’t use any Jedi mind tricks, but I definitely opened the door for them.

At what point will the PMI on my account be automatically cancelled? I’d like a specific date please.

I mean, could I have given them a better set-up?

Still no response.

But if they do come back and plainly say, “July of 2010″ or something, I’ll put this issue to rest.

I won’t be happy but at least I’ll know where they got their answer.

As of right now, they don’t have an answer at all…

(And it also makes you wonder how so many people got their PMI dropped just by using the appreciation of their home rather than the size of their mortgage payments. There are all kinds of articles out there on the net from 2006 or so about that. If PMI isn’t supposed to drop until the amortization schedule says it is, well, what’s up with that?)