Homeowners Protection Act of 1998
September 5th, 2008 | 5:29 am | Posted in PMI - Mortgage Insurance | 14 Comments »
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.
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?)
September 5th, 2008 at 1:14 pm
Hmmm, I found this on the fed reserve bank of sf website(this states 80% of the original purchase price – not amoritization… I don’t know now which is right! This article has many percentages listed – making it all the more confusing!)
Mine is only $21 a month… but that still does add up!!!
How Do You Cancel or Terminate PMI?
Cancellation
Under HPA, you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80 percent of the original purchase price or appraised value of your home at the time the loan was obtained, whichever is less. You also need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years. Your lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.
Automatic Termination
Under HPA, mortgage lenders or servicers must automatically cancel PMI coverage on most loans, once you pay down your mortgage to 78 percent of the value if you are current on your loan. If the loan is delinquent on the date of automatic termination, the lender must terminate the coverage as soon thereafter as the loan becomes current. Lenders must terminate the coverage within 30 days of cancellation or the automatic termination date, and are not permitted to require PMI premiums after this date. Any unearned premiums must be returned to you within 45 days of the cancellation or termination date.
For high risk loans, mortgage lenders or servicers are required to automatically cancel PMI coverage once the mortgage is paid down to 77 percent of the original value of the property, provided you are current on your loan.
Final Termination
Under HPA, if PMI has not been canceled or otherwise terminated, coverage must be removed when the loan reaches the midpoint of the amortization period. On a 30-year loan with 360 monthly payments, for example, the chronological midpoint would occur after 180 payments. This provision also requires that the borrower must be current on the payments required by the terms of the mortgage. Final termination must occur within 30 days of this date.
September 5th, 2008 at 7:45 pm
Wow… Yeah, that confuses the issue even more!
80 percent, 78 percent, 77 percent, 180 payments, Automatic, Final, ?????
Anyway, still waiting on a response from Countrywide. It’s starting to look like this will be another of the online requests that I’ll have to send twice to get some attention…
September 5th, 2008 at 9:03 pm
It’s pretty incredible to me that this oversight has seemed to slip past the ever watchful eye of Google search and the hundreds of millions of internet users like ourselves. The FTC claims of automatic termination are reposted on hundreds of sites but it took a forum search on The Consumerist for me to uncover the information above. It’s not possible that we’re the only individuals under this circumstance. How has this misleading information proliferated to such an extent without the truth following closely behind? Hopefully this post will find it’s way to the top of the search engines so that others wont delay coughing up the money for an appraisal.
September 9th, 2008 at 11:54 am
I discovered your site this morning while searching for people’s experiences in dropping PMI. I am in almost the exact same situation as you are with Countrywide, though I am only at 79% LTV. I have received the same COV letters you have and after reading up about Landsafe on ripoffreport.com, I was skeptical about the entire process – seemed a bit like a scam to me.
After further reading, I perused through the HPA of 1998 and discovered the clause (sorry, not sure if this is the correct term – I haven’t dealt much with law) under section 3, (a), (3), (A) – “evidence [...] that the value of the property securing the mortgage has not declined below the original value of the property.”
I understand that this refers to “Borrower Cancellation”, but wonder if somehow this applies to Automatic Termination even though there is no mention of said “evidence”. Is it not questionable that they require you to appraise through Landsafe?
At this point, I am extremely reluctant to pay $130 for the appraisal as I have no doubt Landsafe will low-ball my house with a laughable, insulting figure. I’m inclined to wait another month or two and try going to one of Countrywide’s storefronts with all documents in hand.
Thoughts?
September 9th, 2008 at 10:40 pm
Please disregard my previous post. I came back to your site to inform you of section 2, definition 16, then reread your findings. Guess I missed the fact that you had also (already) figured out that the termination date is not affected by the current principle. I guess I’m stuck paying PMI until 9/1/2016 as I’m not willing to flush $130 to Landsafe.
Again, please forgive the ignorance in my post this morning.
September 10th, 2008 at 9:48 pm
Dustin. My understanding is that landsafe will not appraise your house. They will contract a local appraiser to do so. I would speculate that if you contacted Countrywide’s PMI cancellation department and told them you wanted to use your own Appraiser they would have no issue with that. (If the met the required qualifications to do so). I would personally rather pay a local appraiser 300 dollars for an appraisal than give a single solitary sent to Countrywide.
September 10th, 2008 at 9:49 pm
Cent too!
September 11th, 2008 at 8:01 pm
[...] Does Countrywide acknowledge the Homeowners Protection Act in regards to the automatic cancellation of [...]
September 17th, 2008 at 4:37 pm
Called Countrywide today. They said they require the appraisal to be done through Landsafe. I’m going to try and run by one of their local offices. Might be more persuasive…
September 18th, 2008 at 7:08 pm
Keep us posted Dustin! I’m still waiting on a response my last online inquiry… Seems I forgot that to get a response, you need to ask twice… ;0)
February 2nd, 2009 at 9:42 am
I have a investment property with a fixed 30yr loan and CW requieres Landsafe to do the appraisal. They said they will not accept it from a licensed appraisal other than Landsafe. What a scam. but then again, it is their neck they are sticking out.
February 2nd, 2009 at 9:45 am
Just got off the phone with CW. My LTV according to their website is 79% once logged in. This loan is over 5 years old and they still insist on a official appraisal. I guess the market has really tanked. I think I am just going to file a small claims case just to get them in court for a formal response. Sick and tired of dealing with the customer reps. that have nothing but scripts they read from.
July 31st, 2009 at 10:20 am
I seem to me in the same situation with regards to the “date” irrespective of my outstanding balance.
From what I have read above, the only thing we can do is wait for the date or the market to pick back up…
February 10th, 2010 at 5:30 pm
I started a loan with Colonial Savings about 10 Months ago.
In closing I had over 20% the value of the loan, and was told at this time that I could use a PMI waver. My wife and I signed it at that time, to find out that they are including PMI insurance at the first of the year. I have called, sent registered letters, and so on. I even applied for another loan, and had the property appraised.
I have not even received a copy of this policy I am paying for.
Should I just go with another loan, and pay closing costs to find an honest lender that will not charge PMI.
I feel that they are ripping me off, and not even providing a copy of the policy I am paying for.