Pmi Cancellation Letter: Fill & Download for Free

Send them a written letter certified return receipt so you have proof. Explain the value of your home has increased and the loan to value ratio has declined to the level where PMI is no longer required. Specifically request that they stop charging you PMI.

The Homeowner’s Protection Act[1][1][1][1] states that PMI must be canceled once the loan balance reaches 78% of the property’s value at the time of purchase, or at the midpoint of the loan. For a 90% loan, this occurs in a little less than seven years.The Act applies only to PMI, which is for conventional loans only. If you have an FHA loan, the mortgage insurance is not PMI, and likely will remain for the life of the loan unless your down payment was at least 10%.A new loan servicer can’t change any of the terms of your loan. A possible exception could be if you had one or more late payments within the past year, but I’m just guessing.The other alternative would be to refinance. With interest rates at historic lows today, the odds are high that you could not only get rid of PMI, but lower your interest rate at the same time.If there is some fact I am missing, just comment here, and I’ll do my best to help out.Footnotes[1] Homeowners Protection Act (HPA or PMI Cancellation Act) examination procedures | Consumer Financial Protection Bureau[1] Homeowners Protection Act (HPA or PMI Cancellation Act) examination procedures | Consumer Financial Protection Bureau[1] Homeowners Protection Act (HPA or PMI Cancellation Act) examination procedures | Consumer Financial Protection Bureau[1] Homeowners Protection Act (HPA or PMI Cancellation Act) examination procedures | Consumer Financial Protection Bureau

Let’s clear up some terminology first.When lenders make a loan for more than 80% of the property’s value, they require a way to limit their risk. This is where mortgage insurance comes in: it acts as a sort of synthetic down payment so that if the borrower defaults and the lender forecloses and sells the property, the mortgage insurance policy will cover any shortfall to repay the loan balance and cover the considerable costs of foreclosure.When the loan is conventional, the insurance comes from a private company like Radian or MGIC. These companies provide private mortgage insurance, or PMI.FHA loans are insured by a government agency, the Department of Housing and Urban Development (HUD). FHA insurance—which is not PMI—works in the same manner as PMI, protecting the lender in the event of foreclosure. FHA mortgage insurance is properly referred to as MIP, for mortgage insurance premium.There are important differences between the two. PMI will drop off automatically once the loan balance reaches 78% of the property’s value at the beginning. For a 90% loan, this point occurs in about seven years. A borrower can also document to the lender that their loan balance is 80% of the home’s current market value by providing an appraisal. With appreciation, this can shorten the time before they can remove PMI. If their home appreciated 4% each year, the homeowner could remove PMI in as little as two years.FHA mortgage insurance has some important differences. The first is that for most FHA loans with 30-year terms and 3.5% down payments, the MIP will remain in place for the life of the loan, regardless of equity. This change occurred for all FHA loans insured after June 13, 2013. If the borrower’s down payment is more than 10%, they’ll be able to cancel MIP after 11 years.Because most borrowers who get FHA loans get 30-year loans with 3.5% down payments, they will be able to remove mortgage insurance only by refinancing to a conventional loan.It’s important to note that the tax assessor’s valuation of the property is irrelevant when it comes to the real equity in the home. A conventional lender would still require a full appraisal in most cases to document the home’s value.I hope this is helpful.