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According to the
Federal Trade Commission's website:
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.
If you signed your mortgage before July 29, 1999, you can ask to
have the PMI canceled once you exceed 20 percent equity in your
home. But federal law does not require your lender or mortgage
servicer to cancel the insurance. On a $100,000 loan with 10
percent down ($10,000), PMI might cost you $40 a month. If you can
cancel the PMI, you can save $480 a year and many thousands of
dollars over the loan. Check your annual escrow account statement
or call your lender to find out exactly how much PMI is costing
you each year. Additional provisions in the law:
- New borrowers covered by the law must be told
- at closing and once a year - about PMI termination and
cancellation;
- Mortgage servicers must provide a telephone
number for all their mortgage borrowers to call for information
about termination and cancellation of PMI;
- Even though the law's termination and
cancellation rights do not cover loans that were signed before
July 29, 1999, or loans with lender-paid PMI signed on any date,
lenders or mortgage servicers must tell borrowers about the
termination or cancellation rights they may otherwise have under
those loans (such as rights established by the contract or state
law)."
So...How
Do You Get 'Em To Cancel It?
Easy...collect the information that plugs into the
blanks in the letter below, send it out via Certified Mail/Return
Receipt Requested, and mail it!
Note: If you don't have a current appraisal [which will probably
be in most cases, unless you just purchased or re-financed your
house] you'll need to pony up the dough to get a current and
acceptable appraisal done to attach with the letter below.
Okay big shot...here's the letter.....
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[Name(s) on Mortgage]
[Mailing Address]
[City/State/Zip]
Certified
Mail, Return Receipt Requested # ???? ???? ???? ???? ????
[Date]
[Name of Mortgage Company/Servicer]
[Address]
[City/State/Zip]
REF: Account
#????????????????/Immediate removal of PMI
To Whom It May Concern:
Reference the account listed above, please
immediately drop the Private Mortgage Insurance being levied/charged to
this mortgage at once. Here are the pertinent facts concerning this
property:
The address of the property financed is:
[drop in property address here]
Here is the necessary valuation information:
a) The current amount
owed/balance financed by your company is: [insert current
balance here]
b) The current
appraisal on this property is: [drop in current appraisal
amount here]
c) The difference
between the current market value and the amount owed is: [insert
balance]
d) Positive equity in
property, as a percentage of value: [insert 00.00% here]
Since my equity in this property exceeds the minimum 20%
requirement, please let this letter serve as my official request to drop
this charge from my monthly payments on this property. Furthermore, I
request a full refund of any monies accrued in the escrow account for
this property to [unnecessarily] cover this PMI.
A photocopy of the current appraisal on this property [dated
_________________] is also attached for your reference and
convenience.
Please confirm in writing that the PMI has been dropped,
as well as the new monthly payment amount.
I look forward to your prompt reply.
Sincerely,
[signed]
[Insert your name here]
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