Attempting to Remove PMI & Bank Refusing

[George Voutsinos]

My current mortgage is 70% LTV, so I have called my bank asking for the removal of the PMI. I'm current on my loan and have never been late or missed a payment. I told them per the Homeowners Protection Act of 1998 they are obligated to automatically drop the PMI when my loan reached 78% LTV and I wanted to be reimbursed for the (26) PMI payments I made past that point. Their response was that they'll review my request and send me a letter in 10-business days of their findings. I got the letter today and they're stating that my PMI won't be removed until the maturity date October 1, 2038. If I wanted to get it terminated earlier I'll need to get an appraisal (paid out of pocket) and have it sent in for their review upon which they still could reject the removal. I've already been through this ordeal however at that point my loan was above 80% LTV. The property is in great condition, it will definitely appraise for market value along with current comps. I'm seriously considering taking this to the next level. Wondering what everyone's thoughts are and if they had similar experiences?

According to the Consumer Finance Protection Bureau...

Is my PMI automatically canceled once my principal balance is 78 percent of the home’s original value?

Yes. Even if you don’t ask your servicer to cancel PMI, in general, your servicer must automatically terminate PMI on the date when your principal balance is scheduled to reach 78 percent of the original value of your home. For your PMI to be cancelled on that date, you need to be current on your payments. Otherwise, PMI will not be terminated until shortly after your payments are brought up to date.

[Joshua Christensen]

George, I was a lender for a lot of years. It's also been 12 years since I was, so take this with a grain of salt. PMI is actually a company, a brand. MI is the mortgage insurance lenders require.

PMI is set by lenders on a lot of different loan programs. The 78% rule applied to conventional mortgages. VA has a funding fee and no monthly MI. FHA has monthly MI as well. After the 2008-2010 recession, FHA made changes to their MI requirements that made MI permanent on their 30 year fixed rate loans.

If your loan was in fact an FHA loan when you acquired the property, that may be what you're running into. I think some of the higher loan to value conventional loan programs may have gone to that model as well, but I'm not sure.

Go back and look at your loan papers and look for the mortgage insurance disclosures and how that is calculated.  It should be included in the docs somewhere.  Check the Promissory Note and/or the TILA disclosures.  It might even be on the Certificate of Disclosure.  

Hope that helps.  May not be the answer you're looking for.  Best wishes.