- April 18, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Seeking Clarification on PMI Removal Criteria from Bank
I recently contacted my bank to inquire about their PMI removal criteria, and to my surprise, the representative informed me that I am eligible to have PMI removed immediately, despite my LTV ratio being 81.5% based on the original value of the property. I am puzzled by this and would like to understand the reason behind it.
## Making Timely Payments and Extra Principal Payments
We have been diligent about making all of our payments on time and have even been making additional payments towards the principal amount. Despite this, I am uncertain as to why the bank is allowing me to remove PMI at this early stage. I am not sure if the increase in property value due to market appreciation plays a role in this decision.
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Your LTV may be lower based on the current value of the home
> I assume that market appreciation isn’t relevant here,
Why would it be irrelevant? LTV = Loan to *value*
what you bought it for was your purchase price, the current market value is what comes into play for LTV.
Curious why you are so worried about it. If theyre willing to remove PMI let them remove PMI.
Is it possible the 81.5% is what your LTV would have been based on the original amortization schedule, and you are at less than 80% based on your extra payments?
Huh. My mortgage was with Wells Fargo, I was paying about 3.5% interest, and my LTV ratio was well below 80%. I called them and asked them to cancel PMI, and they refused. At the time rates were at 2.5% so I refinanced with a 15 year mortgage at another bank, and reduced my monthly payment while shortening my payoff horizon. Bye WF!
There are different rules around PMI in terms of automatic removal vs. borrower-requested removal.
Automatic removal is almost always tied to the original purchase price and under the original payment schedule, so doesn’t get modified by any appreciation or extra principal payments you make. A loan-to-value threshold for automatic removal is set by law / regulation at 78%. I think a bank can choose to use a higher percentage but I’d expect that’s uncommon. Because those factors are all fixed at time of closing, your date of automatic removal may be covered in your closing documents.
However, you requesting PMI to be removed uses the home’s **current** value (not purchase price) and owed balance (including any extra payments). Though there are exceptions, like if the current value is smaller then they’d use the purchase price for the “value” part of the LTV calculation. I think the threshold where a lender is required to honor a removal request is also set by law at 80%, but again a bank may choose to be more lenient. Maybe they’d be more likely to remove PMI at 81% for a million dollar home vs. a $200k one, that’s just a guess though.
Most of the time a removal request will require an official appraisal, paid by you. Though I suppose if your housing market has greatly increased since purchase and you were at, say, around 60% LTV, it’s possible that full appraisal may get waived and more generic methods get used to determine the value.
For what it’s worth my home valuation to remove PMI went about this way: “so what value do you need to get your PMI removed? Yep sounds about right. Have a good day.”
At least on my loan, it’s 80% of purchase price, 80% of current price, or iirc 36 months.
I removed PMI after a year bc my house, purchased during COVID, skyrocketed in value.
Bought for 300k, appraised (it wasn’t an appraisal but an evaluation of comps, I forget the phrase for it) for 450k, had pmi removed within a pay cycle, and I’ve been saving that same amount ever since in a separate account.
Pay myself instead of paying the bank
The below are guidelines if your loan is owned by Freddie Mac or Fannie Mae.
Since you’re above 80% LTV original value, if it’s been 5+ years, you may qualify with a valuation if it confirms your LTV to be lower than 80% of current value (based on the valuation done). If you’re between 2-5 years, then you could qualify if a new valuation confirms 75% LTV of current value. If you’re under 2 years, you’d need to have done large improvements to home to increase value (like major improvements, not just paint some walls) and a valuation must confirm 80% of the current value with improvements.
If you were at or below 80% of ORIGINAL value, then you can just request cancellation. Since you’re above, you may still be able to request if you meet the above criteria. I assume the agent you spoke with was looking at those criteria.
Don’t look a gift horse in the mouth.
Chase just dropped the PMI from our mortgage, unprompted. A delightful surprise! We bought a little less than 3 years ago in a market that’s going up quickly, so if we had gotten an appraisal they would’ve had to remove it but color me shocked that a bank would pass up pocketing an extra $40 a month for no real risk.
You said in your summary “original value”.
Did your taxes go up per chance? Maybe they did an
Internal audit and found your house has appreciated..
PMI is not based on original value, it’s based on current value.
If your home appreciates and you loan to value dips below 80% then PMI should be removed.
Did you have to submit any paperwork or they just removed easily like that?
Semi related but when I refinanced I was able to drop PMI based off my own estimated home value. My guess is they have some metric for evaluating home worth automatically, and if your home is safely within a certain band then they can drop PMI without the need of a separate appraisal. Given your home was previously appraised at a certain value, and markets dictate your house to be worth x now after y years, theres a high confidence that a follow up appraisal would put you easily within that 80% LTV.
Depending on the state, you can have PMI removed early if you’ve made 2 years of payments on time. Your loan docs should give details about early PMI removal, but if they removed it, don’t question it. It’s usually a pain in the butt process to get it removed even when you’ve hit the magic 80% LTV. On my mortgage, I was eligible to have PMI removed when I hit 80% LTV but it wouldn’t automatically come off until I hit 78%. Depending on your mortgage, that could be months of additional patments you unnecessarily pay PMI if you aren’t paying attention to your loan balance.
That’s funny. I submitted my forms for removing mine and they came back and said “you’re at 80.05%, try again next time”
I’m thinking about trying this because I’m also right on the cusp. Can I ask if you’re using one of the larger lenders and if so, who?
Servicers don’t make too many mistakes in your favor.
They can pretty much figure out the fair market value of your home from their desk in a matter of minutes. It’s possible your property tax assessment went up.? They can check that against a hundred other valuation models they have at their fingertips.
If they released the MI, you know damn well you are under 78% LTV.
You just gave me motivation to call our mortgage company to get ours taken off.
We haven’t able to pay extra since daycare started so any extra cash will go a long way.
>Any idea why?
Probably because you’re so close to 80% that any more small appreciation would put you over it. To go from 81.5% to 80% is a change of less than 2%. And it got them a bit of good PR from you (or at least appreciation from you).
They probably did a quick search of the value of the property and those around the area and in the last 5-10 years your area jumped so high and your credit history is good enough that it’s not even worth wasting time double checking if your property is the only one that didn’t jump more than 3% in value.
I just had to prove 20% equity to remove PMI.
COVID increased my home value by 30% in a matter of months, so I just had them reappraise it for free and PMI was removed.
I have been jumping through hoops for almost a year trying to get my PMI removed after it hit 80%…
I think I hate you a little bit. Not nearly as much as my loan services, just a little.
The whole point of PMI, is that you don’t have enough equity interest in the asset, so you’re more “incentivized” to default (in quotes because that’s a bad word for it).
As the underlying asset increases in value, your equity interest increases.
Likely home prices near you went up by a considerable margin, and the lender feels comfortable “assuming” you house went up in value.
In my case, it was because the home went way up in value.
This happened when we refinanced. Our loan amount was under the market value.
Our bank was running a refinance special during Covid when rates were very low.
Your property valuation went up. So the value decrease the loan to %.
Maybe you have a high interest rate mortgage and They project that eliminating PMI will keep you away from looking for refinancing at another bank.
Lender here. You can ask for the PMI removal any time it’s under 82% – We’re going to assume your house has appreciated a bit since you bought, check the valuations and either approve or deny.
I’m trying to remove PMI but everywhere I read says I can’t do it for any loan that originated after 2013, is that legal or correct?
Anyone who has purchased a home before 2020 should call and get their PMI cancelled
What year did you buy?
Why didn’t you ask them?
Read your contract. I’ve done some research on this recently, and – I’m not sure if this is legislation – it seems that You are able to request the removal of PMI after 2 years of ontime payments.
Probably bc of market adjustments. I got mine dropped when our LTV was only 88% based on original purchase (2020) but we ordered an appraisal from the lender and it came in around 75%. We did make some home improvements, but I’m confident it wouldn’t have mattered given what same model homes are selling for in our neighborhood.