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Mortgage Insurance Companies of America (MICA). PrivateMI
You dream of owning a home someday. Why not sooner? Private mortgage insurance can make it a reality. Ask your lender about PrivateMI today. Because the sooner you get in the door, the sooner you start living your dream.
A Wedding, A Townhouse, and PrivateMI Buying your first home and financing a wedding in the same year is no easy feat. But with the help of private mortgage insurance (PrivateMI), 32-year-old Julio Muñoz and his fiancée, Jeanine, were able to do it without breaking a sweat.
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While it guarantees much more, a PrivateMI payment is comparable to most homebuyers':
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How much sooner can I buy a home using PrivateMI with little or no money down versus 20%?
How much more house can I afford with PrivateMI?
PrivateMI or Piggyback Loan: Which is better for me?
How long will it take before I can cancel my PrivateMI?
How can I grow my wealth with PrivateMI?
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Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of
Dollars Each Year
FTC
Consumer Alert!
Cancellation
of Private Mortgage Insurance:
Federal Law May Save You
Hundreds of Dollars Each Year
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).
Next Steps
Some states may have laws that apply to early termination or cancellation of PMI - even
if you signed your mortgage before July 29, 1999. Call your state consumer protection
agency for more information about your state's rules. Fannie Mae and Freddie Mac, which
buy home mortgages from lenders, also may have guidelines affecting termination or
cancellation of PMI on home mortgages signed before July 29, 1999. Check with your lender
or mortgage servicer, or call Fannie Mae or Freddie Mac, for more information.
Contact your lender or mortgage servicer to learn whether you're paying PMI. If you
are, ask how and when it can be terminated or canceled.
For More Information
The FTC works for the consumer to
prevent fraudulent, deceptive and unfair business practices in the
marketplace and to provide information to help consumers spot, stop and
avoid them. To file a complaint or to get free
information on consumer issues , call
toll-free, 1-877-FTC-HELP (1-877-382-4357) ,
or use the online complaint form .
The FTC enters Internet, telemarketing, identity theft and other
fraud-related complaints into Consumer Sentinel ,
a secure, online database available to hundreds of civil and criminal law
enforcement agencies in the U.S. and abroad.
FEDERAL TRADE COMMISSION
FOR THE CONSUMER
1-877-FTC-HELP
www.ftc.gov
July 2000
Results from search: http://www.hsh.com/pamphlets/mgicpmi.html
Understanding Private Mortgage Insurance
The Library
"Understanding Private Mortgage Insurance" is one of many informational
pamphlets produced by the Mortgage Guaranty
Insurance Corporation. It is posted here with their generous
permission.
Understanding Private Mortgage Insurance
Relative to the growth in home prices over the last quarter century,
Americans are earning less and, as a result, saving less. This means
young families today are having to wait longer than their parents and
grandparents before clearing that great barrier to homeownership -- the
down payment.
For these young families, low down payment home mortgages -- loans
with less than 20 percent down payments -- offer an opportunity to
shorten that wait. As such, their popularity has boomed. The government
reports that in 1994 nearly one of every two homebuyers obtained a low
down payment loan; and many of them used private mortgage insurance
(MI) to realize their homeownership dream.
Still, confusion about the role of private MI abounds. "What is it?"
and "What does it do for me?" are questions typically asked by
consumers. Private MI enhances a borrower's ability to attain a
homeownership situation that is right for them. Not only can private MI
help put people in homes, but it can help put people in homes in which
they want to live.
Lenders require private MI on most conventional mortgages because
experience reveals a strong correlation between borrower equity and
default. The less money a borrower has invested in a home, the greater
the probability of default. Thus, private MI is a financial guaranty
that protects lenders against loss in the event that a borrower
defaults. Without that financial guaranty, lenders will typically
require a down payment of at least 20 percent.
A recent Chicago Title and Trust study notes that first-time
homebuyers in 1994 spent three years saving for a down payment before
buying. And when they finally did buy, the average down payment was
13.7 percent. Had they gone without mortgage insurance and saved for
the requisite 20 percent down payment, these first-timers would have
been renting for a minimum of four-and-a-half more years. On the
flipside, had they been willing to put only five percent down, they
could have realized their homeownership dream in just over a year.
By waiting and going with mortgage insurance, though, these
first-timers increased their buying power. For example, $5,000 is equal
to a 10 percent down payment on a $50,000 home; but it is also
sufficient for a five percent down payment on a $100,000 home. Another
scenario: $10,000 may constitute a 20 percent down payment on a $50,000
home; but it can also provide enough financial leverage to help
qualifying borrowers buy a $200,000 home with only five percent down.
This is the value of private mortgage insurance -- it is the reason
so many young families today can afford homeownership despite earning
and saving relatively less than their parents.
Unfortunately, some people continue to confuse private mortgage
insurance with mortgage life insurance. Private mortgage insurance puts
people in homes; mortgage life insurance pays all or a portion of your
mortgage in the event of your death.
Consumers who understand this difference, understand how private MI
enhances their ability to realize their dream of homeownership.
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Welcome to The PMI Group, Inc. site
| About PMI | PMI MIC | Global Business | e-PMI | Corporate Family | Investor Relations | Newsroom | Employment |
Words to our Webmaster . Last updated April 30, 2002
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All rights reserved.
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About The PMI Group, Inc.
The PMI Group, Inc. (NYSE: PMI ) is headquartered in California. Through its subsidiaries PMI is one of the largest private mortgage insurers in the United States, Australia, New Zealand, and the European Union, as well as the largest mortgage guaranty reinsurer in Hong Kong. PMI is a leader in mortgage risk management technology providing various products and services for the home mortgage finance industry as well as title insurance.
Private mortgage insurance protects mortgage lenders against potential losses in the event of borrower default. By covering default risk on residential first mortgage loans, mortgage insurance facilitates the sale of low downpayment mortgages in the secondary mortgage market. In addition, private mortgage insurance expands homeownership opportunities by enabling borrowers to purchase homes with downpayments of less than 20 percent.
More about The PMI Group, Inc. and PMI Mortgage Insurance Co .
To contact our corporate headquarters, please click here . To locate your local PMI office in the United States, click here .
Headquartered in San Francisco, PMI Mortgage Insurance Co. is one of the largest mortgage insurers in the United States. In addition, PMI Mortgage Insurance Co. provides mortgage guaranty reinsurance in Hong Kong and, through a subsidiary, private mortgage insurance in Australia and New Zealand. PMI also recently opened a sales and marketing office in Europe to insure residential mortgage loans within the European Union.
PMI together with its parent company, The PMI Group, Inc. (NYSE: PMI ), and its corporate affiliates, is a leader in risk management technology, and provides various products and services for the home mortgage finance industry, as well as title insurance.
Hong Kong
Australia / New Zealand
Europe
PMI's new, state-of-the-art Internet tool provides lenders, brokers and correspondents with immediate access to our products and services. Order an MI certificate in just seconds!
e-PMI Features
Originates MI entirely online
Accepts Desktop Underwriter ® files from LOS
Delivers MI information in secure encrypted files
Works with a standard browser and operating system
e-PMI Benefits
Reduces paperwork, phone calls and faxes
Minimizes data entry errors
Easy to use
No need for additional software or training
Sensitive information is secure
The PMI Group, Inc., through its subsidiary, PMI Mortgage Insurance Co. ( PMI ), provides mortgage insurance that protects lenders against potential losses in the event of borrower default. Other subsidiaries include:
PMI Mortgage Insurance Ltd. ( PMI Australia )
American Pioneer Title Insurance Company ( APTIC )
CMG Mortgage Insurance Company ( CMG )
RAM Reinsurance Company Ltd. (Ram Re)
For more information on our subsidiaries, click here .
In addition, The PMI Group, Inc., provides mortgage guaranty reinsurance in Hong Kong.
The PMI Group, Inc. is publicly traded on the New York Stock Exchange under the ticker symbol PMI . Click on Investor Relations button to learn more about The PMI Group, Inc., request investor information, view recent financials, and access other company news and information.
Link to First Quarter Earnings Release Slides/Audio.
PMI offers competitive salaries, excellent benefits including medical, dental and vision insurance, a 401(k) plan, employee stock purchase plan and a comfortable working environment. PMI is an equal opportunity employer.
Click button for job postings and descriptions.
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Private Mortgage Insurance
Private mortgage insurance is a type of insurance that helps protect the mortgage company against losses due to foreclosure. This protection is provided by private mortgage insurance companies and allows mortgage companies to accept lower down payments than would normally be allowed.
Private mortgage insurance also enables mortgage companies to grant loans that would otherwise be considered too risky to be purchased by third party investors like the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). The ability to sell loans to these investors is critical to maintaining mortgage market liquidity, which in turn, allows mortgage companies to continue originating new loans.
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HSH Homeplans - Understanding Private Mortgage Insurance
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"Understanding Private Mortgage Insurance" is one of many informational
pamphlets produced by the Mortgage Guaranty
Insurance Corporation. It is posted here with their generous
permission.
Understanding Private Mortgage Insurance
Relative to the growth in home prices over the last quarter century,
Americans are earning less and, as a result, saving less. This means
young families today are having to wait longer than their parents and
grandparents before clearing that great barrier to homeownership -- the
down payment.
For these young families, low down payment home mortgages -- loans
with less than 20 percent down payments -- offer an opportunity to
shorten that wait. As such, their popularity has boomed. The government
reports that in 1994 nearly one of every two homebuyers obtained a low
down payment loan; and many of them used private mortgage insurance
(MI) to realize their homeownership dream.
Still, confusion about the role of private MI abounds. "What is it?"
and "What does it do for me?" are questions typically asked by
consumers. Private MI enhances a borrower's ability to attain a
homeownership situation that is right for them. Not only can private MI
help put people in homes, but it can help put people in homes in which
they want to live.
Lenders require private MI on most conventional mortgages because
experience reveals a strong correlation between borrower equity and
default. The less money a borrower has invested in a home, the greater
the probability of default. Thus, private MI is a financial guaranty
that protects lenders against loss in the event that a borrower
defaults. Without that financial guaranty, lenders will typically
require a down payment of at least 20 percent.
A recent Chicago Title and Trust study notes that first-time
homebuyers in 1994 spent three years saving for a down payment before
buying. And when they finally did buy, the average down payment was
13.7 percent. Had they gone without mortgage insurance and saved for
the requisite 20 percent down payment, these first-timers would have
been renting for a minimum of four-and-a-half more years. On the
flipside, had they been willing to put only five percent down, they
could have realized their homeownership dream in just over a year.
By waiting and going with mortgage insurance, though, these
first-timers increased their buying power. For example, $5,000 is equal
to a 10 percent down payment on a $50,000 home; but it is also
sufficient for a five percent down payment on a $100,000 home. Another
scenario: $10,000 may constitute a 20 percent down payment on a $50,000
home; but it can also provide enough financial leverage to help
qualifying borrowers buy a $200,000 home with only five percent down.
This is the value of private mortgage insurance -- it is the reason
so many young families today can afford homeownership despite earning
and saving relatively less than their parents.
Unfortunately, some people continue to confuse private mortgage
insurance with mortgage life insurance. Private mortgage insurance puts
people in homes; mortgage life insurance pays all or a portion of your
mortgage in the event of your death.
Consumers who understand this difference, understand how private MI
enhances their ability to realize their dream of homeownership.
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Consumers Union - Nonprofit Publishers Of Consumer Reports: Financial Services/Private Mortgage Insurance
Home : Financial Services : Private Mortgage Insurance
Consumers Union 1999 Legislative Session Review
press release (Mon Oct 11 1999) A Win for Homeowners: Onto the Senate for Action Consumers Want Right to Cancel Unnecessary Private Mortgage Insurance
press release (Tue Jul 14 1998) Consumers Union Applauds House Panel for Helping Homeowners Avoid Unnecessary Mortgage Insurance
press release (Sat Mar 21 1998) Consumers Union Praises Senate Vote Outlawing Unfair Mortgage Terms
press release (Wed Mar 18 1998) Consumers Union Seeks Private Mortgage Insurance Bill Fix
press release (Sat Nov 01 1997) Letter to Sen. Alfonse D'Amato, R-NY, Consumer Groups Ask for Changes in Senate PMI Bill
letter
(Wed Oct 22 1997) Testimony on The "Homeowners Insurance Protection Act" before the House Committee on Banking
(Tue Mar 18 1997) Testimony on S. 318: A Bill To Make Home Mortgages More Fair and Affordable before the Senate Banking Committee
(Tue Feb 25 1997)
View Files Sorted By Office: Consumers Union OPI, New York - Washington DC Office
West Coast Regional Office - Southwest Regional Office - Consumer Policy Institute
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Private Mortgage Insurance
Private Mortgage Insurance Questions Answered
On February 5, 1997, I introduced the Homeowner Insurance Protection Act. To find out more information about this bill and what it will do, click on any of the following questions.
What's Happening with the PMI Bill?
What is Private Mortgage Insurance(PMI)?
Who are the PMI lenders?
What are the advantages of PMI?
What are the problems with PMI?
What is the extent of the problem?
What is an example of a PMI problem?
What is another example of a PMI problem?
What is ANOTHER example of a PMI problem?
About H.R. 607
Why is PMI important to you?
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Private Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI)
Law Requires Lenders to Cancel PMI
If you are a homeowner, you will want to be aware of a law that establishes rights
for homeowners and rules for lenders regarding private mortgage insurance (PMI)
cancellation. With this knowledge, you may eliminate premiums you may be paying
unnecessarily.
What is PMI?
Benefits of PMI
New PMI Requirements
The Homeowner's Protection Act (HPA) of 1998
How Do You Cancel or Terminate PMI?
What Disclosures Does the HPA Require?
What If Your Home Value Has Increased?
For More Information
What Is PMI?
PMI is extra insurance that lenders require from most homebuyers who obtain loans that are more than 80 percent of their new home's value. In other words, buyers with less than a 20 percent down payment are normally required to pay PMI.
Benefits of PMI
PMI plays an important role in the mortgage industry by protecting a lender against loss if a borrower defaults on a loan and by enabling borrowers with less cash to have greater access to homeownership. With this type of insurance, it is possible for you to buy a home with as little as a 3 percent to 5 percent down payment. This means that you can buy a home sooner without waiting years to accumulate a large down payment.
New PMI Requirements
A new federal law, The Homeowner's Protection Act (HPA) of 1998, requires lenders or servicers to provide certain disclosures concerning PMI for loans secured by the consumer's primary residence obtained on or after July 29, 1999. The HPA also contains disclosure provisions for mortgage loans that closed before July 29, 1999. In addition, the HPA includes provisions for
borrower-requested cancellation and automatic termination of PMI.
Why a Change in PMI Requirements?
In the past, most lenders honored consumers' requests to drop PMI coverage if their loan balance was paid down to 80 percent of the property value and they had a good payment history. However, consumers were responsible for requesting cancellation and
many consumers were not aware of this possibility. Consumers had to keep track of their loan balance to know if they had enough equity and they had to request that the lender discontinue requiring PMI coverage. In many cases, people failed to make this
request even after they became eligible, and they paid unnecessary premiums ranging from $250 to $1,200 per year for several years. With the new law, both consumers and lenders share responsibility for how long PMI coverage is required.
The Homeowner's Protection Act (HPA) of 1998
What Loans Are Covered?
Generally, the HPA applies to residential mortgage transactions obtained on or after July 29, 1999, but it also has requirements for loans obtained before that date. This new law does not cover VA and FHA government-guaranteed loans. In addition, the new law has different requirements for loans classified as "high-risk." Although the HPA does not provide the standards for what constitutes a "high risk" loan, it permits Fannie Mae and Freddie Mac to issue guidance for mortgages that conform to secondary market loan limits. Fannie Mae and Freddie Mac are corporations chartered by Congress to create a continuous flow of funds to
mortgage lenders in support of homeownership. As of January 1, 2000, mortgages in amounts of $252,700 or less are considered conforming loans. For non-conforming mortgages, the lender may designate mortgage loans as "high risk."
What Is a Residential Mortgage Transaction?
There are four requirements for a transaction to be considered a residential mortgage transaction: (1) a mortgage or deed of trust must be created or retained; (2) the property securing the loan must be a single-family dwelling; (3) the single-family dwelling must
be the primary residence of the borrower; and (4) the purpose of the transaction must be to finance the acquisition, initial construction, or refinancing of that dwelling.
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.
What Disclosures Does the HPA Require?
For Loans Obtained on or after July 29, 1999
The HPA establishes three different times when a lender or servicer must notify a consumer of his or her rights. Those times are at loan closing, annually, and upon cancellation or termination of PMI.
The content of these disclosures varies depending on whether: (1) PMI is "borrower-paid PMI" or "lender-paid PMI," (2) the loan is classified as a "fixed rate mortgage" or "adjustable rate mortgage," or (3) the loan is designated as "high risk" or not.
At loan closing, lenders are required to disclose all of the following to borrowers:
The right to request cancellation of PMI and the date on which this request may be made.
The requirement that PMI be automatically terminated and the date on which this will occur.
Any exemptions to the right to cancellation or automatic termination.
A written initial amortization schedule (fixed-rate loans only).
Annually, your mortgage loan servicer must send borrowers a written statement that discloses:
The right to cancel or terminate PMI.
An address and telephone number to contact the loan servicer to determine when PMI may be canceled.
When the PMI coverage is canceled or terminated, a notification must be sent to the consumer stating that:
PMI has been terminated, and the borrower no longer has PMI coverage.
No further PMI premiums are due.
The obligation for providing notice of cancellation or termination is with the servicer of the mortgage.
For Loans Obtained before July 29, 1999
An annual statement must be sent to consumers whose mortgages were obtained before July 29, 1999. This statement should explain that under certain circumstances PMI may be canceled (such as with consent of the mortgagee). It should also provide an address and telephone
number to contact the loan servicer to determine whether PMI may be canceled.
The HPA's cancellation and automatic termination rules do not apply to loans made before July 29, 1999.
Although parts of the new law apply only to loans obtained on or after July 29, 1999, many lenders report that they plan to follow the HPA's requirements for both new and existing
loans. Making a call to your mortgage loan servicer will help you understand exactly how the law applies to you and your mortgage.
What If Your Home Value Has Increased?
When making mortgage payments, most of the payments during the first few years are finance charges. Therefore, it can take 10 to 15 years to pay down a loan to reach 80 percent of the loan value. If the home prices in your area are rising quickly, your property value may increase so that you can reach the 80 percent mark a lot faster. Your property value could also increase due to home improvements that you make to your home.
If you think your home value has increased, you may be able to cancel PMI on your mortgage. Although the new law does not require a mortgage servicer to consider the current property value, you should contact them to see if they are willing to do so. Also, be sure to ask what documentation may be required to demonstrate the higher property value.
To get a better
idea of where you stand with your mortgage, try the following
formula:
Line 1 -
Enter the present value of your mortgage:
$
Multiply
Line 1 by 1.25
x
1.25
Line 2 - This
represents the minimum value of your property
required to cancel PMI:
$
Line 3 -
Enter the purchase price of your property or a current
appraisal that is acceptable to the lender or holder
of the mortgage on your property (whichever is larger):
$
If the value
of line 2 is larger than line 3, your lender will
probably continue to require PMI.
If the value of line 2 is less than line 3, you may
be able to cancel PMI.
For More Information
To learn about your specific PMI cancellation policies, call your lender or mortgage servicing firm.
To find more information about mortgage insurance and to use a specific formula to estimate when PMI may be canceled, visit the web site of the Mortgage Insurance Companies of America.
When investigating potential frauds, you should contact several of the following:
Mortgage Insurance Companies of America
727 15th St, NW, FL 12
Washington, DC 20005-2168
202-393-5566
The U.S. Department of Housing and Urban Development Customer Service Department can answer your questions about PMI and low down-payment loans.
U.S. Dept. of Housing & Urban Development
Attn: Customer Service
451 7th Street, SW
Washington, DC 20410
(800) 767-7468
Information provided by the Federal Reserve Bank of San Francisco.
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Mortgage Insurance Companies of America (MICA). PrivateMI
You dream of owning a home someday. Why not sooner? Private mortgage insurance can make it a reality. Ask your lender about PrivateMI today. Because the sooner you get in the door, the sooner you start living your dream.
Omontes Feather a New Nest With the Help of PrivateMI Nancy and Frank Omonte were renting an apartment in Bridgeport, Connecticut when a visit to Florida changed their lives. They fell in love with the warm weather and sunshine and resolved to relocate, with or without jobs.
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While it guarantees much more, a PrivateMI payment is comparable to most homebuyers':
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Results from search: http://www.ftc.gov/bcp/conline/pubs/alerts/pmialrt.htm
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of
Dollars Each Year
FTC
Consumer Alert!
Cancellation
of Private Mortgage Insurance:
Federal Law May Save You
Hundreds of Dollars Each Year
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).
Next Steps
Some states may have laws that apply to early termination or cancellation of PMI - even
if you signed your mortgage before July 29, 1999. Call your state consumer protection
agency for more information about your state's rules. Fannie Mae and Freddie Mac, which
buy home mortgages from lenders, also may have guidelines affecting termination or
cancellation of PMI on home mortgages signed before July 29, 1999. Check with your lender
or mortgage servicer, or call Fannie Mae or Freddie Mac, for more information.
Contact your lender or mortgage servicer to learn whether you're paying PMI. If you
are, ask how and when it can be terminated or canceled.
For More Information
The FTC works for the consumer to
prevent fraudulent, deceptive and unfair business practices in the
marketplace and to provide information to help consumers spot, stop and
avoid them. To file a complaint or to get free
information on consumer issues , call
toll-free, 1-877-FTC-HELP (1-877-382-4357) ,
or use the online complaint form .
The FTC enters Internet, telemarketing, identity theft and other
fraud-related complaints into Consumer Sentinel ,
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enforcement agencies in the U.S. and abroad.
FEDERAL TRADE COMMISSION
FOR THE CONSUMER
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www.ftc.gov
July 2000
Results from search: http://www.hsh.com/pamphlets/mgicpmi.html
Understanding Private Mortgage Insurance
The Library
"Understanding Private Mortgage Insurance" is one of many informational
pamphlets produced by the Mortgage Guaranty
Insurance Corporation. It is posted here with their generous
permission.
Understanding Private Mortgage Insurance
Relative to the growth in home prices over the last quarter century,
Americans are earning less and, as a result, saving less. This means
young families today are having to wait longer than their parents and
grandparents before clearing that great barrier to homeownership -- the
down payment.
For these young families, low down payment home mortgages -- loans
with less than 20 percent down payments -- offer an opportunity to
shorten that wait. As such, their popularity has boomed. The government
reports that in 1994 nearly one of every two homebuyers obtained a low
down payment loan; and many of them used private mortgage insurance
(MI) to realize their homeownership dream.
Still, confusion about the role of private MI abounds. "What is it?"
and "What does it do for me?" are questions typically asked by
consumers. Private MI enhances a borrower's ability to attain a
homeownership situation that is right for them. Not only can private MI
help put people in homes, but it can help put people in homes in which
they want to live.
Lenders require private MI on most conventional mortgages because
experience reveals a strong correlation between borrower equity and
default. The less money a borrower has invested in a home, the greater
the probability of default. Thus, private MI is a financial guaranty
that protects lenders against loss in the event that a borrower
defaults. Without that financial guaranty, lenders will typically
require a down payment of at least 20 percent.
A recent Chicago Title and Trust study notes that first-time
homebuyers in 1994 spent three years saving for a down payment before
buying. And when they finally did buy, the average down payment was
13.7 percent. Had they gone without mortgage insurance and saved for
the requisite 20 percent down payment, these first-timers would have
been renting for a minimum of four-and-a-half more years. On the
flipside, had they been willing to put only five percent down, they
could have realized their homeownership dream in just over a year.
By waiting and going with mortgage insurance, though, these
first-timers increased their buying power. For example, $5,000 is equal
to a 10 percent down payment on a $50,000 home; but it is also
sufficient for a five percent down payment on a $100,000 home. Another
scenario: $10,000 may constitute a 20 percent down payment on a $50,000
home; but it can also provide enough financial leverage to help
qualifying borrowers buy a $200,000 home with only five percent down.
This is the value of private mortgage insurance -- it is the reason
so many young families today can afford homeownership despite earning
and saving relatively less than their parents.
Unfortunately, some people continue to confuse private mortgage
insurance with mortgage life insurance. Private mortgage insurance puts
people in homes; mortgage life insurance pays all or a portion of your
mortgage in the event of your death.
Consumers who understand this difference, understand how private MI
enhances their ability to realize their dream of homeownership.
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Welcome to The PMI Group, Inc. site
| About PMI | PMI MIC | Global Business | e-PMI | Corporate Family | Investor Relations | Newsroom | Employment |
Words to our Webmaster . Last updated April 30, 2002
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About The PMI Group, Inc.
The PMI Group, Inc. (NYSE: PMI ) is headquartered in California. Through its subsidiaries PMI is one of the largest private mortgage insurers in the United States, Australia, New Zealand, and the European Union, as well as the largest mortgage guaranty reinsurer in Hong Kong. PMI is a leader in mortgage risk management technology providing various products and services for the home mortgage finance industry as well as title insurance.
Private mortgage insurance protects mortgage lenders against potential losses in the event of borrower default. By covering default risk on residential first mortgage loans, mortgage insurance facilitates the sale of low downpayment mortgages in the secondary mortgage market. In addition, private mortgage insurance expands homeownership opportunities by enabling borrowers to purchase homes with downpayments of less than 20 percent.
More about The PMI Group, Inc. and PMI Mortgage Insurance Co .
To contact our corporate headquarters, please click here . To locate your local PMI office in the United States, click here .
Headquartered in San Francisco, PMI Mortgage Insurance Co. is one of the largest mortgage insurers in the United States. In addition, PMI Mortgage Insurance Co. provides mortgage guaranty reinsurance in Hong Kong and, through a subsidiary, private mortgage insurance in Australia and New Zealand. PMI also recently opened a sales and marketing office in Europe to insure residential mortgage loans within the European Union.
PMI together with its parent company, The PMI Group, Inc. (NYSE: PMI ), and its corporate affiliates, is a leader in risk management technology, and provides various products and services for the home mortgage finance industry, as well as title insurance.
Hong Kong
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PMI's new, state-of-the-art Internet tool provides lenders, brokers and correspondents with immediate access to our products and services. Order an MI certificate in just seconds!
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Originates MI entirely online
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e-PMI Benefits
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Minimizes data entry errors
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No need for additional software or training
Sensitive information is secure
The PMI Group, Inc., through its subsidiary, PMI Mortgage Insurance Co. ( PMI ), provides mortgage insurance that protects lenders against potential losses in the event of borrower default. Other subsidiaries include:
PMI Mortgage Insurance Ltd. ( PMI Australia )
American Pioneer Title Insurance Company ( APTIC )
CMG Mortgage Insurance Company ( CMG )
RAM Reinsurance Company Ltd. (Ram Re)
For more information on our subsidiaries, click here .
In addition, The PMI Group, Inc., provides mortgage guaranty reinsurance in Hong Kong.
The PMI Group, Inc. is publicly traded on the New York Stock Exchange under the ticker symbol PMI . Click on Investor Relations button to learn more about The PMI Group, Inc., request investor information, view recent financials, and access other company news and information.
Link to First Quarter Earnings Release Slides/Audio.
PMI offers competitive salaries, excellent benefits including medical, dental and vision insurance, a 401(k) plan, employee stock purchase plan and a comfortable working environment. PMI is an equal opportunity employer.
Click button for job postings and descriptions.
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Private Mortgage Insurance
Private mortgage insurance is a type of insurance that helps protect the mortgage company against losses due to foreclosure. This protection is provided by private mortgage insurance companies and allows mortgage companies to accept lower down payments than would normally be allowed.
Private mortgage insurance also enables mortgage companies to grant loans that would otherwise be considered too risky to be purchased by third party investors like the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). The ability to sell loans to these investors is critical to maintaining mortgage market liquidity, which in turn, allows mortgage companies to continue originating new loans.
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HSH Homeplans - Understanding Private Mortgage Insurance
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"Understanding Private Mortgage Insurance" is one of many informational
pamphlets produced by the Mortgage Guaranty
Insurance Corporation. It is posted here with their generous
permission.
Understanding Private Mortgage Insurance
Relative to the growth in home prices over the last quarter century,
Americans are earning less and, as a result, saving less. This means
young families today are having to wait longer than their parents and
grandparents before clearing that great barrier to homeownership -- the
down payment.
For these young families, low down payment home mortgages -- loans
with less than 20 percent down payments -- offer an opportunity to
shorten that wait. As such, their popularity has boomed. The government
reports that in 1994 nearly one of every two homebuyers obtained a low
down payment loan; and many of them used private mortgage insurance
(MI) to realize their homeownership dream.
Still, confusion about the role of private MI abounds. "What is it?"
and "What does it do for me?" are questions typically asked by
consumers. Private MI enhances a borrower's ability to attain a
homeownership situation that is right for them. Not only can private MI
help put people in homes, but it can help put people in homes in which
they want to live.
Lenders require private MI on most conventional mortgages because
experience reveals a strong correlation between borrower equity and
default. The less money a borrower has invested in a home, the greater
the probability of default. Thus, private MI is a financial guaranty
that protects lenders against loss in the event that a borrower
defaults. Without that financial guaranty, lenders will typically
require a down payment of at least 20 percent.
A recent Chicago Title and Trust study notes that first-time
homebuyers in 1994 spent three years saving for a down payment before
buying. And when they finally did buy, the average down payment was
13.7 percent. Had they gone without mortgage insurance and saved for
the requisite 20 percent down payment, these first-timers would have
been renting for a minimum of four-and-a-half more years. On the
flipside, had they been willing to put only five percent down, they
could have realized their homeownership dream in just over a year.
By waiting and going with mortgage insurance, though, these
first-timers increased their buying power. For example, $5,000 is equal
to a 10 percent down payment on a $50,000 home; but it is also
sufficient for a five percent down payment on a $100,000 home. Another
scenario: $10,000 may constitute a 20 percent down payment on a $50,000
home; but it can also provide enough financial leverage to help
qualifying borrowers buy a $200,000 home with only five percent down.
This is the value of private mortgage insurance -- it is the reason
so many young families today can afford homeownership despite earning
and saving relatively less than their parents.
Unfortunately, some people continue to confuse private mortgage
insurance with mortgage life insurance. Private mortgage insurance puts
people in homes; mortgage life insurance pays all or a portion of your
mortgage in the event of your death.
Consumers who understand this difference, understand how private MI
enhances their ability to realize their dream of homeownership.
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Consumers Union - Nonprofit Publishers Of Consumer Reports: Financial Services/Private Mortgage Insurance
Home : Financial Services : Private Mortgage Insurance
Consumers Union 1999 Legislative Session Review
press release (Mon Oct 11 1999) A Win for Homeowners: Onto the Senate for Action Consumers Want Right to Cancel Unnecessary Private Mortgage Insurance
press release (Tue Jul 14 1998) Consumers Union Applauds House Panel for Helping Homeowners Avoid Unnecessary Mortgage Insurance
press release (Sat Mar 21 1998) Consumers Union Praises Senate Vote Outlawing Unfair Mortgage Terms
press release (Wed Mar 18 1998) Consumers Union Seeks Private Mortgage Insurance Bill Fix
press release (Sat Nov 01 1997) Letter to Sen. Alfonse D'Amato, R-NY, Consumer Groups Ask for Changes in Senate PMI Bill
letter
(Wed Oct 22 1997) Testimony on The "Homeowners Insurance Protection Act" before the House Committee on Banking
(Tue Mar 18 1997) Testimony on S. 318: A Bill To Make Home Mortgages More Fair and Affordable before the Senate Banking Committee
(Tue Feb 25 1997)
View Files Sorted By Office: Consumers Union OPI, New York - Washington DC Office
West Coast Regional Office - Southwest Regional Office - Consumer Policy Institute
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Private Mortgage Insurance
Private Mortgage Insurance Questions Answered
On February 5, 1997, I introduced the Homeowner Insurance Protection Act. To find out more information about this bill and what it will do, click on any of the following questions.
What's Happening with the PMI Bill?
What is Private Mortgage Insurance(PMI)?
Who are the PMI lenders?
What are the advantages of PMI?
What are the problems with PMI?
What is the extent of the problem?
What is an example of a PMI problem?
What is another example of a PMI problem?
What is ANOTHER example of a PMI problem?
About H.R. 607
Why is PMI important to you?
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Private Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI)
Law Requires Lenders to Cancel PMI
If you are a homeowner, you will want to be aware of a law that establishes rights
for homeowners and rules for lenders regarding private mortgage insurance (PMI)
cancellation. With this knowledge, you may eliminate premiums you may be paying
unnecessarily.
What is PMI?
Benefits of PMI
New PMI Requirements
The Homeowner's Protection Act (HPA) of 1998
How Do You Cancel or Terminate PMI?
What Disclosures Does the HPA Require?
What If Your Home Value Has Increased?
For More Information
What Is PMI?
PMI is extra insurance that lenders require from most homebuyers who obtain loans that are more than 80 percent of their new home's value. In other words, buyers with less than a 20 percent down payment are normally required to pay PMI.
Benefits of PMI
PMI plays an important role in the mortgage industry by protecting a lender against loss if a borrower defaults on a loan and by enabling borrowers with less cash to have greater access to homeownership. With this type of insurance, it is possible for you to buy a home with as little as a 3 percent to 5 percent down payment. This means that you can buy a home sooner without waiting years to accumulate a large down payment.
New PMI Requirements
A new federal law, The Homeowner's Protection Act (HPA) of 1998, requires lenders or servicers to provide certain disclosures concerning PMI for loans secured by the consumer's primary residence obtained on or after July 29, 1999. The HPA also contains disclosure provisions for mortgage loans that closed before July 29, 1999. In addition, the HPA includes provisions for
borrower-requested cancellation and automatic termination of PMI.
Why a Change in PMI Requirements?
In the past, most lenders honored consumers' requests to drop PMI coverage if their loan balance was paid down to 80 percent of the property value and they had a good payment history. However, consumers were responsible for requesting cancellation and
many consumers were not aware of this possibility. Consumers had to keep track of their loan balance to know if they had enough equity and they had to request that the lender discontinue requiring PMI coverage. In many cases, people failed to make this
request even after they became eligible, and they paid unnecessary premiums ranging from $250 to $1,200 per year for several years. With the new law, both consumers and lenders share responsibility for how long PMI coverage is required.
The Homeowner's Protection Act (HPA) of 1998
What Loans Are Covered?
Generally, the HPA applies to residential mortgage transactions obtained on or after July 29, 1999, but it also has requirements for loans obtained before that date. This new law does not cover VA and FHA government-guaranteed loans. In addition, the new law has different requirements for loans classified as "high-risk." Although the HPA does not provide the standards for what constitutes a "high risk" loan, it permits Fannie Mae and Freddie Mac to issue guidance for mortgages that conform to secondary market loan limits. Fannie Mae and Freddie Mac are corporations chartered by Congress to create a continuous flow of funds to
mortgage lenders in support of homeownership. As of January 1, 2000, mortgages in amounts of $252,700 or less are considered conforming loans. For non-conforming mortgages, the lender may designate mortgage loans as "high risk."
What Is a Residential Mortgage Transaction?
There are four requirements for a transaction to be considered a residential mortgage transaction: (1) a mortgage or deed of trust must be created or retained; (2) the property securing the loan must be a single-family dwelling; (3) the single-family dwelling must
be the primary residence of the borrower; and (4) the purpose of the transaction must be to finance the acquisition, initial construction, or refinancing of that dwelling.
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.
What Disclosures Does the HPA Require?
For Loans Obtained on or after July 29, 1999
The HPA establishes three different times when a lender or servicer must notify a consumer of his or her rights. Those times are at loan closing, annually, and upon cancellation or termination of PMI.
The content of these disclosures varies depending on whether: (1) PMI is "borrower-paid PMI" or "lender-paid PMI," (2) the loan is classified as a "fixed rate mortgage" or "adjustable rate mortgage," or (3) the loan is designated as "high risk" or not.
At loan closing, lenders are required to disclose all of the following to borrowers:
The right to request cancellation of PMI and the date on which this request may be made.
The requirement that PMI be automatically terminated and the date on which this will occur.
Any exemptions to the right to cancellation or automatic termination.
A written initial amortization schedule (fixed-rate loans only).
Annually, your mortgage loan servicer must send borrowers a written statement that discloses:
The right to cancel or terminate PMI.
An address and telephone number to contact the loan servicer to determine when PMI may be canceled.
When the PMI coverage is canceled or terminated, a notification must be sent to the consumer stating that:
PMI has been terminated, and the borrower no longer has PMI coverage.
No further PMI premiums are due.
The obligation for providing notice of cancellation or termination is with the servicer of the mortgage.
For Loans Obtained before July 29, 1999
An annual statement must be sent to consumers whose mortgages were obtained before July 29, 1999. This statement should explain that under certain circumstances PMI may be canceled (such as with consent of the mortgagee). It should also provide an address and telephone
number to contact the loan servicer to determine whether PMI may be canceled.
The HPA's cancellation and automatic termination rules do not apply to loans made before July 29, 1999.
Although parts of the new law apply only to loans obtained on or after July 29, 1999, many lenders report that they plan to follow the HPA's requirements for both new and existing
loans. Making a call to your mortgage loan servicer will help you understand exactly how the law applies to you and your mortgage.
What If Your Home Value Has Increased?
When making mortgage payments, most of the payments during the first few years are finance charges. Therefore, it can take 10 to 15 years to pay down a loan to reach 80 percent of the loan value. If the home prices in your area are rising quickly, your property value may increase so that you can reach the 80 percent mark a lot faster. Your property value could also increase due to home improvements that you make to your home.
If you think your home value has increased, you may be able to cancel PMI on your mortgage. Although the new law does not require a mortgage servicer to consider the current property value, you should contact them to see if they are willing to do so. Also, be sure to ask what documentation may be required to demonstrate the higher property value.
To get a better
idea of where you stand with your mortgage, try the following
formula:
Line 1 -
Enter the present value of your mortgage:
$
Multiply
Line 1 by 1.25
x
1.25
Line 2 - This
represents the minimum value of your property
required to cancel PMI:
$
Line 3 -
Enter the purchase price of your property or a current
appraisal that is acceptable to the lender or holder
of the mortgage on your property (whichever is larger):
$
If the value
of line 2 is larger than line 3, your lender will
probably continue to require PMI.
If the value of line 2 is less than line 3, you may
be able to cancel PMI.
For More Information
To learn about your specific PMI cancellation policies, call your lender or mortgage servicing firm.
To find more information about mortgage insurance and to use a specific formula to estimate when PMI may be canceled, visit the web site of the Mortgage Insurance Companies of America.
When investigating potential frauds, you should contact several of the following:
Mortgage Insurance Companies of America
727 15th St, NW, FL 12
Washington, DC 20005-2168
202-393-5566
The U.S. Department of Housing and Urban Development Customer Service Department can answer your questions about PMI and low down-payment loans.
U.S. Dept. of Housing & Urban Development
Attn: Customer Service
451 7th Street, SW
Washington, DC 20410
(800) 767-7468
Information provided by the Federal Reserve Bank of San Francisco.
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