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Can I get rid of the PMI on my fannie mae backed loan?

I've made improvements to my home that have increased the LTV to over 80% but still being told that I'm locked in for the next 2 years. Help! by osrin103 from Longdale, Oklahoma. Jan 14th 2021 Reply

Bert Carpenter (BertCarpenter)
#1 ranked lender in Arizona - 2,300 contributions

You probably are stuck until they say you can be released. There are many misconceptions on how PMI can be cancelled. The Homeowners Protection Act of 1998 applies to all PMI loans consummated on or after July 29, 1999. It is commonly called the 'PMI Cancellation ACT'. It lays out very specific obligations for both parties (the bank and the borrower). Specifically, the law states that the borrower may request a cancellation of the PMI when the principal loan balance reaches 80% of the ORIGINAL APPRAISED VALUE used to underwrite the loan. (emphasis is mine). If the borrower requests in writing and the loan is at 80%, It requires the lender to cancel the PMI provided the loan is not in default and is otherwise in good standing. It also requires the lender to automatically cancel the PMI when the principal balance reaches 78% of the original Appraised Value. Nowhere does the regulation require a lender to use appreciation or improvements in the calculation. My guess is that the lender has calculated that you will meet the threshold in 24 months. To validate the month in which you cross the 80% threshold, find your original loan package. On a purchase, the official appraised value for loan purposes is the Appraised Value or the Purchase price, whichever is lower. On a Refinance loan, it is the appraised value. Divide the loan balance by the Appraised value and see where you are. ~ Bert Carpenter, The LoansA2z Team of NEXA Mortgage ~ NMLS 40586 ~ At NEXA, we've got you covered. We are licensed in all states except MA and NY and we are pending approval in VA, so give us a call. ~ 480-889-9000.

Jan 14th 2021
Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 4,421 contributions

Yes, no, and maybe. PMI on conventional loans will automatically go away once you reach 78% of the original deal through payments only. The next is that you can ask to have PMI cancelled once you believe you are under 80% through payments and appreciation. The lender is under no obligation to factor in appreciation, but most will by requiring you to obtain an appraisal. Even with that, making a minimum of 2-years of PMI payments before being allowed to drop is very common. All you can do is reach out to your current servicer to ask, or refinance, which uses current appraised value. I lend in MN WI IA SD ND. Find me at - Cambria Mortgage, Joe Metzler Team. NMLS 274132

Jan 19th 2021
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