Submitted by Oskeros t3_z8yelg in personalfinance
We recently had an appraisal done which came back at 80.7% LTV. We asked our lender to remove PMI and they told us "there is a requirement when we request a new appraisal it has to come back 75% LTV to remove PMI"
Isn't this illegal? I thought under the law they have to remove it, when asked, when at 80%. This is Wisconsin by the way.
Thanks!
>I thought under the law they have to remove it, when asked, when at 80%.
Based on the original value of the home, not based on the current value. There is no law requiring lenders to take into account appreciation since the loan originated.
>You can ask to cancel PMI earlier if you have made additional payments that reduce the principal balance of your mortgage to 80 percent of the original value of your home. For this purpose, “original value” generally means either the contract sales price or the appraised value of your home at the time you purchased it, whichever is lower (or, if you have refinanced, the appraised value at the time you refinanced).
Emphasis mine.
Not true, the bank will reappraise based on current market value.
Source: We removed PMI this way, it was a very simple process. The lender was Chase.
I didn't say it wasn't possible, I said it's not required by law for them to do this. If you look further on that link, that part is covered:
>Loan investors, including Fannie Mae and Freddie Mac, often create their own PMI cancellation guidelines that may include PMI cancellation provisions beyond what the HPA provides. But these guidelines cannot restrict the rights that the HPA provides to borrowers. For example, the HPA does not contain any requirements for a loan’s tenure before a borrower may request cancellation or be eligible for automatic PMI termination (known as a “seasoning” requirement).
You said it’s based on the original value, which is not true. Most banks will reappraise for a small fee. That reappraisal value is used to remove PMI.
I said based on the original value is what is required by law. Look at the part of the OP that I originally quoted.
Based on the current value is dependent on the lender, which typically means the big loan investors requirements.
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>Isn't this illegal?
It is not. The law only requires PMI be removed at 78% (or 80% if requested) based on the original amortization schedule. You can also request it if its at 80% based on the original purchase price due to additional payments.
If you're relying on an increase in property value, the lenders can set their own restrictions
75% is pretty standard without “substantial improvements” made to the property.
Nonsense. Please link to where you’re getting this info.
We canceled PMI within 2 years, at 80% LTV and without improvements, based on a market value reappraisal.
75% is a standard LTV without substantial improvements being done. Some allow for 80%, but many do not.
Not true. Many big lenders like Chase will remove at 80% reappraisal without improvements. I know because I’ve done it (recently).
You’d need to speak with your specific lender. But saying 75% with substantial improvements is standard practice is wildly incorrect.
I said it’s a standard, not the standard. I know many people who are in the same boat of having to hit a 75% LTV. This has been especially true with the rapid rise in home prices the past couple of years - banks do not want to get caught holding a bag because Zillow says your house is worth 20% more than you bought it 6 months ago.
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Even if the law said 80, you’re above 80.
I believe it's 78%. Keep in mind, that's off the original purchase price. Home equity due to appreciation I don't think is part of the legal requirement.
This is from nerdwallet:
> Here’s a caveat: To cancel based on current value, you must have owned the home for at least two years and have 75% LTV. If you've owned the home for at least five years, you can cancel at 80% LTV.
This is not true, we cancelled PMI within 2 years by getting an appraisal done.
It was also solely due to market value increase, not improvements.
It depends on the lender and what is in the loan documentation.
Okay, you should go ahead and write the authors and let them know to correct their article.
https://www.nerdwallet.com/article/mortgages/how-to-cancel-private-mortgage-insurance
No thanks
Yea, because you're wrong. You're anecdote isn't the law, which is what OP asked.
KoastPhire t1_iydyole wrote
It's listed in your documents when you sign it. Typically it's 75%-78% LTV for them to remove it.