Private Mortgage Insurance (PMI)

If a borrower has less than 20% down payment for the property they wish to purchase with a conventional loan, the lender may require the borrower to carry Private Mortgage Insurance (PMI). Private Mortgage Insurance is a type of insurance that protects lenders in the event the borrower defaults on the payment of the loan. Agreeing to carry Private Mortgage Insurance allows the lender to accept lower down payments, and a lower down payment may help the borrower qualify for a loan.

We services loans on behalf of investors who actually own these loans. These investors set forth requirements we must follow in servicing the loan. Based on these guidelines, we are unable to delete the mortgage insurance requirement for FHA loans. There are advantages to having an FHA insured loan. With FHA loans, customers are eligible for the temporary mortgage assistance payment plan and other programs. If you have a FHA loan and would like more information on the FHA insurance, please review your closing paperwork.

On July 28, 1998, President Clinton signed into law the "Homeowners Protection Act of 1998". This Act describes the provisions under which mortgagors with conventional loans can request cancellation of Private Mortgage Insurance. The Act also describes disclosures and notices that are required for lenders to automatically terminate PMI on conventional loans. This Act applies only to residential mortgages secured by single-family, single-unit, owner-occupied dwellings closed on or after July 29, 1999. Mortgage loans closed before July 29, 1999, or mortgage loans secured for vacation or second homes, by 2-4 family dwellings or other multifamily dwellings, or by investment properties are not covered by the Act.

A loan-to-value ratio can be expressed as the current principal balance divided by either the original property value (the original appraised value or sales price, which ever is less), or based on a new appraisal. For example, if the current principal loan balance is $123,000, the original property value is $168,000, and the sales prices was $175,000, then the current LTV is equal to: 73.2% ($123,000 / $168,000 = 73.2%)

You are required to have a good payment history in order to request cancellation of your Private Mortgage Insurance. For most loan types, a good payment history is defined as: No payments 30+ days past due in the last 12 months, AND No payments 60+ days past due in the last 24 months, AND, if your loan has been refinanced, then: The last 12 consecutive payments must have been made within 30 days of the due date. If you have anything other than a FNMA or FHLMC loan, there may be other payment history requirements.

A LTV based on the original property value takes into consideration your current principal balance compared to the original property value. For example, if your principal balance is currently $89,000 and the original property value was $111,000, then your current LTV based on the original property value is: $89,000 / $111,000 = 80.1%. A LTV based on a new appraisal takes into consideration increases in property value that may have been realized since the loan was originated. For example, if your principal balance is currently $89,000 and the home you originally bought for $111,000 has increased in value to $142,000, then your current LTV based on the property's new appraised value is: $89,000 / $142,000 = 62.6%. In order to validate the current property value, a new appraisal obtained at the expense of the borrower must be performed by an approved appraiser. You will be required to contact Lenders Services, Inc. to schedule an appraisal.

In order for us to consider cancellation of your Private Mortgage Insurance (PMI), you will need to submit your request in writing to