|Getting rid of private mortgage
insurance isn't always easy|
Julie Garton-Good, GRI, DREI
though the lender originally said we might be able to remove the private
mortgage insurance, they now say we need to fill out forms, get a new appraisal,
and then it still might not be removed. Has this rule changed?
the private mortgage insurance (PMI) is at the discretion of the lender. The
lender is the one insured against the borrower's loss (usually on the top 20
percent of the loan.
Even though the lender gave you the removal guidelines at the time you took
out the loan, those might change. In fact, most lenders evaluate removing PMI on
a case-by-case basis.
While guidelines differ from lender to lender, most lenders would require
that the borrower provide a fee appraisal showing 20 percent or more equity in
the property and also have a satisfactory loan repayment record.
But other factors come into play, such as the strength of the local real
estate market, the neighborhood, and the property itself.
A class-action suit last year against a lender for not removing private
mortgage insurance ruled in favor of the lender. The court said that since the
lender wrote the loan requiring PMI and the borrower was well aware of its
inclusion in the loan, it was up to the lender to decide whether or not it
should be removed (although the industry is currently reviewing blanket policies
that might give consumers a better idea of removal policy guidelines).
It's certainly worth a shot to get the appraisal and ask the lender to
remove the PMI. If the request is denied, ask why and also ask what it would
take to have it removed. Be persistent---as with most inquiries, the squeaky
wheel gets the grease!