Cancelling PMI

by: Ron Vignari

Cancelling PMI
The Federal Government passed a private mortgage insurance (PMI) reform law, effective July 29, 1999. Known as the Homeowners Protection Act of 1997, the new law amends the Federal Truth in Lending Act and could save some homeowners more than $1,000 a year in PMI payments.

The key provision in the new law forces most lenders to automatically cancel PMI when a homeowner pays down their mortgage balance to at least 78 percent of the home's original purchase price. Homeowners also may apply to have the insurance removed when the mortgage balance drops to 80 percent of the original value. The appraised value may be determined by the original, or a new appraisal. Both provisions require that the borrower be current with their mortgage payments.

PMI reform not for all:

Only loans written July 29, 1999 or later are covered by the new law, and the small print in many other mortgages could preclude still more consumers from canceling PMI.

If you have questions about PMI cancellation policies, contact your mortgage company.

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