Bank is refusing to remove PMI on 78% LTV mortgage without a home inspection

[dirtbiker]

Bank is refusing to remove PMI on 78% LTV mortgage without a home appraisal

I purchased my current house last year with about 12% down on a conventional 15 year mortgage. Obviously the bank required PMI. I have aggressively paid it down to to less than 78% loan to value (IOW, >22% equity) as of December. They told me it would automatically get removed, but after a month when it didn't happen, I called and requested it to be removed. I was told they would submit for removal and I would get a letter in the mail.

I received a letter in the mail denying the request to remove PMI due to the reason of requiring a home appraisal, at my expense, for $200. This is on a house I bought less than a year ago.

I called back to dispute this, and after a long runaround, finally spoke with a manger in their PMI department. I advised them that I was less than 78% LTV and that they had to, by law, remove PMI and refund me the previous 3 months PMI payments. I also advised them I had my previous mortgage with their bank for ten years without a single late payment, and have had perfect payment history on this mortgage as well, and requested an exception.

They replied that although my LTV was <78%, that they only base the LTV on the amortization schedule, not on the actual LTV.

After Googling this, it appears that is how the law is written.

They refused to make any consideration for my ACTUAL (not scheduled) LTV or my perfect payment history over the past decade. I MUST pay for the home appraisal and won't receive any refunds for the previous 3 months PMI, and that it will take up to 30 days until PMI is removed after all else is done. All in all, this will cost me about $1000, and all for BS.

Once my last check is cut to Huntington Bank, that'll be the last dealing I ever have with this bank.

 

[MC Rider]

You need an appraisal AND a home inspection? I'd be surprised if they skipped an appraisal. The price you paid may not match the current value. I think this is SOP for a lender.

 

[Closet_Gamer]

As soon as rates decline, I would refi the house.

 

[athena53]

I'm guessing that this is also what the PMI insurers require in order to limit their risks. It's unfortunate, though, that you were given the impression that the insurance would end when you had 22% equity, without telling you that the equity % would have to be evaluated with a current appraisal. To put some numbers on it, if you bought the house for $100K, borrowed $88K and now owe $78K, they want the loan-to-value ratio to be $78K/current value. Current value may have dropped given increasing mortgage interest rates.

I feel your frustration. It would be great if you could refinance with someone else and tell them to go to you-know-where but with rising interest rates that would cost you. You could certainly do it if they fall.

 

[dirtbiker]

You need an appraisal AND a home inspection? I'd be surprised if they skipped an appraisal. The price you paid may not match the current value. I think this is SOP for a lender.

I edited my original post. I accidentally put inspection when I meant appraisal. They ONLY require an appraisal.

 

[gauss]

I purchased my current house last year with about 12% down on a conventional 15 year mortgage. Obviously the bank required PMI. I have aggressively paid it down to to less than 78% loan to value (IOW, >22% equity) as of December. They told me it would automatically get removed, but after a month when it didn't happen, I called and requested it to be removed. I was told they would submit for removal and I would get a letter in the mail.

I received a letter in the mail denying the request to remove PMI due to the reason of requiring a home inspection, at my expense, for $200. This is on a house I bought less than a year ago.

I called back to dispute this, and after a long runaround, finally spoke with a manger in their PMI department. I advised them that I was less than 78% LTV and that they had to, by law, remove PMI and refund me the previous 3 months PMI payments. I also advised them I had my previous mortgage with their bank for ten years without a single late payment, and have had perfect payment history on this mortgage as well, and requested an exception.

They replied that although my LTV was <78%, that they only base the LTV on the amortization schedule, not on the actual LTV.

After Googling this, it appears that is how the law is written.

They refused to make any consideration for my ACTUAL (not scheduled) LTV or my perfect payment history over the past decade. I MUST pay for the home appraisal and won't receive any refunds for the previous 3 months PMI, and that it will take up to 30 days until PMI is removed after all else is done. All in all, this will cost me about $1000, and all for BS.

Once my last check is cut to Huntington Bank, that'll be the last dealing I ever have with this bank.

If we were in a falling interest rate environment, you probably wouldn't have these problems IMHO (ie the ability to refinance and take your business elsewhere that doesn't require PMI)

They probably know that they have you where they want you -- sad.

-gauss

 

[dirtbiker]

If it financially makes sense to refinance, I will. I'm at 4.625% (which was a steal last year), so rates will have to significantly drop to make the cost of refinance make sense, especially since I'm on track to pay it off in about ten years. As angry as I am at this bank, I won't lose money to spite them. I won't, however, ever do business with them again.

 

[MC Rider]

I edited my original post. I accidentally put inspection when I meant appraisal. They ONLY require an appraisal.

OK. That would or at least should reveal if there is some dire problem with the place. So, you pay for the appraisal and in a few months you save enough to cover the cost. Have you checked to get an idea what the comps are? Zillow, Realtor, etc are easy to check but I would not put too much stock in them unless maybe you are in a tract area with good comp sales.

 

[MissMolly]

If this is a Fannie, Freddie or Ginnie loan they are required to follow the rules of whoever owns the loan. Failure to do can be the basis of monetary sanctions if your loans happens to be one they review on the annul audit. Many other loan investors also follow Fannie rules.

 

[MC Rider]

Fannie & Co can force the lender to buy the loan back in some cases. The bank does not want that.

 

[dirtbiker]

OK. That would or at least should reveal if there is some dire problem with the place. So, you pay for the appraisal and in a few months you save enough to cover the cost. Have you checked to get an idea what the comps are? Zillow, Realtor, etc are easy to check but I would not put too much stock in them unless maybe you are in a tract area with good comp sales.

I'm not actually all that concerned about a lower appraised value. We did a barn extension, updated a few things, and have kept the place in great condition. I'm just irked that I have to spend the money to get this done, and frankly, don't appreciate the privacy invasion.

Comps are fairly worthless for me, at least as far as checking others myself. I live on a 40 acre farm in a very rural area. Nothing comes up for sale around here. When I got the original appraisal last year, they had to do some creative comps from pretty far away to make it work.

 

[MC Rider]

^^^


Yes. That kind of property is not easy to appraise.

 

[mystang52]

If you sent a check for, say, $10,000 to be applied to Principal, would that "automatically" bring the LTV below 80% per the amortization schedule? If yes, this strategy (for whatever the amount needs to be) may make the most practical, effective, sense.

 

[MC Rider]

I'll guess no. But I was just the appraiser, not a decider. Can't hurt to ask about alternatives.

 

[Aerides]

As soon as rates decline, I would refi the house.

Yup that is what I did. It was a while back, but when my mortgage holder tried similar delays on removing PMI, I just refi'd with a new lender.

 

[dirtbiker]

If you sent a check for, say, $10,000 to be applied to Principal, would that "automatically" bring the LTV below 80% per the amortization schedule? If yes, this strategy (for whatever the amount needs to be) may make the most practical, effective, sense.

Unfortunately, no. I'm at 76.x% LTV right now. I actually asked the manager on the phone "if I paid off all but $100 right now, but was still prior to the 78% amortization DATE, would I still need an appraisal?" Her answer was yes.

My ACTUAL LTV is completely irrelevant to them. Only the date on the amortization schedule that I was supposed to hit 78% matters. It's absolutely ludicrous.

The date on the amortization schedule that I will hit 78% is in July of 2025. Even though by then, my ACTUAL LTV will be about 70%.

 

[treeofpain]

Pay the $200. Get rid of the PMI. Then move to another lender when it makes financial sense.

 

[MC Rider]

I think the actual LTV is exactly what the bank is interested in.
Also the appraisal will likely cost a lot more than $200, but hopefully less than $1000.
But what do I know, I was only the appraiser.

Good luck with it.

 

[dirtbiker]

I think the actual LTV is exactly what the bank is interested in.
Also the appraisal will likely cost a lot more than $200, but hopefully less than $1000.
But what do I know, I was only the appraiser.

Good luck with it.

Yes, I guess they are actually looking for the actual LTV. However, they're using a loophole to do it. The PMI reform law was written to protect home buyers from exactly what Huntington Bank is doing. However, because the wording of the law specified only the LTV based upon amortization schedule, rather than amount paid off, the bank can go against the spirit of the law on this one.

The letter from Huntington Bank specified exactly $200 as the cost. The $1000 cost to me is the cost of the appraisal plus the cost of additional PMI payments I won't get refunded.

 

[dirtbiker]

Thanks to everyone who responded.

For the record, I am going to pay to have the appraisal done to get rid of the PMI. I'm pretty salty about this, and I truly believe the bank's actions here are predatory and against the spirit of the law.

It's actually not as much about the cost of the appraisal and loss of several months of PMI that I will not get refunded, as the invasion of privacy of having a home appraisal forced upon me.

Right from the beginning, I was up front with the bank that I planned to have the PMI removed within the first year by overpaying. I verified there was no prepayment penalty, and was even told that it would automatically get removed once I hit 78% LTV. Granted, this was told to me verbally (so I don't have a leg to stand on there to fight this), and by the folks from the mortgage department, not the PMI department, who I assume probably thought the same thing I did.

Regardless, I had no reason to expect them to fight me on this.

Funny thing was that I was very happy with the mortgage application process and really like their online service, which is why I chose them a second time for this mortgage (along with competitive rates, of course). I have told several people of my good experiences with the bank up until this point. My coworker is actually in the process of buying his first home, and, of course, I recommended Huntington bank to him. I'll be updating him on my experience with this bank...

 

[athena53]

However, because the wording of the law specified only the LTV based upon amortization schedule, rather than amount paid off, the bank can go against the spirit of the law on this one.

I agree- that's sleazy. Good luck on the appraisal. Since you have a property that's hard to value, I hope there's an appeal process.

 

[Aerides]

Right from the beginning, I was up front with the bank that I planned to have the PMI removed within the first year by overpaying. I verified there was no prepayment penalty, and was even told that it would automatically get removed once I hit 78% LTV. Granted, this was told to me verbally (so I don't have a leg to stand on there to fight this), and by the folks from the mortgage department, not the PMI department, who I assume probably thought the same thing I did.

Ah, yes. Not in writing there's your issue. Highly likely the folks answered you honestly from what they thought would be true, without knowing it to be true. Funny how it's human nature to answer something without saying "I don't know I'll check first" but it's...everywhere.

In your shoes, yes, pay the $200, then watch rates like a hawk and find the first opportunity to jump ship.

 

[target2019]

Something like this happened to us in 2006/7 when we asked to have PMI removed from a $100K initial mortgage. I don't have the records or LTV, but we were probably 12 years into the 30-year loan. We had been making extra principle payments since the rate was 7.8% approximately.

I expected PMI to be removed due to reading articles. When it wasn't, we received a gift of money (from M-I-l) to pay off the loan.

 

[dirtbiker]

I agree- that's sleazy. Good luck on the appraisal. Since you have a property that's hard to value, I hope there's an appeal process.

Thanks. Hopefully I won't need an appeal...

Ah, yes. Not in writing there's your issue. Highly likely the folks answered you honestly from what they thought would be true, without knowing it to be true. Funny how it's human nature to answer something without saying "I don't know I'll check first" but it's...everywhere.

In your shoes, yes, pay the $200, then watch rates like a hawk and find the first opportunity to jump ship.

Yep. I wish I had asked the question in an email instead of over the phone...

Something like this happened to us in 2006/7 when we asked to have PMI removed from a $100K initial mortgage. I don't have the records or LTV, but we were probably 12 years into the 30-year loan. We had been making extra principle payments since the rate was 7.8% approximately.

I expected PMI to be removed due to reading articles. When it wasn't, we received a gift of money (from M-I-l) to pay off the loan.

Unfortunately I don't have a monetary gift coming to pay the mortgage off.

I doubt interest rates are going to come down quickly enough to make refinancing a financially wise investment either. With only 12 years left to pay it off, we'll need a significantly better rate than the 4.625% we've got to cover the refinance costs. I'm hoping it happens, but I'm not holding my breath.

 

[dirtbiker]

My coworker that is currently buying a house, and just made an offer that was accepted, was preapproved by several banks, and was between Huntington Bank (on my recommendation) and another local bank in which one he was going to get financing through. He was leaning toward Huntington because of my personal recommendation. After telling him my experience, he decided against Huntington. This was on a 30 year ~500k mortgage.

Although a bit petty, I can at least smile that I just cost Huntington more money than they'll ever steal from me over this PMI issue.

This also might be the only time in my life I've been able to extract any sort of revenge against a company, particularly in such a short time frame. lol