Question: We purchased our home in Glendale eighteen
months ago with a 5% down payment and 95% financing. Inasmuch
as our loan was more than 80% financing, we had to purchase private
mortgage insurance (PMI). Due to the rapid appreciation of home
values in our neighborhood, our loan balance is now only 73% of
the value of our home. Even though we are now below the 80% financing,
our mortgage lender refuses to cancel our monthly PMI payment.
Doesn’t the Homeowners’ Protection Act of 1998 allow us to demand
that the PMI be removed based on the financing being less than
80% of the appraised value of the home?
Answer: No. The Homeowners’ Protection Act of 1998 (12
U.S.C. § 4901 et seq.) authorizes removal of the PMI when the
mortgage loan is paid down to 80% of the “original value of the
property securing the loan if the borrower so requests.” Subsequent
appreciation of the property is not a basis for the application
of the 80% threshold for cancellation of the PMI. In other words,
if you purchased the home for $100,000, you will only be able
to cancel the PMI when the loan balance is paid down to 80% of
the purchase price, or $80,000, even if the home is now worth
$200,000.
