Countrywide Changing PMI Removal Rules?

I have a house with a Fannie-Freddie loan sold to Countrywide. Now the mortgage is paid down below 80% of the original amount, so I called to get the PMI off.

They sent a form letter stating that their CURRENT rules were 70% of original loan must be paid off, plus there must be an appraisal done by their appraisal company. The cost of the appraisal was either $560 for urban area, or $610 for resort. We are neither.

I called the Countrywide PMI office in Texas to complain. They are now reviewing the file. CAN THEY CHANGE THE RULES LIKE THIS? What if they just decide to make the PMI PERMANENT UNTIL PAID OFF?! No way am I paying $600 for an appraisal!

Has anyone encountered this recently?
Furnishedowner

You sue in the SCC for the PMI premium each month. After a few months of default judgments, it will get removed.

BLL,

Thanks, I knew you would have an answer. But what is the SCC?

Furnishedowner

Just a guess, SCC=small claims court?

Yes. Small Claims Court.

I am still fighting Countrywide and getting nowhere. Am I the only one who is getting ripped off?

I have paid off the loan principal required to have PMI fall off, as per the loan docs that I signed when we bought the property. It’s $46/month but they want me to keep paying until the TERM of the PMI runs out. That means I would be flushing an extra $3220 down the toilet in PMI premiums! Until the 10-year term runs out!

So, the FNMA/FHLMC docs are worthless, if the lender can then change the rules. This seems worthy of a class-action suit or something.

Countrywide just keeps sending form letters:

If the property is a one-family principal residence or a second home (owner-occupied) the LTV ratio must be 75% or less.

If the property is a 1-to-4-family investment property or a 2-to-4-family principal residence, the LTV must be 70% or less.

Now, the owner must also pay for an appraisal by an appraiser provided by Countrywide. The cost of the mandatory appraisal is either $655 or $605.

THIS IS ALL OUTRAGEOUS! I bought the property with the understanding that PMI would be removed when the loan amount was below 80% LTV. I paid off extra principal so I could get PMI off. I am furious. How dare they change the rules. I have never paid late and just want what I was promised.

Does anyone care? Am I the only borrower who is getting screwed?

Furnishedowner

Furnished,
We don’t pay PMI, but your situation sounds awful. On properties we’ve owned in the past w/ PMI, the lender has always said that you just have to pay it down to 80% and it will be taken off at our request. Your stuff sounds fishy and it would be interesting to know if any other borrowers w/ that bank are going thru the same thing.

Furnished,

Do not waste your time with a CW appraisal. Landsafe is HANDS DOWN the worst national appraisal management company out there. It will be a complete waste of your money.

$605 to 655 for an appraisal? Talk about highway robbery! $350 - 400 is the going rate around my neck of the woods.

At most, an appraisal is one day’s work. What a ripoff!

I sent this problem in to the CNNMoney Helpline. Maybe thay can do something. Yes, it is outrageous. Reminds me of the credit card companies’ business plan–now that you owe us some money, we will change the rules and fees so we get MORE money.

Furnishedowner

Countrywide has been hard to deal with all the way around. I think it is because of the transition they are making due to the sell to boa. They have been impossible to get loan modifications through as well. :banghead

I don’t see any valid reason for serving this type of notice as there are no such directions to the financing companies by the Govt. You should report the matter.

shubh,

Who is it that I should report the matter to? I am still stymied on this.

I saw a segment on Howard, the money guy on CNN where a man in Florida had the same problem. Howard told him to refinance. But to refinance a NON-OWNER occupied property just now, to get rid of PMI, seems expensive. I just want to get rid of PMI the way it was supposed to happen!

Could this be grounds for some attorney tackling a class-action consumer lawsuit?

Furnishedowner

I’m can’t be much help but I am curious:

1. Do your loan papers specify the PMI criteria?
2. What would happen if you deducted the PMI amount from your monthly payment?

Why haven’t you sued in small claims court? It will cost them more than the PMI to defend the suit. Most times they don’t show up and you win by default.

The Homeowners Protection Act of 1998 - which became effective in 1999 - establishes rules for automatic termination and borrower cancellation of PMI on home mortgages. These protections apply to certain home mortgages signed on or after July 29, 1999 for the purchase, initial construction, or refinance of a single-family home. These protections do not apply to government-insured FHA or VA loans or to loans with lender-paid PMI.

For home mortgages signed on or after July 29, 1999, your PMI must - with certain exceptions - be terminated automatically when you reach 22 percent equity in your home based on the original property value, if your mortgage payments are current. Your PMI also can be canceled, when you request - with certain exceptions - when you reach 20 percent equity in your home based on the appreciated property value, if your mortgage payments are current. If the basis of your request for PMI removal is that the loan is now less than 78% of the property’s original purchase price AND if the loan has at least 24 months seasoning, then the PMI should be removed automatically under the provisions of the Homeowners Protection Act of 1998.

One exception to automatic removal is if your loan is “high-risk” (sub-prime). Another is if you have not been current on your payments within the year prior to the time for termination or cancellation. A third is if you have other liens on your property. For these loans, your PMI may continue.

If you signed your mortgage before July 29, 1999, you can ask to have the PMI cancelled once you exceed 20 percent equity in your home. But federal law does not require your lender or mortgage servicer to cancel the insurance.

You said your loan was sold to Fannie or Freddie. I suspect that CW is your loan servicer, but Fannie Mae or Freddie Mac holds your note. Fannie Mae and Freddie Mac also have guidelines affecting termination or cancellation of PMI on home mortgages signed before July 29, 1999. If your mortgage was originated before July 1999, I suspect the rules you are being cited are Fannie/Freddie rules and not CW rules.

If your loan is at least 24 months old, you have had no late pays, and if your equity is at least 22% of the original property value, then just ask CW to send you their standard form to request PMI cancellation. Fill out the form and send it in. If the note holder requires a current appraisal to ensure that the property value has not declined since the loan was originated, it will be at your expense. In most cases, the appraiser will be a local appraiser and the appraisal fee will be consistent with the prevailing rate for your area.

Since CountryWide is owned by Bank of America, maybe a local BoA loan representitive will be able to assist you.

Very helpful responses…

BLL, I haven’t filed in Small Claims Court here because I have had 2 bad experiences there. Both judges here seemed vindictive and clueless, and really couldn’t have cared less about both cases. My gut feeling is that they would say," This doesn’t belong in Smalls Claims, take it up with your lender. Next!"

Equity, The loan papers specified the exact amount that would have to be paid off in monthly payments over 10 years. But I paid off that amount in 4 years. If I didn’t pay the full loan amount, I would start getting late payment notices, etc. I don’t think they would do any thing other than dun me and damage my credit.

Dave T, Does the Homeowners’ Protection Act cover the single family rental home, or just owner-occupied? We signed the mortgage in Dec. 2004 and closed in Jan. 2005. All payments are current and were timely, with the extra principal being paid as well. We now have 22% equity based on the original property value. There are no other liens. It was a full-documentation loan.

I have requested now several times, in writing and by telephone, that PMI be removed. They continue to send me a demand for an additional $6200+ to get the loan to 70% LTV plus they demand that I order an appraisal for $655 or so from their Landsafe Appraisal outfit.

I am next going to appeal to Bank of America and quote the Homeowner’s Protection Act. Thank you for your comprehensive advice.

Furnishedowner

As Dave mentioned, they can’t change the rules because the Homeowner’s Protection Act of 1998 sets the rules. I am going through the same PMI fight with Countrywide/now Bank of America. I quoted the HPA to them this morning and I was told they don’t have to delete the PMI when you pay to 22% equity, they have to delete it when your original amortization schedule says you would hit 22% if you only paid your regular payments. I didn’t do that, I paid extra principal just to get to 22%. The way I understand the HPA, what they said is not true. So this is what I did next… the Comptroller of the Currency is the regulator of national banks like BofA, and you can file a complaint here: http://www.helpwithmybank.gov/. There are also some FAQs, etc.

To stir the pot further, my understanding is that Countrwide’s PMI was paid to an insurance subsidiary of Countrwide called Balboa. So they are insuring themselves and profiting from the PMI premiums we pay. At least that’s how it appears based on what I know of how the company is structured.

fightingPMI,

Nice to hear from you about where to file a complaint. I knew I couldn’t be the only one who was trying to slay that dragon.

I hope to tackle it next week. Damn, I’m mad.

Furnishedowner

The owner must also pay for an appraisal by an appraiser provided by Countrywide. The cost of the mandatory appraisal is either $655 or $605.