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Loans, Financing, and Borrower' Rights

Failure to Cancel Private Mortgage Insurance

Many homeowners are required to purchase private mortgage insurance (PMI) if their down payment is less than 20%. If you had to purchase PMI when you purchased your house, you have a right to cancel it when your principal balance reaches a certain level set forth in your loan agreement. If your mortgage lender fails or refuses to cancel your PMI, our consumer rights lawyers may be able to help.

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Private Mortgage Insurance Details

PMI is a form of insurance commonly added to a homebuyer’s monthly mortgage payments if their down payment is less than 20% of the new home’s value. For most mortgages, the Homeowners Protection Act (HPA) of 1998 requires automatic cancellation of PMI when the borrower’s principal balance reaches 78% of the original value of the loan. Automatic cancellation is still required even if the home’s value has declined, and the loan servicer cannot require an appraisal before cancelling.

In addition to this automatic cancellation, in many instances a borrower can request to cancel their PMI early if:

  • The borrower’s loan-to-value ratio is at or below 80%;
  • The borrower is current with their mortgage payments;
  • The borrower has a good payment history; and
  • The borrower makes a formal written request to cancel PMI.

Unfortunately, mortgage lenders sometimes fail to automatically cancel PMI or to consider requests for early cancellation. If you believe your mortgage lender or servicer has violated the law regarding your private mortgage insurance, please contact our consumer protection attorneys for a free consultation. We understand how frustrating and confusing it can be to take on a large corporation on your own, and we would like to help.

Examples of Failure to Cancel Private Mortgage Insurance

  • Being forced to continue paying for private mortgage insurance after the "automatic termination date"set forth in your contract.
  • A lender requiring an appraisal before automatically terminating your PMI, or refusing to cancel your PMI before the automatic cancellation date even though your loan-to-value ratio is at or below 80%.

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