Come in if you're gotten MIP/PMI removed from mortgage

[Susie]

We have an FHA loan on our house, 30 year fixed at 4.375%, originated in 2010 just before lifetime MIP became a feature of FHA loans.  I remember that our terms require us to pay it until the later of 5 years or achievement of a specific % LTV.  I can't remember whether it was 80% LTV or 78%, and I also can't remember what value they use in the LTV ratio -- the original loan balance, the value their appraiser gave during the financing process, or something else.  

We haven't rushed paying the house off, but are finally getting close to the required LTV %.  Depending on the value number used, within the realm of what I think is likely we're anywhere between 81-84% LTV right now.  Close enough to start thinking about a lump payment to get under the wire and stop wasting $90/month on MIP.  

I called BOA to ask 1) what the required LTV % is, 2) what the "value" is that they use in determining LTV %, and 3) what I'll need to do to initiate once I know we've paid it down enough.  The rep told me they don't have that info, and they have no way to connect me to someone who does.  Apparently there's a totally separate group that handles MIP, and that group does not accept phone calls.  WTF.  All they could do is put in a request to the MIP group on my behalf to have my account reviewed for MIP removal, and I'd get a letter with a decision in the mail.  

...So am I supposed to start doing that every month once I think I might conceivably have 80% LTV, to avoid paying for any months of MIP that I don't have to?  This seems crazy, and all so very "pay no attention to the man behind the curtain."

Has anyone gone through this process successfully and have any insight?

The frustrating thing is that we've put a lot of money into improvements (compared to mortgage pay down), and I am confident that we are well over 20% equity in the house at this point, but that doesn't matter with the existing loan.

[kadams767]

I did this with our old house. Essentially, we did almost exactly what you did, called the mortgage company (servicer, actually) and requested removal of PMI. We had to schedule a new appraisal through them at our cost. It was roughly $250, I believe, for the appraisal. It got submitted back to the mortgage company, showing our LTV was significantly less than the required 78%. PMI was removed on the following month's mortgage payment.

LTV should be based on the home's current value, not your original loan amount.

[Susie]

kadams767, that process sounds like it actually makes sense, but it seems pretty different from what BoA is offering.  BoA is apparently going to review, make a decision, and send me a letter with the decision in 7-10 days, which doesn't seem like it allows for an appraisal as part of the process.  I would be happy to pay for one, because it would definitely work in our favor -- sale prices in our neighborhood are significantly higher now than they were in 2010.  If the house appraised for what I think it would, we'd already be somewhere in the 75-77% LTV range.  (We'd be at 71% LTV using the Zillow value, but I think it's a little too optimistic.)  They must make the decision based on numbers that they already have to hit the 7-10 day timeline though, especially since they do it without interaction with the homeowner.

I guess I'll see what the letter says and go from there.  I'm not really expecting a favorable decision, I'm mostly hoping for useful information on what I'd need to do in order to get a favorable decision in the near future.

[tripleshot]

Feb 8, 2019 15:05:26 GMT -5 kadams767 said:

I did this with our old house. Essentially, we did almost exactly what you did, called the mortgage company (servicer, actually) and requested removal of PMI. We had to schedule a new appraisal through them at our cost. It was roughly $250, I believe, for the appraisal. It got submitted back to the mortgage company, showing our LTV was significantly less than the required 78%. PMI was removed on the following month's mortgage payment.

LTV should be based on the home's current value, not your original loan amount.

We just did this in August.  Same process as above. Our county reassessed all the homes and our value went up 30% from our appraisal 3 years prior, which is outrageous in our area. So to fight the county tax appraisal, I called our mortgage company to get a bank appraisal.  I figured it would come back lower than the county appraisal, but high enough to remove PMI and I was right. So it was a win-win for us.  I think the appraisal was $550.

[kadams767]

Feb 8, 2019 15:48:55 GMT -5 Susie said:

kadams767 , that process sounds like it actually makes sense, but it seems pretty different from what BoA is offering.  BoA is apparently going to review, make a decision, and send me a letter with the decision in 7-10 days, which doesn't seem like it allows for an appraisal as part of the process.  I would be happy to pay for one, because it would definitely work in our favor -- sale prices in our neighborhood are significantly higher now than they were in 2010.  If the house appraised for what I think it would, we'd already be somewhere in the 75-77% LTV range.  (We'd be at 71% LTV using the Zillow value, but I think it's a little too optimistic.)  They must make the decision based on numbers that they already have to hit the 7-10 day timeline though, especially since they do it without interaction with the homeowner.

I guess I'll see what the letter says and go from there.  I'm not really expecting a favorable decision, I'm mostly hoping for useful information on what I'd need to do in order to get a favorable decision in the near future.

Yes, I will say that what you are describing sounds like what I went through initially when I called, which is that they do their own independent review of your file to see if you are at or below the threshold for automatic removal.  I had to specifically request that a new appraisal be ordered and PMI be removed pending the new appraisal.  I'd imagine that they are going to base their initial review on their existing information, like you said, and then go from there.  Although depending on location, they can get an appraiser out there for a sight appraisal in that timeframe without needing the homeowner, and see if LTV is easily met.  Depending on the timeframe of the mortgage and how the market has been in the area, that could be a possibility and they wouldn't need a full appraisal.  

[hbomdiggity]

We didn't have a FHA loan and it was wells fargo.

I called WF about the process and it required an appraisal by them ($400) and we could request at 80% (we also had to wait 2 years from purchase which was an issue for us but I know you've had your house longer).

I just looked back at the appraisal document and it's hilarious. We were in the middle of a renovation so the pictures look straight out of a hoarders episode. but all the appraisal does is confirm the value hasn't decreased since purchase which was absolutely not a concern in our market at the time. I mention this because I hear people clean and do a ton of prep for certain appraisals, but this was not necessary in our case.

[Susie]

hbomdiggity, you could request to start the process (including new appraisal) at 80% based on what?  Just curious because that affects when/whether you have hit 80%.  The loan balance is a known number, but the % changes depending on the value you're using.  That's part of my current annoying BoA mystery.

[hbomdiggity]

Feb 8, 2019 17:48:09 GMT -5 Susie said:

hbomdiggity , you could request to start the process (including new appraisal) at 80% based on what?  Just curious because that affects when/whether you have hit 80%.  The loan balance is a known number, but the % changes depending on the value you're using.  That's part of my current annoying BoA mystery.

principal loan balance/ purchase price.

We could request at 80% and do the appraisal deal, otherwise it would terminate automatically at 78%.

[Susie]

Feb 8, 2019 17:58:08 GMT -5 hbomdiggity said:

Feb 8, 2019 17:48:09 GMT -5 Susie said:

hbomdiggity , you could request to start the process (including new appraisal) at 80% based on what?  Just curious because that affects when/whether you have hit 80%.  The loan balance is a known number, but the % changes depending on the value you're using.  That's part of my current annoying BoA mystery.

principal loan balance/ purchase price.

We could request at 80% and do the appraisal deal, otherwise it would terminate automatically at 78%. 

That sounds similar to what I remember our mortgage broker telling us.  Ours was a refi though, so there wasn't a purchase price associated with this loan.  We refi'ed after only 2 years in the house, to get from 6.125% in 2008 to 4.375% in 2010.  

I wonder if the bank's appraisal from the refi would be the analogous relevant number for us.  It makes more sense than using the original loan balance, although for some reason that is sticking in my mind.  Obviously that would suck since it's the lowest of all the possibilities, so it inflates our LTV ratio.

[kadams767]

Feb 8, 2019 19:29:58 GMT -5 Susie said:

Feb 8, 2019 17:58:08 GMT -5 hbomdiggity said:

principal loan balance/ purchase price.

We could request at 80% and do the appraisal deal, otherwise it would terminate automatically at 78%. 

That sounds similar to what I remember our mortgage broker telling us.  Ours was a refi though, so there wasn't a purchase price associated with this loan.  We refi'ed after only 2 years in the house, to get from 6.125% in 2008 to 4.375% in 2010.  

I wonder if the bank's appraisal from the refi would be the analogous relevant number for us.  It makes more sense than using the original loan balance, although for some reason that is sticking in my mind.  Obviously that would suck since it's the lowest of all the possibilities, so it inflates our LTV ratio.

It wouldn't be the original loan balance no matter what, though.  You aren't trying to pay down your mortgage balance to 80% (give or take) of the original loan balance unless your original loan was 100% of your original purchase price or home value.  You start from day one with a LTV that takes into account your down payment % (ie. if you put down 5%, you are starting at 95%, etc.).  The issue is whether they are only willing to base it on your original purchase price/appraisal or if they will accept a new appraisal amount.

[litasail]

It's an FHA loan, right?

I just looked into this with our FHA loan lender (Wells Fargo) and found that you can't really do anything to initiate it with an FHA loan. It happens automatically when you hit 78% of the amount you paid or the appraised value at the time of purchase (whichever is less).

www.wellsfargo.com/mortgage/manage-account/insurance/mortgage-insurance/how-to-remove-mortgage-insurance/

[litasail]

More info: www.michaeladeery.com/blog/how-to-cancel-fha-mortgage-insurance-if-you-bought-a-home-prior-to-june-2013/

[waverly]

We had an FHA and I think we refinanced from a 30 year to a 15 year non FHA loan and had it removed at the same time. It would have been before we hit their percentage so I think we did need to hit a slightly higher appraisal. I think we had to get 2 appraisals about 8 months apart because the first appraisal wasn’t high enough because it wasn’t a good time seasonally in the market. The second time Showed stronger sales in the area, and yes I did clean up a bit more. DH surprised me with the first one so I had no time. Probably the stronger sales were the deciding factor rather than me cleaning but I figured it couldn’t hurt.

[Susie]

Feb 8, 2019 20:33:01 GMT -5 kadams767 said:

Feb 8, 2019 19:29:58 GMT -5 Susie said:

That sounds similar to what I remember our mortgage broker telling us.  Ours was a refi though, so there wasn't a purchase price associated with this loan.  We refi'ed after only 2 years in the house, to get from 6.125% in 2008 to 4.375% in 2010.  

I wonder if the bank's appraisal from the refi would be the analogous relevant number for us.  It makes more sense than using the original loan balance, although for some reason that is sticking in my mind.  Obviously that would suck since it's the lowest of all the possibilities, so it inflates our LTV ratio.

It wouldn't be the original loan balance no matter what, though.  You aren't trying to pay down your mortgage balance to 80% (give or take) of the original loan balance unless your original loan was 100% of your original purchase price or home value.  You start from day one with a LTV that takes into account your down payment % (ie. if you put down 5%, you are starting at 95%, etc.).  The issue is whether they are only willing to base it on your original purchase price/appraisal or if they will accept a new appraisal amount.

I completely agree that it wouldn't make any logical sense.  I just have this specific memory that I can't shake (from >8 years ago now, so it's admittedly suspect) that they told me that when we were ready to have MIP removed, the original balance was the number they'd use as proxy for the "value" in the LTV ratio for this specific purpose.  It felt like one more way that the terms make it just a little harder to get it removed.  But I can't find anything in writing either confirming or indicating otherwise, and BoA frustratingly doesn't seem to want to tell me.

We rolled in closing costs when we refi'ed, so our 2010 refi original loan balance was about $1k over the 2008 purchase price for the house.  Even with closing costs rolled in, the original loan balance couldn't have exceeded about 97% (or 96.5%?) LTV relative to the appraised value since we would have had to have 3% (or 3.5%?) equity for the FHA refi.  I think we were pretty close to that mark.

I've been tracking % LTV in our net worth spreadsheet for months now, relative to 3 or 4 different possible values, watching it tick down by about 0.2% each month.  I'm just so eager to get this over with.  $90/month on MIP drives me crazy.

[k3am]

Feb 8, 2019 20:56:18 GMT -5 litasail said:

It's an FHA loan, right?

I just looked into this with our FHA loan lender (Wells Fargo) and found that you can't really do anything to initiate it with an FHA loan. It happens automatically when you hit 78% of the amount you paid or the appraised value at the time of purchase (whichever is less).

www.wellsfargo.com/mortgage/manage-account/insurance/mortgage-insurance/how-to-remove-mortgage-insurance/

This is what I remember from mortgage shopping the first time around. We passed on an FHA loan because of it.

[hamster]

Ours automatically dropped off at 78% of the original loan value. We had a schedule that showed when it would drop as part of our closing documents when we got the loan. Do you have anything like that? It was not an FHA though.

[lacey]

Susie We just went through this with BOA last year. Same scenario except ours was the original purchase in 2010. It would drop off automatically at 78% buy we could request it once we got below 80%. We made a lump payment that got us below 80% of the original purchase price and my husband called and requested PMI be removed. We got a letter a week or so later saying we still had to pay $7xx before they could remove PMI. They included something we could send in to make the payment. Honestly, I have no idea how they came up with the number since it differed from our expected number. I didn't have the bandwidth at the time to figure it out. We sent in the extra money (I think my husband preferred making another online payment and calling again to request the PMI removal). The next time we got a letter saying PMI was removed and it would be effective the next month or so (probably based on where exactly you are in the billing cycle).

If I were you, I would request the PMI removal and expect you will get the payoff amount in the letter you receive in the mail. I would only pursue additional appraisals if the payoff amount is more than you want to spend on the mortgage.

[starlily]

Our mortgage is with Wells Fargo, but I did look into removing MIP late last year, after we reached the 5 year mark. We were denied at that time, because we weren't yet at 78% LTV based on original balance. They were able to tell me, however, when the MIP would automatically drop off (this August) and how much additional principal we'd have to pay if we wanted to have it dropped sooner. Then they followed up with a letter with the same info.

[madisen]

FHA loans originated prior to the 2013 changeover for new MIP rules will have the mortgage insurance drop off automatically at 78% LTV of the original purchase/appraisal price for the loan it's insuring. That's why there's no appraisal or input needed by the borrower. These are FHA guidelines, not bank or servicer rules. BofA and other servicers will provide a service as described where they will give you an assessment at your request to let you know where you stand on LTV and how much you would need to pay the principal down by to have the MIP fall off.

A new appraisal with current value doesn't work for FHA loans.

The other option you have if you're not at 78% LTV of original purchase/appraisal price or don't want to pay down the principal to get it there, is to refinance into a Conventional loan and hope your LTV comes in at < = 80% based on a new appraisal at current value ETA: so that you're not paying PMI on the Conventional loan.

[Susie]

So, 3 weeks later, I finally got the letter from BOA.  It kind of/sort of answers my questions!  It tells me that we need to pay the loan down to $193,804.65 in order to have MIP removed at 78% LTV, which requires an $8k and change principal payment.  Cool, at least I know.  It's a smaller amount than I expected.

The one part that is still a mystery to me is how they got that number.  I looked up the appraised value from the refi process, and 78% LTV relative to that value is like $189k and change.  ¯\_(ツ)_/¯  Oh well.  I will take their number!