FHA Guidelines

loan modification affect pmi cancellation dates

The FHA property flipping guidelines were enacted to curb fraudulent flipping by establishing time restriction  eligibility requirements for properties to be purchased and financed through the FHA mortgage program. Property flipping occurs when a property is deliberately acquired through a sale for the purpose of a quick resale at an artificially inflated value. The FHA property flipping rules require a seller to hold title to a property for at least 90 days before it can be sold to a buyer seeking FHA-insured mortgage financing.

Q: Can I lower my PMI (private mortgage insurance) with a 5 yr flawless payment history?I have owned my home for 5 years and the inital PMI cost was high due to 0$ down. Now that I have proven to pay responsibly, can I re- negotiate?

A:Under HPA (The Homeowner’s Protection Act of 1998), you have the right to request cancellation of PMI when you pay down your mortgage to the point that it equals 80 percent of the original purchase price or appraised value of your home at the time the loan was obtained, whichever is less. You also need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years. Your lender may require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.

Q: When Will Lenders Automatically Terminate PMI?

A: Once your mortgage is paid down to 78% of the original property value. PMI on certain high risk loans will not be canceled before 77%. Don’t forget about a good payment history. Again, declining real estate values in your nrea might affect the bank’s decision.

Fortunately the handler of our modification actually stayed with the company long enough to see it through to our trial payment period of 3 months. So after 5 months of not paying, we began making payments again for the next 3 months. Meanwhile, we neither hear nor see anything from CitiMortgage regarding the status of our modification. Having read the experiences of others’ denials after being lead on by CitiMortgage, we assumed the worst and stuck to the letter of the trial period agreement by ceasing payments again. It takes another 2 months before they even contact us again!

Under HPA, lenders are required to automatically terminate PMI once your loan is paid down to 78 percent. Again, you must be current on your payments. Another requirement of HPA is that lenders are required to provide specific disclosures to homebuyers on closing. Some specifics include the borrower’s right to request that PMI be canceled, the date on which the request may be submitted and the lender’s responsibility to automatically terminate PMI.Another thing most borrowers don’t know about PMI when obtaining a home loan is that you do not have to use the PMI company referred to you or suggested by your lender or real estate professional. Shop around and compare prices to get the best deal. You will have to put forth some effort to work PMI to your greatest advantage, but if you do, you’ll come out way ahead and pay far less than if you depend solely upon your lender to do the job.

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