My first suggestion to homeowners who currently have a loan opened before July 1999 is to consider refinancing. The chances are great that you may be able to obtain a new loan at a much lower interest rate even now as these rates are starting to climb.
If for some reason it is not possible for you to refinance then you might want to review your loan documents and check your statements to see if you are paying Private Mortgage Insurance (PMI). Home buyer’s who put less than 20 percent down on a home mortgage, are usually required by the lender to have PMI. PMI protects the lender if you default on the loan. The Homeowners Protection Act of 1998 (HPA) became effective on July 29, 1999. HPA established rules termination cancellation of PMI on home mortgages. These protections apply to conventional home mortgages and do not apply to government-insured FHA or VA loans or to loans with lender-paid PMI.
While home buyers with mortgages made after the passage of the HPA have certain rights and protections loans made before July 1999 still have ways to have the PMI cancelled once 20 percent equity in your home has been reached. The HPA federal law does not require your lender or mortgage servicer to cancel the insurance, but most lenders have applied the new laws to older loans.
If your loan was opened before the HPA passage be sure to check your annual escrow account statement or call your lender to find out exactly how much PMI is costing you each year.
Even though the law’s termination and cancellation rights do not cover loans that were signed before July 29, 1999, or loans with lender-paid PMI signed on any date, lenders or mortgage servicers are still required to inform borrowers about the termination or cancellation rights they may have under those loans.
Many states have laws for early termination or cancellation of PMI, even for loans signed before July 29, 1999. Home buyers might want to call their state consumer protection agency for more information about their state’s rules. Fannie Mae and Freddie Mac, which buy home mortgages from lenders, may have other guidelines about termination or cancellation of PMI on home mortgages signed before July 29, 1999.
An annual statement must be sent to consumers with mortgage loans obtained before July 29, 1999. This statement should explain that under certain circumstances PMI may be canceled and provide an address and telephone number to contact the loan servicer to determine whether PMI may be canceled.
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