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Old 11-17-2011, 12:40 PM
 
Location: MID ATLANTIC
4,032 posts, read 8,740,444 times
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Okay, so you are talking $45 per 100K vs $55 per 100K. But what they probably didn't share, those rates are not guaranteed until the loan is submitted. There are "add-ons" for different nuances, such as property type, location, credit score and loan amount. I suspect their loan officer ran their scenario thru a simulator to determine those rates. If everything remains the same, the rate should, too.

(I'm also in the camp, get a 12% second. Not only is the MI gone, but the rate on the 1st is better, too).
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Old 11-17-2011, 02:53 PM
 
Location: New York
1,118 posts, read 2,191,093 times
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Quote:
Originally Posted by VictorBurek View Post
...
First, it is more work. Second, you dont make money on 2nd liens... As a loan officer we get paid a certain % of the loan amount. The larger the first mortgage, the more money the LO typically makes. Your right Victor - on the LO not making anything. It's the bank that makes money on the interest rate, as like a credit card making the minimum, the payment is designed not to pay down on the principle.

Conforming loans - PMI can drop off when the LTV is less than 80% LTV. Approaching a bank to have it removed, you're going to use one of their appraisal company's. You have to pay $350+ for the appraisal. The bank makes it almost impossible, because their appraiser uses the lowest comp in your neighborhood to compare your value. My advise is if your at 80%, don't waste your money. When your sure your around 70% to 75% LTV, then it is worth the risk.
Conforming Loan calculating PMI

15 Yr 30 Yr 15 Yr 30 Yr 15 Yr 30 Yr
95.01% - 97% 0.79% 0.90% n/a n/a
90.01% - 95% 0.56% 0.78% 0.77% 0.88% 0.81% 0.92%
85.01% - 90% 0.23% 0.52% 0.50% 0.61% 0.54% 0.65%
80.01% - 85% 0.19% 0.32% 0.22% 0.33% 0.26% 0.37%
80% and less n/a n/a n/a

FHA loans - MI will be canceled when the Loan to Value ratio reaches 78% LTV regardless of the amount of time the mortgagor has paid the premiums. The rule use to include 5years or which ever is longer.
Calculating MI of FHA Loans:
  • For mortgages with terms 15 years and less and with Loan to Value ratios 90 percent and greater.
  • For mortgages with terms more than 15 years, the annual mortgage insurance premiums will be canceled when the Loan to Value ratio reaches 78 percent, provided the mortgagor has paid the annual premium for at least 5 years.
  • Mortgages with terms 15 years and less and with loan to value ratios of 89.99 percent and less will not be charged annual mortgage insurance premiums.
My personal view on whether mortgage insurance or take out a 2nd mortgage.

If you are looking to keep the property longer then a few years. I suggest it is better in the loan run, to go with one payment having PMI. You will develop equity much faster. Because your making one payment. Something to look forward to, sometime in the future it will drop off.

Not having the property for an extended period. Having a 1st and 2nd mortgage - the out going payment may be cheaper per month, since the 2nd mortgage is a minimum payment, it takes "forever" to achieve any equirty.

I brought my home in 1990, putting 10% down and having PMI. I was young and have little to none mortgage experience. In 2001 we did our first refinance to a lower interest rate, immediately dropping the PMI. Our LTV was 65%. In the time I purchased my home the value went up.
That's when I learned a very valuable lesson.

A lesson learned - continued to pay Washington Mutual the PMI for eleven years. The bank was under no obligation to inform me when I could of dropped the PMI. Tracking my value back, the value shot up two years after I purchased. Back then could of reduced my monthly payment by $121.00.

I paid an extra$13000.00+ into my mortgage for nothing.


I became a loan officer right after my refinance - 10 years later still involved with mortgages as an advisory capacity saving people from losing their homes. If I knew what I knew today, back then. I would be in a totally different position. I hope someone reads this - so in the future they don't make the same mistake I made years ago......


..

Last edited by Modification Specialist; 11-17-2011 at 03:07 PM..
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Old 11-17-2011, 04:54 PM
 
Location: The Twilight Zone
773 posts, read 140,299 times
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Quote:
Originally Posted by Modification Specialist View Post
Conforming loans - PMI can drop off when the LTV is less than 80% LTV. Approaching a bank to have it removed, you're going to use one of their appraisal company's. You have to pay $350+ for the appraisal. The bank makes it almost impossible, because their appraiser uses the lowest comp in your neighborhood to compare your value. My advise is if your at 80%, don't waste your money. When your sure your around 70% to 75% LTV, then it is worth the risk.


..
Why would they wait until they are at 70% to 75% LTV? PMI automatically drops off at 78% LTV by law. The lender is required to drop it. You can request it to be dropped off when you reach 80% LTV, but it is automatically gone at 78%.

Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year

"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 original property value, if your mortgage payments are current."
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Old 11-17-2011, 06:49 PM
 
Location: New York
1,118 posts, read 2,191,093 times
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Quote:
Originally Posted by Heritage Member View Post
"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 original property value, if your mortgage payments are current."

I totally agree with all of the above rules....

However........READ between the lines.... .... PMI can be terminated, (per my story above), but.....again I say but... this is not written in the fine print.......

Who's responsibility is it to monitor and tell the bank what the value is. It Is You not there's!!!!!!

Lets look at the facts on what really is going on....(the real picture the of what web site you found your information).

In determining value, it is an educated guess by an appraiser. You are responsible for paying for the so-called "Approved" appraiser the bank uses to check the value on your home. Just like you had an injuiry from a car acceidint. IMPs are hired to say there is nothing wrong with you. The same thing works for appraisal companys, where work is referred from a bank.

They get paid by producing a "Low Ball" appraisal. This is common is the business. In the decade I wrote loans, cannot count the amount of people I have worked with, refinancing their mortgage to remove the PMI. They going back and challenging the value with an appraisal review.

On one hand if they want any future work from that bank, they are going to be really tight on the comparably. On the other hand PMI insurance is being paid by you (costing the bank nothing). This is their guaranty to get trheir money if the borrower defaults.

The reason why I am saying wait to have an appraisal done, where you have to pay up to $550 to get a professional report what the value is. If the value is really tight, if there are foreclosures in your neighborhood (simple just check zillow.com).

There is less risk at a lower LTV, where your paying for an appraisal you can use. There is less of a risk your not wasting your money.. Unless you have $XXX.xx to possibly burn.... If value is an issue, why risk paying for the appraisal that doesn't work.

Point - I am talking reality and from experience......


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Old 11-17-2011, 07:20 PM
 
Location: The Twilight Zone
773 posts, read 140,299 times
Reputation: 361
Quote:
Originally Posted by Modification Specialist View Post
I totally agree with all of the above rules....

However........READ between the lines.... .... PMI can be terminated, (per my story above), but.....again I say but... this is not written in the fine print.......

Who's responsibility is it to motor and tell the bank what the value is. It Is You not there's!!!!!!

Lets look at the facts on what really is going on....(the real picture the of what web site you found your information).

In determining value, it is an educated guess by an appraiser. You are responsible for paying for the so-called "Approved" appraiser the bank uses to check the value on your home. Just like you had an injuiry from a car acceidint. IMPs are hired to say there is nothing wrong with you. The same thing works for appraisal companys, where work is referred from a bank.

They get paid by producing a "Low Ball" appraisal. This is common is the business. In the decade I wrote loans, cannot count the amount of people I have worked with, refinancing their mortgage to remove the PMI. They going back and challenging the value with an appraisal review.

On one hand if they want any future work from that bank, they are going to be really tight on the comparably. On the other hand PMI insurance is being paid by you (costing the bank nothing). This is their guaranty to get trheir money if the borrower defaults.

The reason why I am saying wait to have an appraisal done, where you have to pay up to $550 to get a professional report what the value is. If the value is really tight, if there are foreclosures in your neighborhood (simple just check zillow.com).

There is less risk at a lower LTV, where your paying for an appraisal you can use. There is less of a risk your not wasting your money.. Unless you have $XXX.xx to possibly burn.... If value is an issue, why risk paying for the appraisal that doesn't work.

Point - I am talking reality and from experience......


http://www.mgic.com/pdfs/71-41599hopa.pdf

According to the information I am finding, it works like this:

1) The lender is required by law to notify the borrower when they reach 80% LTV and this is based off the purchase value or refi appraisal. A new appraisal is not needed.

2) The borrower can then request the cancellation of the PMI. A new appraisal is not needed.

3) The lender must cancel the PMI at 78% LTV automatically. A new appraisal is not needed.

Last edited by Heritage Member; 11-17-2011 at 07:49 PM..
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Old 11-17-2011, 10:31 PM
 
Location: MID ATLANTIC
4,032 posts, read 8,740,444 times
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There are severe penalties for collecting PMI beyond the loan's decline to a 78% LTV.

As for the second loan, you need to factor in the borrower's income and if the PMI is deductible. Most of my customers take that second trust and treat it like a luxury car payment and double up, or slap bonus income at it. Most are professional couples, many times with the wife just returning after maternity leave. Once that second is knocked out, they're sitting on a sweet payment.

Sorry, but I'll just have to disagree. Auto bill-pay takes away any inconvenience of a second payment, not to mention the payment can be hundreds less with a second (allowing more to go to prepayment). And if you have a condo, you better believe the second trust route really pays off.
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Old 11-18-2011, 09:57 AM
 
Location: Richardson, TX
6,627 posts, read 10,283,789 times
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MS, why would you expect the bank to notify you when your house value went up? How would they know? Of course it's up to you, the homeowner, to contact the bank and request removal when you feel the value is high enough.

If you pay PMI, you are not just paying for insurance for the bank that doesn't help you. You are paying the premium so that you can obtain a home loan with less than 20% down. By definition, that is a riskier loan which is more likely to default. Nobody is forced to pay PMI, you can always save up money longer or buy a more inexpensive home. However, if one does not wish to do so, mortgage insurance exists so that those higher loan-to-value loans are possible to get (without getting a second).

By the way, the bank and the appraiser being in collusion is totally illegal, as is purposely choosing lower comps without adequate support.
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Old 11-18-2011, 12:58 PM
 
Location: New York
1,118 posts, read 2,191,093 times
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Quote:
Originally Posted by Heritage Member View Post
Heritage Member - I looked at the link - it is listed

"Borrower Initiated Cancellation - "appraisal done at the borrowers expense".

Quote:
Originally Posted by Debsi View Post
MS, why would you expect the bank to notify you when your house value went up? How would they know? Of course it's up to you, the homeowner, to contact the bank and request removal when you feel the value is high enough.

If you pay PMI, you are not just paying for insurance for the bank that doesn't help you. You are paying the premium so that you can obtain a home loan with less than 20% down. By definition, that is a riskier loan which is more likely to default. Nobody is forced to pay PMI, you can always save up money longer or buy a more inexpensive home. However, if one does not wish to do so, mortgage insurance exists so that those higher loan-to-value loans are possible to get (without getting a second).

By the way, the bank and the appraiser being in collusion is totally illegal, as is purposely choosing lower comps without adequate support.
Debsi - that's my point, thank you. Banks do not monitor an individuals home value. It would be impossible.

What I meant by the banks appraiser - its a 3rd party "APPROVED" appraiser that the bank contracts........

My name says what I do - everyday speak to people in default or facing foreclosure. Many have mortgages with PMI. Banks realize because the insurance is on the loan, if a home owner defaults, they can reclaim their losses through the mortgage insurance. They don't have to cut their profit. When banks are reviewing a loan for a modification, if there is mortgage insurance, at best the interest rate reduction is 5%. Compared to a conforming loan, the interest rate reduction can be as low as 2%.

Because my firm is required to check affordability before we take on a loan for modification. I lost count of the number times I've spoken with home owners showing no affordability factoring in PMI.


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Old 11-18-2011, 04:25 PM
 
Location: The Twilight Zone
773 posts, read 140,299 times
Reputation: 361
Quote:
Originally Posted by Modification Specialist View Post
Heritage Member - I looked at the link - it is listed

"Borrower Initiated Cancellation - "appraisal done at the borrowers expense".



Debsi - that's my point, thank you. Banks do not monitor an individuals home value. It would be impossible.

What I meant by the banks appraiser - its a 3rd party "APPROVED" appraiser that the bank contracts........

My name says what I do - everyday speak to people in default or facing foreclosure. Many have mortgages with PMI. Banks realize because the insurance is on the loan, if a home owner defaults, they can reclaim their losses through the mortgage insurance. They don't have to cut their profit. When banks are reviewing a loan for a modification, if there is mortgage insurance, at best the interest rate reduction is 5%. Compared to a conforming loan, the interest rate reduction can be as low as 2%.

Because my firm is required to check affordability before we take on a loan for modification. I lost count of the number times I've spoken with home owners showing no affordability factoring in PMI.


MS, I believe it works like this:

The PMI MUST automatically be dropped by the lender when you reach 78% LTV from the value at time of getting the mortgage. It is based soley on the original amortization schedule and you must be current. You will NOT need another appraisal for this.

The lender MUST notify you when you reach 80% LTV from the value at time of getting the mortgage and then they MUST drop the PMI if you request them to. You will NOT need another appraisal for this.

IF the value of your home goes UP, chuckle chuckle, you then can request the PMI to be dropped when you reach 80% LTV. This is when you WILL be required to get a new appraisal at your own cost.

The first two scenarios are based on the value at the time off getting the mortgage, which is why you don't need a new appraisal. Only in the last scenario will you need a new appraisal.
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Old 11-18-2011, 04:29 PM
 
Location: Richardson, TX
6,627 posts, read 10,283,789 times
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Quote:
Originally Posted by Heritage Member View Post
MS, I believe it works like this:

The PMI MUST automatically be dropped by the lender when you reach 78% LTV from the value at time of getting the mortgage. You will NOT need another appraisal for this.

The lender MUST notify you when you reach 80% LTV from the value at time of getting the mortgage and then they MUST drop the PMI if you request them to. You will NOT need another appraisal for this.

IF the value of your home goes UP, chuckle chuckle, you then can request the PMI to be dropped when you reach 80% LTV. This is when you WILL be required to get a new appraisal at your own cost.

The first two scenarios are based on the value at the time off getting the mortgage, which is why you don't need a new appraisal. Only in the last scenario will you need a new appraisal.
I don't think you're right on scenario #2. You sure about that one?
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