U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 04-06-2008, 11:29 AM
 
9 posts, read 89,504 times
Reputation: 14

Advertisements

Anyhow, my problem is that I was very ignorant when I purchased my 1st house at 25 years old! A combination of empty/mis-leading promises from my mortgage broker and just being so excited to be a homeowner got me into SERIOUS financial trouble!

I have been in my home for almost 5 years and have been paying $500.00 per month in PMI. I was told it would automatically end after 2 years
My monthly mortgage payments are about $1700.00 p/m with PMI for a little two bedroom town house in Hudson WI.

Throughout the 5 years in a struggle to attempt to keep up and pay for my awful mistake, my credit has gone down the drain, due to mortgage lates and other bills being paid late. I spent the last year & 1/2 working extra p/t jobs to bring my credit up and make no late payments on anything-- I succeeded and the score came up, only to attempt the refinance process and be denied. After 3 months of trying to get the loan closed my lender can't get it through underwriting (FHA Loan, as this is the only kind that I would be able to qualify for).

Now, due to a financial set back, we are late again, after our streak of good paying/no lates. As we are now again 30 days late, we are at our wits end, have tried selling-- no luck due to crap market. Have no lump sum of cash of course to end the PMI. We want out of this situation so bad that I am half tempted to begin sending in my mortgage payments, less the $500.00 p/month for PMI. In September it will be $30,000.00 that I have paid. WELL over what 20% would've been down on this house that I bought for $143,000.00 5 years ago.

What should I do, I can't afford, can't sell and credit is in the crapper-- do I become a statistic and just go into foreclosure? Will lenders ever just end it to avoid losing the loan to a foreclosure... it doesn't appear so. My only option has been the mortgage forbearance deal, which just puts you more financially behind, as it will go on back end of loan and still gives you lates every month on credit.

Anyone have anything to offer me.... Clearly desperate here!
Reply With Quote Quick reply to this message

 
Old 04-06-2008, 12:50 PM
 
Location: Memphis, TN
185 posts, read 872,500 times
Reputation: 110
That sounds like an incredibly high PMI @ $500 per month for a relatively smaller loan (below national average).

What you can do is pay for an appraisal, which will set you back $200 to $300, and hope the value comes back at 20% higher than your loan balance. If so, then they should drop your ridiculously expensive $500 per month PMI payment. After 5 years you've paid a whopping $102,000 in payments so surely you'd be at 80% LTV by now, unless you are on an interest only loan or a 40 year armortization. At this rate you're going to be paying $612k for a loan in the low $100's. This is how the banks make serious bank!

Like you, I also bought my 1st home at age 25, but my PMI was under $200, around $175 for a JUMBO loan that was on stated income. This was 7 years ago for me and it was dropped when I refinanced, thanks to a significantly higher appraisal and because I paid principle down some more. However, I refinanced in mid 2003, when loans were much easier to come by and rates were the lowest in recorded history for the USA. Even at $175 per month for PMI, I felt like I was throwing money away and it was at the top of my agenda to alleviate this PMI predicament. In your case, this seems like a form of monetary castration that should be outlawed!

I have no idea why they are charging you 42% of principle & interest for your PMI. That's the equivalent of me paying $1050 per month for PMI, which is insane! You can buy a multi-million dollar term life insurance policy for that kind of monthly payment.

I totally understand your frustration and I'm perplexed as to why they charge you such a high PMI. Maybe they made a typo on your contract? $50 per month sounds more in line with your loan amount.

Last edited by simcity; 04-06-2008 at 12:59 PM..
Reply With Quote Quick reply to this message
 
Old 04-06-2008, 01:20 PM
 
9 posts, read 89,504 times
Reputation: 14
Default Thank You for reply Simcity!

Thank you so much for taking the time to read my lengthy mortgage problem!

No typo, it is clearly $500.00 p/month ($501.25 to be exact). I'm on a 30 year fixed, conventional mortgage, with 7.25% interest rate and my taxes/insurance are escrowed in. Payments are currently $1688.00, which includes the PMI.

I get the same reaction from everyone... "no not 500.00 p/m". It does seem inconceivable. But that's what it is. Again, I was ensured that it automatically drops after two years-- I figured I would be throwing 12k down the tubes for two years, but figured as I couldn't rack up money down, it was just the price I would pay to be a homeowner. Oh, how I wish I could go back!

It sounds illegal to me, but I guess it's all within the FTC guidelines. I tried to discuss the route you mentioned with getting an appraisal to prove that we now have 20% equity, however that won't fly as they won't consider the market value increase. (Which is also down, due to the bad market). Every year I call the my lender, which has changed twice due to my loan being sold, to try and find a way to get rid of the PMI and they go over all the guidelines, showing how it's perfectly legal what they charge and there is no way around it until I have 20% of the principle paid off-- Well you know how it is the first years, everything pretty much goes to interest. So all in all, I guess I don't have much on principle, it's only down to about $138,000.00 now (purchased for about $143,000.00 about 5 years ago).

Tough situation! I just wish once you've paid 20% with PMI that would count for something, but it counts for absolutely nothing. 30k down the drain for nothing.

Yes, this is how the banks become rich! I just didn't realize that my case seems so absurd, I've never known or read of anyone to pay over $180.00 p/month for PMI and aside from my situation, 180.00 is the highest I've ever seen, the average seems to be $40-100 bucks!

Thanks again for your time! Hopefully something will give... I'm trying to be responsible and get this figured out, it's too bad all the money I give to this insurance is just bailing out some of the people that are irresponsible about their home loans. Okay... enough self pity! Thanks Again!
Reply With Quote Quick reply to this message
 
Old 04-06-2008, 02:20 PM
 
Location: Memphis, TN
185 posts, read 872,500 times
Reputation: 110
Monthly PMI payment: Monthly cost of Principal Mortgage insurance (PMI). For loans secured with less than 20% down, PMI is estimated at 0.5% of your loan balance each year. Monthly PMI is calculated by multiplying your starting loan balance by this percent and dividing by 12. When your loan balance exceeds 20% of the original purchase price, your PMI payment drops to zero.
Source: Experian National Score Index - U.S. Average Credit Score Rankings

Using the above calculation based on the “National Index”, you should be paying $715 per year in PMI, which is $59.58 monthly. I see what the problem was. Your lender made an error (or a deliberate scam) in calculating your PMI. They multiplied your loan balance by 5.0% instead of 0.5%, which resulted in a PMI that is 10x what the correct amount should have been.

$143k on a 30 year amortization @ 7.25% originating in 2003, your loan balance will be below 80% of the original purchase price in the year 2016:Mortgage calculator: Bankrate.com

If your let the bank have their way, you will be throwing away another $48,120 in PMI and $73,716 in additional interest before they drop your $501.25 per month PMI. That’s at a total cost of $263,328 to have $28,600 in equity (from 2003 to 2016), assuming your property’s value stays flat at $143k and does NOT lose value by 2016.

This is why I only do 15 year fixed mortgages now, as I sorta learned the hardway too. For my primary residence, I was on a 30 year fixed @ 8.25% back in 2001, but when rates fell I refinanced to 4.5% fixed on 15 year. This way you pay more to principle than to interest right off the bat (1st month's payment applies 51% to principle). Fast forward 5 years later to 2008, and now 63.5% of my monthly payment goes to principle, and only 36.5% is interest. My monthly payments are actually lower on a 15 year than they were on the 30 year, because of the lower interest rate.

So, if you could refi to a 15 year fixed I bet your monthly payment would be significantly LOWER than they are now, even with a PMI (assuming they use the correct cacluation of 0.5% of the loan amount). Just review your next loan carefully, I'm pretty sure you won't let this mistake happen to you again.

Do what you can to repair your credit in the meantime, but omitting your PMI would inevitably result in foreclosure as you wouldn’t be meeting the monthly payments in your loan agreement.

Last edited by simcity; 04-06-2008 at 02:43 PM..
Reply With Quote Quick reply to this message
 
Old 04-06-2008, 02:52 PM
 
Location: Chaos Central
1,122 posts, read 3,609,406 times
Reputation: 893
Start calling reputable mortgage lenders and try to refi a fixed rate - try local companies especially rather than the 'nationals'.
Reply With Quote Quick reply to this message
 
Old 04-06-2008, 03:33 PM
 
Location: Papillion
2,584 posts, read 9,361,364 times
Reputation: 884
Agree with simcity... write a letter to the lender with a summary of what simcity outlined... calculate what you think the overpayments in PMI have been over the term... the formally request an AUDIT of the original loan/pmi/escrow terms... and ask for a refund of the overpayment (and state how much that is)... give them a specific timeframe to respond back with the audit results (be reasonable - like 45 days)... This is a nice request.

Let that initial time pass... assuming no response then follow-up with a 2nd letter indicating that your formal request for audit was not received. Based on their ignoring that request you are formally requesting the refund of the original amount you stated within 30 days or you will file a formal complaint to the regulatory authorities and potentially file an action in small claims (or regular court depending on the amount and your local laws)...

Let that time pass... assuming no response file a formal complaint with your state banking regulator (with a copy to the lender)...

Depending on what you hear from the regulator you determine your next course of action (1) you might find out they were right and they'll explain why; (2) they might finally agree and refund your money (ask for interest); or (3) you file a lawsuit in small claims (or in regular court with an attorney)....

Document everything you do including emails, phone calls, and letters. The 3 letters you write send Certified Mail.

I will be suprised if they don't respond with either the 1st or 2nd letter.
Reply With Quote Quick reply to this message
 
Old 04-06-2008, 03:40 PM
 
9 posts, read 89,504 times
Reputation: 14
Default Thank You Thank You! Great Info.!

Quote:
Originally Posted by simcity View Post
Monthly PMI payment: Monthly cost of Principal Mortgage insurance (PMI). For loans secured with less than 20% down, PMI is estimated at 0.5% of your loan balance each year. Monthly PMI is calculated by multiplying your starting loan balance by this percent and dividing by 12. When your loan balance exceeds 20% of the original purchase price, your PMI payment drops to zero.
Source: Experian National Score Index - U.S. Average Credit Score Rankings

Using the above calculation based on the “National Index”, you should be paying $715 per year in PMI, which is $59.58 monthly. I see what the problem was. Your lender made an error (or a deliberate scam) in calculating your PMI. They multiplied your loan balance by 5.0% instead of 0.5%, which resulted in a PMI that is 10x what the correct amount should have been.

$143k on a 30 year amortization @ 7.25% originating in 2003, your loan balance will be below 80% of the original purchase price in the year 2016:Mortgage calculator: Bankrate.com

If your let the bank have their way, you will be throwing away another $48,120 in PMI and $73,716 in additional interest before they drop your $501.25 per month PMI. That’s at a total cost of $263,328 to have $28,600 in equity (from 2003 to 2016), assuming your property’s value stays flat at $143k and does NOT lose value by 2016.

This is why I only do 15 year fixed mortgages now, as I sorta learned the hardway too. For my primary residence, I was on a 30 year fixed @ 8.25% back in 2001, but when rates fell I refinanced to 4.5% fixed on 15 year. This way you pay more to principle than to interest right off the bat (1st month's payment applies 51% to principle). Fast forward 5 years later to 2008, and now 63.5% of my monthly payment goes to principle, and only 36.5% is interest. My monthly payments are actually lower on a 15 year than they were on the 30 year, because of the lower interest rate.

So, if you could refi to a 15 year fixed I bet your monthly payment would be significantly LOWER than they are now, even with a PMI (assuming they use the correct cacluation of 0.5% of the loan amount). Just review your next loan carefully, I'm pretty sure you won't let this mistake happen to you again.

Do what you can to repair your credit in the meantime, but omitting your PMI would inevitably result in foreclosure as you wouldn’t be meeting the monthly payments in your loan agreement.
I greatly appreciate all of your useful information, thank you kindly for your time.

I am very interested on the information you gave me on calculating my PMI. Do you think these are general guidelines or do you think there are actually legal limits? Do you think it's possible that my loan made it all the way through with either by mistake or intentionally, with to high of PMI? My loan started of at Ohio Savings and was sold and is now with Wells Fargo. It's amazing that Wells Fargo wouldn't have noticed this... I guess they aren't going to admit a mistake like that.

I am going to make another call tomorrow and try and get information, taking this approach-- possibilty that it was miscalculated. Assuming it may not go well, where would you turn. FTC? Real Estate Attorney? Fanny Mae/Freddy Mac?

Thank you again for all your time!
Reply With Quote Quick reply to this message
 
Old 04-06-2008, 03:48 PM
 
Location: Memphis, TN
185 posts, read 872,500 times
Reputation: 110
Default PMI is directly related to the mortgagor's credit score.

That would be great if Dave1215's advice was to work out for you, but upon further reasearch it seems that your "original" lender at closing may have legally justified your higher PMI based on a lower FICO score. Do you recall what your FICO score was when your received the loan? If it was above 700 then your $501 PMI is not jusitified. If it was below 600, then they could probably get away with sticking it to you. Between 600 to 699 should have been a gray area, but still wouldn't justify a PMI that is 10 fold above the national average.

Btw, Wells Fargo probably bought your loan because it is remarkably profitable and thus very attractive for them to hold. Then again, Wells Fargo bought and now holds my loan too and I lacked a PMI (my refi was through some small lender that I had found online that gave best rate at the time).

In the end, apparently it's not uncommon for the PMI to be hundreds of dollars above the norm if the borrower's credit score is low.

See below for details:
----------------------------------------------------------
PMI “shock” comes most often when many almost-homeowners get to the closing table and realize the payment for their mortgage insurance is going to be much more than previously expected. The best thing you can do to avoid a situation like this is to be realistic, and budget for a PMI payments that is much higher than expected.

“‘We have clients that were initially given a good-faith estimate of $50 to $75 a month in PMI costs and then they find out at closing that the actual PMI rate is hundreds of dollars higher,’ says attorney Terry Smiljanich of the James Hoyer law firm in Tampa, Fla. ‘In many cases, this is because their PMI premium was initially based on the premise that the borrowers were in a good credit quality category, when they actually ended up in a subprime category.’”
Source: Up your credit score and PMI will go down (http://www.leimortgage.com/articles/Credit-and-Debt-articles/Up-your-credit-score-and-PMI-will-go-down.php - broken link)

Last edited by simcity; 04-06-2008 at 04:06 PM..
Reply With Quote Quick reply to this message
 
Old 04-06-2008, 03:52 PM
 
Location: Papillion
2,584 posts, read 9,361,364 times
Reputation: 884
Take a look at the links on this Fed Reserve site... there are 5 or so references that might help you out, including the basics of what PMI is, but also what your rights are:

Consumer Information: New Law Requires Lender to Cancel PMI

Here is a link to an Online PMI Calculator that you can use to both sanity check what you are hearing, but to also use as a reference when you request your audit and show how you calculated the overpayment that you are asking to be refunded. An alternative calculator for comparitive purposes. And then a third so you have good backup to your audit request.
Reply With Quote Quick reply to this message
 
Old 04-06-2008, 03:54 PM
 
Location: Papillion
2,584 posts, read 9,361,364 times
Reputation: 884
Quote:
Originally Posted by simcity View Post
That would be great if Dave1215's advice was to work out for you, but upon further reasearch it seems that your "original" lender at closing may have legally justified your higher PMI based on a lower FICO score. Do you recall what your FICO score was when your received the loan?
This is what your request for an audit should then reflect... don't make the first request be mean, harsh, or negative... just factual showing why you think they are in error based on the facts available to you...
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top