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Fannie, Freddie helping borrowers ditch their mortgage insurance
By Jeff Lazerson
What I think: Freddie Mac, and now Fannie Mae, are on a push to lighten your (payment) load. Provided, that is, if you are paying private mortgage insurance. If you have lender-paid mortgage insurance (where a loan officer talked you into baking the mortgage insurance into the rate), you are out of luck.
More than 4.1 million U.S. homeowners with $1.1 trillion worth of mortgages had mortgage insurance from 2013 through 2017, said U.S. Mortgage Insurers President Lindsey Johnson.
Nearly 73,000 California properties were financed with conventional mortgage insurance in 2017, second only to Texas, which had more than 79,000 MI-financed properties, Johnson said.
The average monthly mortgage insurance is roughly $134, according to the website of mortgage insurance company MGIC Investment Corporation.
Under the 1998 Homeowners Protection Act (a.k.a., the PMI cancellation act), lenders must remove the mortgage insurance when borrowers with good payment records pay down the loan to 78 percent of the original balance. And a borrower can always refinance into a new mortgage without the insurance.
But getting rid of your PMI isn’t always easy. Just 4 percent of MGIC’s insured borrowers have initiated the mortgage insurance removal process in recent years, according to the company.
And borrowers with really low mortgage rates are captive to unresponsive lenders, since they’re not likely to refinance into a loan with a higher interest rate to get rid of PMI.
Now Freddie and Fannie are coming to the rescue, leading, supervising and approving the PMI removal process for you.
Freddie and Fannie will both consider the original appraisal value or the current value to decide if you have at least 20 percent equity. One difference is that Fannie will require confirmation that the original value did not drop. Freddie assumes the original value is good. Your servicing lender has to vet your property through Fan or Fred. If current data is not available for your home, you may be required to pay for an appraisal.
Call your lender and ask if Fannie or Freddie owns the loan.
If your loan is owned by Freddie Mac, your loan servicer can do this by Oct. 1.
Fannie Mae will be ready to implement by Jan. 1, and Fannie’s servicers are required to implement by March 1.
If you have questions or comments, please contact Jeff Lazerson by clicking here. For more great insight make sure to check out Jeff Lazerson’s Mortgage Grader Radio Show on Sundays at 10 am on AM830 KLAA.
Jeff Lazerson - Mortgage Columnist since 2011