If you put down less than 20% when you purchased a home, you probably pay for private mortgage insurance (PMI) every month. Private mortgage insurance protects the lender in case you can't make your payments and the house is foreclosed on. But what happens if you paid 20% down? Surely, that proves that your loan is not a risky one for the lender. I mean you have shown that you have a significant financial stake in the property. Pay attention, Mortgage Watchdog says that 70% of existing escrow accounts violate federal law by holding excessive balances. According to the Federal Deposit Insurance Corporation (The FDIC is an independent agency of the federal government responsible for insuring deposits.) Home loan errors are costing Americans $8 billion to $10 billion each and every year.
So how did a Florida family get foreclosed on even though they were making mortgage payments and had put down 20%? The 20% down means that they should not have had to pay for a PMI. Simply put, the reason they got foreclosed on is because lender's are people too and people make mistakes. Their lender erroneously charged them for a PMI. Here's a list of the top 10 loan servicing abuses:
- Misapplied Payments
- Illegal Fees
- Two-Faced “Help”
- Blocked Refinances
- Squelched Legal Rights “Waivers”
- Botched Taxes and Insurance
- Zipped Lips (Lack of Notices/Communication)
- Whirlwind Foreclosures
- Crazy Foreclosures
- "Robo-Signing” and Other Fraud
For definitions of these abuses, read them here.
So what can you do? Pull out your original loan documents and double-check everything. When your loan-to-value (LTV) ratio is 80%, you can ask the lender to stop charging you for the PMI. Ideally because of the Homeowners Protection Act of 1998 unless you have an FHA or VA loan or lender-paid insurance, banks must “automatically cancel” PMI when you hit the 22% threshold. But “automatic” it isn't always if bank policy requires an appraisal.
And if you are a victim of bad lending, DO:
- Make sure your payments are never delinquent;
- Keep a log of communications with your loan servicer, taking care to document all the actions you took;
- Send detailed letters of corrections needed and mail them via certified mail; and
- Need more help? Contact Amerihope Alliance Legal Services and let one of our attorneys fight for you. Call us at 877.882.5338 or email us at firstname.lastname@example.org.
Key takeaway, if you have a PMI, monitor your loan balance and regularly compare it to the value of your home, and when your LTV is 80% keep trying to get the lender to drop the PMI.