I bought a house 2 months ago with just 5% down as I was selling my previous home. I then sold the previous home and made a single principal only payment of about half of my new loan. My current LTV, based on the original loan value, is 48%. Freddie Mac owns the loan, Newrez services it. Newrez says “the investor has denied your request to terminate the pmi”, but won’t say why. I’ve read Freddie Mac’s own guidelines (Guide Home) and they explicitly say that once a borrower is below 80%, they may cancel the PMI. They have to be in good standing without any late payments. They specifically say that the “late” payment test is based upon origination date if the mortgage was taken out within the past 12 months. So there is no mandatory 12 or 24 month wait period. Any idea what leg they are standing on?
Request they complete a recast of the loan.
Dorian said:
Request they complete a recast of the loan.
I am, but I am not quite to the 60 day mark since Freddie bought it. But I definitely will recast in a few weeks.
Dorian said:
Request they complete a recast of the loan.
I am, but I am not quite to the 60 day mark since Freddie bought it. But I definitely will recast in a few weeks.
You will need to put more down to recast. Previous payment does not count you should have contacted them before you made that kind of principal payment if a recast was the goal.
Lender can require 12 payments before removing but keep pushing the issue given it isn’t even close to 80 LTV.
@Laine
I reserved a sufficient amount to make another principal only payment after 60 to initiate the recast. The initial big payment did not make me eligible to recast, but it definitely “counts”, as it lowers the remaining balance that will be recast. But you are right that I will have to make another payment of at least $5k when I recast. No problem.
Freddie Mac’s own procedures say that 12 months is not necessary. If that is a rule/law, I’d like to see it.
@Ash
The law that established the rule leaves that as a gray area. Did they send you a written denial at this point or just verbal? With that kind of a pay down I’ve never seen this issue pop up but the lenders going to get an early payoff penalty either way so there is no benefit to them to not remove it.
@Laine
Thanks. I received a letter that made no sense. It even said my LTV was 49%, and because 80% is required, I was denied. Go figure.
@Laine
This is a conventional loan with no prepayment penalty. What “early payoff penalty” are you referring to?
Ash said:
@Laine
This is a conventional loan with no prepayment penalty. What “early payoff penalty” are you referring to?
Lender is going to get hit for what they got paid on the loan because it got paid down. No early payoff for you.
How do you know your mortgage is owned by Freddie Mac? My mortgage was sold off and I make payments to NewRez.
Davin said:
How do you know your mortgage is owned by Freddie Mac? My mortgage was sold off and I make payments to NewRez.
I just got a letter in the mail today that Freddie bought it, a month after my local bank transferred servicing to Newrez.
Freddie Mac sometimes requires at least six months before you can drop PMI.
Wei said:
Freddie Mac sometimes requires at least six months before you can drop PMI.
I disagree. The Freddie Mac servicing rule says that if the LTV falls below 80% based on the original value due to accelerated payments, the borrower may cancel pmi.
@Ash
Ok. When I tried to cancel I was told I had to wait or furnish proof of substantial improvements.
Wei said:
@Ash
Ok. When I tried to cancel I was told I had to wait or furnish proof of substantial improvements.
If you are seeking to cancel due to an increase in market value (and therefore borrower equity), then they can make you wait a certain amount of time. But Freddie’s manual says that requests to cancel based on the original LTV falling below 80% due to accelerated payments are all good. That said, they haven’t approved my request, so I am flummoxed.
@Ash
Take it up with NewRez. It’s ultimately there call. Good luck.
Both and Fannie and Freddie have a website you can check.
Look at your PMI disclosure form that you received during closing. It should have the earliest date you can apply for removal. For both Freddie and Fannie you need 2yrs of seasoning to review your on time payment history.
@Birch
Thanks. I keep hearing here on Reddit that I need 2 years of seasoning, but that’s not what the rules you linked say. For cancellation due to accelerated payments based on the original value, payment history can be from the time of origination if less than 12 months.
"The Borrower’s payment history must show:
- The Mortgage is current
- There was no payment 30 days or more past due in the preceding 12 months (or since the Origination Date if the Mortgage was originated in the past 12 months); and
- There was no payment 60 days or more past due in the preceding 24 months (or since the Origination Date if the Mortgage was originated in the past 24 months)"