Posted by snoopdogMs on 8/15/10 8:33pm
Msg #349047

Mortgage insurance premium

Let me see if I can articulate my thoughts correctly. Does the LO have the lenders authority to tell the borrower that the mortgage insurance premiums will end in say 5 years when the TIL states 8 or 9 years. I was at a closing where having gone over my preliminary docs, one of which is the payment letter ( which of course includes MIP and escrows if applicable) and the borrower said that the LO told them that it would drop off in 5 years. When we get to the TIL, it showed about 8+ years to knock it off. They asked me which was true, the LO or the TIL.. I told them that they had to call the LO and ask HIM that question. Mrs. borrower called the LO and he made absolutely no sense saying those payments just decrease, blah, blah blah. Mrs borrower just said OK and hung up saying he made no sense whatever. I just kept quiet and we kept going. This is not the first time that borrowers were told less time than what the TIL showed. Is there forgiveness of the MIP by the lender at an earlier date even if the principle does not meet the 78% criteria? If the borrower does nothing to accelerate the principle, how can 8 become 5?

Reply by Pete/MD on 8/15/10 8:40pm
Msg #349049

In my experience, FHA loans require a min of 5 years of MI. I have come across a couple of LO's who are less than honest and will say it will fall off after 5 years when the TIL will show up to 12 years.

Reply by MikeC/NY on 8/15/10 10:18pm
Msg #349069

As far as I know, the only way to reduce the time on the MIP is to accelerate paying off the principle to get it below the threshhold sooner.

This would not be the first time an LO was blowing smoke in order to get a deal done...

Reply by MW/VA on 8/16/10 7:36am
Msg #349104

Also, if major improvements are made to the home that increase it's value, they can get a new appraisal & apply to have it taken off. If there are any changes that would shift the LTV to 80%
MIP can be taken off.

Reply by BobbiCT on 8/16/10 6:34am
Msg #349095

Optomistic MIP ...

Theory that the total of principal paydown and INCREASE in re-sale value of residence will shorten MIP term. Moldy oldy days it used to, particuarly during subprime climb era.

Of course, the LO probably didn't say the borrowers would have to PAY for an appraisal acceptable to lender (or whoever owns the loan that future day) that justifies the LTV being below the threshold ... and sometimes PAY a processing fee to lender. Have friends and family that go their MIP removed sooner, but had to pay upfront costs to for appraisal and underwriting review fee.

Reply by MistarellaFL on 8/16/10 7:31am
Msg #349102

Bobbi's right

The LO is depending on the future appraisal to be increased within 5 years, so that the LTV
IS at 78% or better.

Reply by PAW on 8/16/10 12:56pm
Msg #349147

Don't confuse MIP with PMI

MIP - Mortgage Insurance Premium is required to insure the mortgage. Most commonly an FHA loan. It doesn't make any difference what the LTV (Loan To Value) ratio is. Accelerated payments will not reduce the MIP term, unless the mortgage is paid off before the MIP expires. Lender does not set MIP policy, the government does.

PMI - Private Mortgage Insurance (for conventional, non-FHA loans) is required by some lenders to insure the mortgage when the mortgage is more than 80% of the value of the house. Accelerated payments will automatically eliminate the PMI payments once the property reaches 78% LTV. Once LTV falls below 80%, then the borrower can request that the PMI be terminated. This can save on some payments, usually about 5 or 6.

Reply by MW/VA on 8/16/10 1:26pm
Msg #349157

Thanks for the clarification, Paul. n/m

Reply by snoopdogMs on 8/16/10 2:05pm
Msg #349164

Re: Thanks for the clarification, Paul.

Yes Paul. The question should have been concernig PMI not MIP.