LETTERS TO THE EDITOR

It's easier to cancel PMI on newer loans

Dear Editor:

MIP may be able to be canceled! It would depend on when the person obtained the FHA mortgage. FHA has changed the MIP and UFMIP policy. True, the person asking most likely obtained the mortgage during a time when MIP cannot be canceled, but that ruling does not exist today.

For instance, if you purchased a home and used an FHA loan today, you would have to pay MIP for five years. After that time you could get the MIP removed (assuming you have at least 80 percent LTV, paid on time and have permission from the mortgage company.) Those people who obtained an FHA loan 10 years ago are stuck with MIP unless they refinance. If they refinance into an FHA mortgage, they would have to pay MIP for five years before it can be removed. The difference is WHEN you got the FHA loan. Older loans still have to follow the old guidelines and can not remove the FHA MIP.

As a matter of fact, many mortgage companies have jumped on this confusion of how MIP and UFMIP can be handled by sending out junk mail to homeowners. The UFMIP (Up Front Mortgage Insurance Premium) is part of the mortgage insurance that has to be paid at the time of closing. The vast majority of home buyers finance this portion of the mortgage insurance into the loan itself. In prior years if you paid off an FHA mortgage (within seven years of obtaining the loan) a portion of this UFMIP charged would be refunded. About six years ago FHA changed this. The good news is they lowered the amount that is being charged; the bad news is you can NOT get any refund. But older FHA loans still can qualify. Obviously time is running short on this benefit.

The mass mailing campaign many companies produce tout that you may get a refund due to the new law change Bush put into effect. I have personally received many letters like this and as a mortgage professional may of my clients have come to me with the letter asking for an explanation (and, of course, hoping for some kind of refund.) FHA is a terrific mortgage tool, but with the changes can be confusing to the general public. Robert's response, although correct for this person, told only part of the picture and could accidentally lead the general public astray.

Mark Randolph
GMAC Mortgage
Wilmington, Del.