First, I want to define Private Mortgage Insurance, referred to as PMI insurance by the mortgage industry.
Private Mortgage (PMI) insurance is for mortgages companies. If a default of payment occurs, the MORTGAGE COMPANY is able to collect what is owed on the home. This insurance only covers the difference between what the home sells for, (after default) and what is owed to the mortgage company. The seller's of Private Mortgage Insurance policies admitt that they only sell insurance to mortgage companies. It is also extremely expensive. Yet, our government allows mortgage companies to force homeowners to pay for this outragous rip off.
Private mortgage insurance usually shows up at your mortgage closing. Most victims are never made aware that an outragous charge for this insurance is being added to their mortgage payment. Most closing attornies never explain what this cost is to it's victims (the home buyer). This is one of the most outragous consumer rip-off's ever, and it is approved by your congressmen. (who remember folks, are supposed to represent we, the people.)
If congress wanted to represent the people of this country, they would never allow mortgage companies to pass this cost off to the homeowner. This should me a normal business expense and/or operating cost for all mortgage companies.
Congress did pretend, (after thousands of complaints) to pass new rules about PMI Insurance. Effective July of 1999, congress did passed a consumer protection act #105-216 declaring that mortgage companies were no longer allowed to charge homeowners for PMI insurance after the homeowner has 20% of equity into their homes.(If you would like a copy of this rule, use order code 97-373 E from CRS Web. ) But, congress did not attach any penalty to companies that did violate this law. PMI insurance should be banned completely. IF comsumers must carry an extra insurance for the loan to be approved, then the comsumer should be able to shop for their own policy, and this coverage put to the open market. The average cost for this insurance is 4 to 5 times more expensive than a home insurance policy. Yet a home owners policy gives far more coverage than PMI. This proves that without competition, cost skyrocket.
The law says that once there is 20% of equity into the home, PMI insurance is to be removed. However, HomeSide Lending refuses to acknowledge this law, and will use every means possible to force the home owner into paying for this needless insurance. They will even use the sale price of the home instead of the value of the home to calculate this formula. Anything as long as they can keep forcing the customier to pay for it.