How does a lender compute equity requirement for PMI?
I owe 280k on a house and asked my lender (CitiMortgage) about refinancing. My credit score is great (close to 850), and I'm a customer in good standing.
CitiMortgage's appraisal came back at around 345k -- whereas I was expecting at least 380k -- and they say I need at least 365k in order to avoid PMI.
I disputed the appraisal, but it's not looking good; I really feel cheated. The appraiser came to my house and spent a whole 3-4 minutes. He compared my house with houses that were 10-20 years older and in really old subdivisions.
In any event, why is Citi saying the value of my house needs to be 365k to avoid PMI? Shouldn't it be around 350k if I owe 280k?
edit 1
I got the call from citimortgage and they denied my appraisal dispute. I asked why and the manager at citimortgage said he had no answer. I then questioned him further about why he did not know and then I asked about why I would have to pay PMI and he couldn't answer that, he said "I'm not a licensed mortgage consultant, I'm just a manager".
Do I have any legal options...I am so frustrated with them.
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Do you have any legal options? Not really. Citi is under no obligation to refinance your loan on your terms. But that goes both ways, and you are under no obligation to refinance with Citi!
Get more quotes from another lender. It'll feel really good when you find a lender that wants your business. You might get a better deal. And think how good it will feel to cut ties with Citi!
In regards to the legal recourse, no there is none. Also, despite your frustrations with Citi, it may not be their fault. Mortgage companies are now forced to select appraisers (essentially at random) through 3rd party Appraisal Resource Companies (ARCs). This randomization mandate from the government was issued in order to combat fraud, but it is really causing more trouble for homeowners because it took away appraiser accountability. Basically, there's nothing we can do to fire an appraiser anymore. I've had appraiser do terrible jobs, just blatantly wrong, and have gone the distance with the dispute process only to find they won't change the value. My favorite real-life example came from an appraiser who got the bedroom count wrong (4 instead of 5); yet he took pictures of 5 bedrooms. The one he excluded he stated it shouldn't count because it didn't have a closet. Problem is, it DID have a closet. I had the homeowner take pictures of all of the closets in his house, and send them in. He still refused to change the count. After close to 2 months of the dispute process, the ARC came in and changed the count, but did not chagne the value, stating that the room count didn't increase the sqft, and there would be no adjustment in value. I was floored. The only solution we had was to wait for the appraisal to expire, then order it again; which we did. The new appraiser got the count right, and surprisingly (not really), it came in at the right value...
In regards to the value necessary to avoid MI, they are likely using 80%, but it's not based on your current balance vs the value, it's based on the new loan amount (which will include costs, prepaids, skipped mortgage payments, etc) vs the value.
Here are your options:
Get a new appraisal. If you are confident the value is wrong, go somewhere else and get a new appraisal.
Restructure the loan. Any competent Loan Officer would have noticed that you are very close to 80%, and should have offer you the option of splitting the mortgage into a 1st and 2nd loan. Keeping the first loan at 80%, and taking out a 2nd for the difference would avoid MI.
Best Regards,
Jared Newton
Never ever use a giant monster mega bank for home loans.
I am sure you probably didn't and they bought your loan from someone else. You have no legal options. What you should do Is look at getting a new loan maybe a 15 year loan. Your payment might be the same with no PMI.
I would check with a relator to see what they think your home is worth. Also if you have any money you can always pay extra to the principle and get yourself to 20% based on the next appraisal.
You might have a legal option regarding what they say you need in value 350k is what it should appraise to for you to get rid of pmi when you owe 280k
Remember Citibank is a publicly traded company and their goal is to make more money. The CEO has a fiduciary relationship with stock holders not customers. They seriously have board meetings to figure out what charges they can invent to screw their customers and make shitloads of money. There is no incentive for them to let you get out of your PMI.
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