My lender is requiring me to pay PMI when I did not have to pay it before, why? Is this legal?

Question: I have lived in this house for about 5 years and was never paying PMI before. I am trying to refinance my mortgage right now and qualify for a new Fannie Mae program which I am pretty sure does not require PMI. I spoke to my lender for mortgage rates refi, and they are requiring me to pay PMI even with this program. Does this sound true according to mortgage law? Is there anything I can do to stop the mortgage lender from charging me the PMI? Is this related to the credit score for mortgage?

Response by Tomek Pilch: According to Federal Law & Homeowner's Protection Act (HPA) of 1998, if you are required to pay PMI for a loan it must be fully disclosed to you. PMI is typically charged if your loan amount is above 80% of your current home value the time the loan is issued from the mortgages companies. Because the Real Estae market has took a pretty hefty dip in values for most parts of the country in recent times, it could be that your value has dropped cause your loan to surpass the 80% ratio. Thus, you may be legally entitled to now pay PMI.

However, there have also been recent reforms and movements made to make qualifications a bit easier for certain homeowners in distress. If you are attempting to qualify for a specialized Fannie Mae program that you believe does not require you to pay PMI, then you should consult with a Real Estate Lawyer who specializes in mortgage issues. They may be able to help litigate the matter with your lender and prove infact you do not have to pay it. Most people you deal with at banks are employees who must follow formal procedures, thus, its possbile it could be a mistake on their end.

Additional Resource: Consumer Information - PMI

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