When a borrower has to pay PMI, a 15-year mortgage is better then longer-term mortgages because the borrower will reach the 80 percent LTV threshold earlier. The borrower will be able to cancel PMI at this point and not have to pay any more PMI premiums.

Canceling PMI

The borrower has the right to request cancellation of PMI once the LTV reaches below 80 percent on non-high risk loans. LTV will eventually decrease by the borrower's paying down the principal on the loan through mortgage payments, if the fair market value (FMV) of the property appreciates in value, or through a combination of both loan payments and appreciation in FMV. (Note that a full appraisal of the property is usually required to establish FMV.)

To request cancellation of PMI, a good payment history1 is needed. The lender is not responsible for advising the borrower to cancel PMI. The borrower needs to initiate the request to the lender to cancel PMI.

Automatic Termination

When a mortgage is scheduled to reach 78 percent LTV on non-high risk loans, the lender must automatically terminate PMI on residential mortgage transactions. However, the borrower needs to be current on the loan in order for PMI to be automatically terminated. If the borrower is not current on the loan, the lender must terminate PMI when the borrower eventually becomes current.

If a mortgage is a non-conforming2 high-risk loan, a lender must automatically cancel PMI when the mortgage is scheduled to reach 77 percent LTV. However, if the borrower is not current on the loan, the lender must terminate PMI when the borrower eventually becomes current.

The following is a helpful chart showing under what circumstances PMI may be canceled automatically:

Canceled Automatically (if all are true)	NOT Canceled Automatically (if any are true)
Loan signed on or after July 29, 1999	Loan signed before July 29, 1999
Conventional Loans	FHA or VA Loans
Borrower has a good payment history	Borrower does not have a good payment history
Borrower is current on the loan	Borrower is not current on the loan

 

 

 

 

Final Termination

If a mortgage has not otherwise been canceled or terminated for any of the above reasons, a lender must automatically terminate PMI when the loan reaches the midpoint of the amortization period. This means that if there is a 30-year loan (360 months), the chronological midpoint occurs after the 180th month. However, as with all other circumstances for termination or cancellation of PMI, the borrower must be current on the loan for final termination.

If you have any questions regarding Cancellation or Termination of PMI, please contact DSI's Customer Service Department at (800) 649-1362.

DSI's Compliance Department invites you to review our other articles on canceling PMI and entering PMI/MMI information in DocMagic:

	Overview
	Entering Monthly PMI in DocMagic
	Entering Upfront PMI in DocMagic
	Entering FHA (MMI) in DocMagic

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1 A borrower has a good payment history if the borrower has not made a payment that was: (1) 60 days or more late within the first 12 months of the last 2 years prior to the date borrower reaches the cancellation date; or (2) 30 days or more late within the first 12 months prior to the date borrower reaches the cancellation date.

2 A non-conforming loan is defined as a loan with an original principal balance that exceeds Fannie Mae or Freddie Mac conforming loan limits.

When entering PMI in the DocMagic software, it is important to enter data in the correct fields. We have prepared this guide to help you through the process.

Monthly PMI

Section A and B (see image below) will always be left blank unless the borrower is required to pay the first year of PMI premiums up front. PMI may be either constant or tiered.

Constant PMI - Constant PMI means the 1st renewal rate percentage is the same throughout the loan. You will need to fill in Sections C and D based on your PMI certification. Then, Sections G and H will automatically default with the monthly PMI payment and PMI due date, respectively. Section H will default to the same date as your first mortgage payment date. For Section I, if you need to collect any months upfront at closing, you would enter it in this section.

For example, if you have a $100,000 loan for 30 years with a renewal rate of .78%, you would enter PMI information as follows: In Section C, you will need to enter in .78; in Section D, you will need to enter 360; The values in Sections G and H, will then default automatically, with Section G defaulting to $65.00.

The PMI monthly calculation for Section G is as follows:

loan amount X renewal rate # 1 e.g. $100,000 X .00780 = $65.00
                  12                                             12

H will default to the same date as your first mortgage payment date.

Tiered PMI - Tiered PMI has two levels of PMI (2 different renewal rates.) You will need to fill in Sections C and D based on your PMI certification. First, you would enter the renewal rate #1 percentage in Section C. Then, fill in Section D. The "1st Renewal # Months" field (Section D) equals the 1st renewal # of months in your PMI certification. The "Renewal Rate # 2" field (Section E) equals the lowest rate that is in the PMI certification. The "2nd Renewal # Months" field (section F) equals the 2nd renewal # of months, that are left on your loan. Then, Sections G and H will automatically default with the monthly PMI payment and PMI due date, respectively.

For example, if you have a 30 year loan with a 1st renewal rate of .78% and a 2nd renewal rate of .50%, you would enter PMI information as follows: In Section C, you will need to enter in .78; in Section D, you will need to enter in 120; in Section E, you will need to enter .50; in Section F, you will need to enter in 240; The values in Sections G and H, will then default automatically.

The PMI monthly calculation for Section G is as follows:

loan amount X renewal rate # 1 e.g. $100,000 X .00780 = $65.00
                  12                                             12

H will default to the same date as your first mortgage payment date. For Section I, if you need to collect any months upfront at closing, you would enter it in this section.

Click for larger image

If you have any questions on how to enter a monthly PMI, please contact DSI's Customer Service Department at (800) 649-1362.

DSI's Compliance Department invites you to review our other articles on canceling PMI and entering PMI/MMI information in DocMagic:

	Overview
	Canceling PMI
	Entering Upfront PMI in DocMagic
	Entering FHA (MMI) in DocMagic

When entering PMI in the DocMagic software, it is important to enter data in the correct fields. We have prepared this guide to help you through the process.

Upfront PMI

If a borrower needs to pay one year's worth of PMI premiums upfront, the DocMagic customer will need to fill in Sections A and B and leave Sections C-G blank (see image below). Section B will automatically default with the first year premium when Section A is filled. For example, if you have a $100,000 loan with a renewal rate of .78%, you will need to fill in Section A with .78. Section B will automatically default to $780.00.

Then, Sections H and I would need to be filled next. In Section H, enter the date when the PMI premium becomes due one year from now. In Section I, enter the number of months of PMI premiums to be collected (since the amount was collected upfront, Section I will be "0").

Click for larger image

If you have any questions on how to enter an Upfront PMI, please contact DSI's Customer Service Department at (800) 649-1362.

DSI's Compliance Department invites you to review our other articles on canceling PMI and entering PMI/MMI information in DocMagic:

	Overview
	Canceling PMI
	Entering Monthly PMI in DocMagic
	Entering FHA (MMI) in DocMagic

When entering PMI in the DocMagic software, it is important to enter data in the correct fields. We have prepared this guide to help you through the process.

FHA Loan

An FHA loan is a loan insured by the Federal Housing Administration and made by an approved lender in accordance with the FHA's regulations. These FHA-insured mortgages require insurance, also known as mutual mortgage insurance (MMI). With FHA loans, the borrower will need to pay an upfront mortgage insurance premium (MIP) as well as a monthly MIP. The below screen shot illustrates how one would enter the loan amount when there is MIP.

When there is MIP, the "Loan Amount" field must be entered in the following manner. The "Loan Amount" equals the total loan amount, plus the MIP that is being charged. For example, if the loan amount is $100,000 and MIP is $5,000, these numbers would be added together and the sum total of $105,000 would be entered in the "Loan Amount" field.

Click for larger image

Next, you will need to make sure that you have "MIP Financed" entered as a charge. You would select this charge from the DocMagic "Charges" menu in the worksheet, under the "Code" column (see image below). Make sure you fill out the rest of the information in the row, as shown on the screen, such as: to whom MIP would be paid, the amount of MIP financed, whether the borrower or other party is paying MIP, etc.

Click for larger image

Finally, you will need to leave Sections A-F blank (see image below). Section G will automatically default with your monthly MMI amount. And, Section H will default to the same date as your first mortgage payment date. For Section I, if you need to collect any months upfront at closing, you would enter it in this section.

Click for larger image

If you have any questions concerning this article, please contact DSI's Customer Service Department at (800) 649-1362.

DSI's Compliance Department invites you to review our other articles on canceling PMI and entering PMI/MMI information in DocMagic:

	Overview
	Canceling PMI
	Entering Monthly PMI in DocMagic
	Entering Upfront PMI in DocMagic