Rep. Jim Hansen, R-Utah, says private mortgage insurance can turn into an expensive scam for homeowners, and it is time to stop it.
He introduced a bill that would require full disclosure of what private mortgage insurance (PMI) is, and set some conditions under which it may be canceled.Many homeowners are required to buy PMI initially - with payments averaging between $50 and $100 a month - when they do not put at least 20 percent down on their mortgage, Hansen said. It helps guarantee payments, helping them get into homes with mortgages that might not otherwise be approved.
"This bill will correct a long-standing and widespread problem by requiring the lender or person arranging the loan to disclose to the homeowner what PMI is and how can be canceled," Hansen said.
"Second, this bill will provide the homeowner with the right to cancel PMI once certain requirements are met; namely, a good payment history and equity in the property of at least 20 percent of the original appraised value of the home."
Hansen added, "It is not fair for the average homeowner to pay for something that they don't need. And it is even more unfair when a homeowner is never told that he/she does not have to pay these premiums."
He said, "This is not a new problem, but one that has been going on for years and it is time to stop the scam."