The Community Associations Institute applauds Congress for passing private mortgage insurance (PMI) cancellation legislation that will benefit many condominium, cooperative and planned community homeowners across the nation. Legislative history accompanying the compromise bill, passed yesterday, incorporates CAI's language clarifying that condominiums and cooperatives, as well as single-family homes, are covered by the legislation. President Clinton is expected to sign the bill.
CAI has been actively supporting PMI cancellation legislation since early 1997 and recently intensified its push for final action through a national grassroots letter-writing campaign. "This is a great victory for American homeowners, many of whom will save an estimated $500 to $1,000 annually because they will no longer be forced to pay for unnecessary mortgage insurance," said Richard S. Ekimoto, chairman of CAI's Government and Public Affairs Council. "We are especially pleased that CAI was successful in clarifying that the bill's benefits will be available to the nation's 5 million condominium and cooperative owners, since there was some concern they might be inadvertently omitted from the legislation."
Most homeowners are required to obtain and pay for PMI when they commit to a down payment of less than 20 percent of the total value of their home loan. However, it is often impossible to learn when and how to cancel such insurance, even when an owner's equity exceeds 20 percent.
The legislation passed today would allow most homeowners with good payment records to cancel PMI when the equity in their home reaches 20 percent and require automatic cancellation when equity reaches 22 percent, so long as the owner is current on the loan. Cancellation rights are restricted for borrowers who obtain certain low-down-payment loans through Fannie Mae, Freddie Mac, the Federal Housing Administration and the Veterans Administration. Unfortunately, CAI's recommendation that owners be allowed to request cancellation of PMI based on growth in their equity due to appreciation in their home's appraised resale value was not included in the final legislation.
The legislation will not preempt PMI cancellation laws currently on the books in eight states provided they meet certain criteria within two years.
The Community Associations Institute is a nonprofit association created in 1973 to educate and represent the nation's 205,000 community associations—condominium associations, homeowner associations and cooperatives. CAI members include homeowners, associations and related professionals and service providers.