I have a neighbor who is going through this right now (not the person in the article) and I decided to do some research after he told me about it.
And a link to a law firm that is getting involved in Virgina. This explains the scenario as well.
I'd really like for a mortgage professional to chime in here because I want to know if there is anything they can do about this. Thanks!
I can't comment to the legality of the issue, but lender paid PMI is a very common now a days. It is most common in first time home buyer setups... they will increase the going rate by 1%, but eliminate PMI for the loan. The lender is more than willing to do so because they will make a LOT more money over the life of the loan. They are denying the refinance because it would eliminate their stream of profits.
Starting Score: 627 EQ, 621 TU - 11/15/08
https://www.facebook.com/note.php?note_id=181366745221774
There has been a class action lawsuit filed for your particular issue.
http://www.bluestephens.com/assets/1/First%20Amended%20Complaint%20(Stamped).pdf
This is the Complaint the law firm filed.
The problem is not that the LPMI exists. The problem is that they don't disclose it and no other bank will refinance a loan that has a LPMI
@soliloquy wrote:https://www.facebook.com/note.php?note_id=181366745221774
There has been a class action lawsuit filed for your particular issue.
http://www.bluestephens.com/assets/1/First%20Amended%20Complaint%20(Stamped).pdf
This is the Complaint the law firm filed.
The problem is not that the LPMI exists. The problem is that they don't disclose it and no other bank will refinance a loan that has a LPMI
I didn't see that part and it doesn't make any sense. Why would another bank care what the lender is paying. I see that it can't be done through the HARP program, but in a standard refi, wouldn't the question just be whether the bank is willing to loan the payoff amount given the value of the house? Why would they care if the lender is carrying a separate mortgage policy on the loan?
This is an excerpt from the lawsuit:
On or about December 17, 2009, Bank employee Mod Cut informed the Kiels
via written correspondence that the Kiel Loan was encumbered by LPMI. The Bank stated:
Our records indicate that your loan has Lender Paid Mortgage Insurance
(LPMI). As the premiums are paid by the lender and does not affect your
monthly payment. I have also confirmed that disclosure of LPMI is not
required at the time of origination.
It still doesn't make sense but there are THOUSANDS of complaints about it. Read the link to the lawsuit, it's really amazing.
Please don't post personal names in the public forums.
MarineVietVet, myFICI moderator
@soliloquy wrote:This is an excerpt from the lawsuit:
On or about December 17, 2009, Bank employee Mod Cut informed the Kiels
via written correspondence that the Kiel Loan was encumbered by LPMI. The Bank stated:
Our records indicate that your loan has Lender Paid Mortgage Insurance
(LPMI). As the premiums are paid by the lender and does not affect your
monthly payment. I have also confirmed that disclosure of LPMI is not
required at the time of origination.
It still doesn't make sense but there are THOUSANDS of complaints about it. Read the link to the lawsuit, it's really amazing.
I read (skimmed) the complaint. I don't see a reference to other lenders refusing a refinance because of LPMI. What I see is HARP guidelines not allowing it and a lender not wanting to refi its own loan because of LPMI. On the latter, it isn't very clear that it is really the LPMI that is the issue, or if it is just the fact that these people are probably so underwater on their homes.
I don't see anything that suggests that if I had a mortgage with LPMI through Bank of America and was say 70/30 on my home that Wells Fargo, for example, wouldn't refi because of the LPMI.
These people were told there would be no PMI on their loan. Other people, not just people in this complaint, like my neighbor, have been told that they cannot refinance their loan because the loan was encumbered by a LPMI which they never knew about until they tried to refinance. This isn't just HARP financing either. However, it's interesting to know that HARP does not prevent the refinancing of LPMI's. It is possible to qualify with LPMI through the HARP program. But, it's up to each bank whether they permit this within their guidelines. Additionally, IF you have LPMI, you have to refi through your current servicer.
These people were told that their loan was ENCUMBERED by a LPMI which implies that the LPMI acts as a type of lien on their loan.
Here is a couple going through the same thing that visited several banks in an attempt to refinance.
And a statement from the law firm.
REPRESENTATIVE ENGAGEMENTS
Bank of America Lender Paid Mortage Insurance (LPMI)
Mod Cut , P.C. have filed a proposed nationwide class action lawsuit against Bank of America, alleging that from 2007 through 2009, the bank fraudulently marketed its deceptively-named No Fee Mortgage Plus (NFMP) loan product to borrowers across the country.
The lawsuit alleges that the Bank, through its marketing materials and loan documents, falsely claimed that NFMP loans would not be burdened with any form of private mortgage insurance. The named plaintiffs learned that Bank of America covertly purchased lender paid mortgage insurance (LPMI) policies on their homes without their knowledge or consent when they attempted unsuccessfully to refinance their NFMP loans. The plaintiffs allege that the LPMI premium costs have been passed along to them in the form of higher interest rates, making the bank’s promise of no fees completely false.
The plaintiffs also allege that by failing to disclose and, in fact, hiding its purchase of LPMI, Bank of America violated the Homeowners Protection Act of 1998, which requires lenders to disclose, among other things, the existence of and process by which a borrower may cancel LPMI.
The class action lawsuit seeks to represent anyone who acquired a home loan from or through Bank of America under the No Fee Mortgage Plus program. If you have information that you believe is important to the case, please contact Mod Cut
I also edited this post as per the forums Terms of Service which prohibit the posting of any personal information belonging either to the poster or another person, including, but not limited to, full name, address, phone number, email address, social media accounts (Facebook, Linkedin, etc.);
MarineVietVet, myFICO moderator
@soliloquy wrote:These people were told there would be no PMI on their loan. Other people, not just people in this complaint, like my neighbor, have been told that they cannot refinance their loan because the loan was encumbered by a LPMI which they never knew about until they tried to refinance. This isn't just HARP financing either. However, it's interesting to know that HARP does not prevent the refinancing of LPMI's. It is possible to qualify with LPMI through the HARP program. But, it's up to each bank whether they permit this within their guidelines. Additionally, IF you have LPMI, you have to refi through your current servicer.
These people were told that their loan was ENCUMBERED by a LPMI which implies that the LPMI acts as a type of lien on their loan.
Here is a couple going through the same thing that visited several banks in an attempt to refinance.
And a statement from the law firm.
REPRESENTATIVE ENGAGEMENTS
Bank of America Lender Paid Mortage Insurance (LPMI)
Mod Cut , P.C. have filed a proposed nationwide class action lawsuit against Bank of America, alleging that from 2007 through 2009, the bank fraudulently marketed its deceptively-named No Fee Mortgage Plus (NFMP) loan product to borrowers across the country.
The lawsuit alleges that the Bank, through its marketing materials and loan documents, falsely claimed that NFMP loans would not be burdened with any form of private mortgage insurance. The named plaintiffs learned that Bank of America covertly purchased lender paid mortgage insurance (LPMI) policies on their homes without their knowledge or consent when they attempted unsuccessfully to refinance their NFMP loans. The plaintiffs allege that the LPMI premium costs have been passed along to them in the form of higher interest rates, making the bank’s promise of no fees completely false.
The plaintiffs also allege that by failing to disclose and, in fact, hiding its purchase of LPMI, Bank of America violated the Homeowners Protection Act of 1998, which requires lenders to disclose, among other things, the existence of and process by which a borrower may cancel LPMI.
The class action lawsuit seeks to represent anyone who acquired a home loan from or through Bank of America under the No Fee Mortgage Plus program. If you have information that you believe is important to the case, please contact Mod Cut
I also edited this post as per the forums Terms of Service which prohibit the posting of any personal information belonging either to the poster or another person, including, but not limited to, full name, address, phone number, email address, social media accounts (Facebook, Linkedin, etc.);
MarineVietVet, myFICO moderator
I don't want to beat this to death, but the couple in the link you provided are seeking a loan through the HARP program. And I don't see how the quoted section you provided regarding the class action lawsuit is relevant.
Can you quote something that says that someone who is paying PMI cannot get their mortgage refinanced by another lender. I'm not seeing anything that says that.
My understanding from reading this though is that HARP guidelines do not prevent the original servicer of the loan from using the program when PMI is involved, only other lenders. It does seem pretty shady for BofA or any other lender to choose not to allow a HARP refi because of PMI when the advertized the loan such that there was no PMI.