[Congressional Record Volume 142, Number 82 (Thursday, June 6, 1996)]
[House]
[Pages H5982-H5983]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       PRIVATE MORTGAGE INSURANCE

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Utah [Mr. Hansen] is recognized for 5 minutes.
  Mr. HANSEN. Mr. Speaker, if I told you that you owed me $50 a month 
for 30 years would you pay it if you did not have to? If you answer 
yes, I have some private mortgage home insurance [PMI] for you. But if 
no is your answer, then why are thousands of people doing it?
  Private mortgage insurance [PMI] is to provide lenders--or the 
ultimate purchaser of a loan--protection against a home owner's non-
payment. The insurance typically insures a percentage of any potential 
loss. The majority of people buying homes nowadays put down less than 
the traditional 20 percent of the home purchase price. As a result, 
many of these homeowners have accepted the fact that they have to 
commit a part of their monthly home mortgage payment--typically $50 to 
$90 to pay for mortgage insurance.
  The problem arises when the homeowner overpays private mortgage 
insurance; can't cancel the PMI; or is not told that they have the 
right to cancel it. It is not a new problem, but one that has made many 
servicers and insurers rich. It has been going on for years. What makes 
private mortgage insurance even more sinister is that those who are 
mostly taken by it are the ones that need the money most, once they are 
not required to pay it.
  Nineteen years ago, a secretary in Dallas, TX, purchased her home for 
$26,000. She financed $22,950 and was required to purchase private 
mortgage insurance [PMI], which is required as a condition of making a 
loan to a homeowner with less than 20 to 25 percent down on a home. At 
no time was she told that she had a right to cancel the mortgage 
insurance. Over 19 years later, she and her husband are still paying 
PMI. Why? Her current loan to value ratio is almost 90 percent, which 
means that her debt is 10 percent of the value of her home.
  Her home mortgage servicer continues to charge these premiums every 
month even though it knows that the PMI is unnecessary when it passes a 
certain amount. In fact, her home mortgage servicer has been charging 
her for PMI, even though the owner of her home mortgage requires zero 
insurance. Moreover, she has been required to overinsure her home 
mortgage for

[[Page H5983]]

years. As the investor's insurance requirement decreased, her servicer 
continued to keep the original coverage amount in place. So, she has 
been a victim of paying insurance for too long. Her servicer has been 
overinsuring her home loan, and failing to cancel the insurance when it 
knew she had the right to, and failed to even tell her that she could 
insist on the cancellation of the insurance.
  She is not alone. The above example is just one of the 315,000 
homeowners that her lender services. Her lender, even at the more 
conservative fee of $50 a month for PMI, could theoretically collect 
tens of millions of dollars a year in PMI charges for the home 
mortgages it holds. It is time that we stop the scam.
  It is time to stop sticking it to hardworking homeowners. I have 
introduced H.R. 3556 that will correct this problem and will: First, 
require the lender or person making or arranging the loan to disclose 
to the homeowner that PMI is and how it can be canceled and second, 
provide the homeowner with the right to cancel PMI. If the borrower has 
met the mortgage owners requirements for cancellation, ie., a good 
payment history and if once the equity in the property has reached or 
exceeded 20 percent of the original appraised value of home.
  This bill will continue to protect mortgage lenders, insurers and 
mortgage servicers, while at the same time protecting thousands of 
people throughout the United States who have PMI long after all 
requirements for release are met.

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