Increase In PMI A Result Of Bad Lender

Q: I enjoyed reading your articles, and wondered if you could answer some questions I have about a mortgage I obtained in April 2003 in order to pay for my new home.
 

The house cost $110,000, and the interest rate was 7.5 percent due to me being a single parent and having no credit. I put down a little over $4,000, and the loan was for 106,700.

I received a good faith estimate stating that the private mortgage insurance payment would be $84.47 per month, but after closing noticed that the PMI is $371 per month. I have tried several times to contact the original mortgage company to see why this changed, but they sold my mortgage to another company shortly after closing, and say they cannot help me.

Does this sound expensive for private mortgage insurance on a $110,000 home? Can someone triple my PMI without sending me documentation before closing?

I believe that I was taken advantage of by the broker who also advised me to use the lawyer for the mortgage company to cut expenses for myself, as I was a first time homebuyer and single parent of three.

Needless to say the home is facing foreclosure as I cannot pay this high mortgage payment every month. I have written several letters to the State Representatives office, the State Banking Commission, and the Attorney General.

Could you shed some light on this for me and point me in the right direction if there is anyone else I should be contacting, as I am very angry at this point and worry about them taking my home and my children not having a roof over their heads.

A: If your good faith estimate said your PMI payment would be $84.47, then that’s what it should be – not $371. And yes, the PMI charge seems high for what it is, but what is more troubling is your lender's bad behavior and the unfortunate financial situation in which you now find yourself.

You should call the Attorney General's office to make sure your complaint got filed and also file a complaint with the Better Business Bureau. Follow up with the State Banking Commission as well. You should also call the toll-free customer service number on your payment coupon and try to find someone there who can help you. You should also make an appointment to see the manager of the loan office that originally did the loan for you. Be sure to bring your paperwork.

Your letter is a good example of someone who would have benefitted from having her own attorney to make sure that everything was firmed up the way you thought it would be. When you're doing something complicated like buying a piece of property on your own for the first time, it pays to have someone on your side who does not have a vested interest in seeing you close on the property.

In my opinion, using the loan company’s attorney is the same thing as having no attorney. You’re far better off hiring your own legal representation so you don’t get taken.

What you should now do is see if you can refinance your way out of this situation by calling a reputable mortgage company. You can also talk to an attorney about any legal options you may have. At the same time, continue to apply pressure on the original lender by following up with the authorities.

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