In Part 1 of 2 in this learning session we will be discussing PMI processing on Fiserv Premier®. Most of the processes can be automated but there are a few things to consider:
LTV Calculations vary
LTV Calculations can be based off Current Balance, Original Amortization, or Current Amortization. Additionally, the balance can be used with the Collateral Value, Appraisal Value, Purchase Price, or a combination of the three. All these variables can change depending on the type of PMI.
Borrower-Requested Cancellation is typically considered at 80% LTV (of the “Original Value”), however it can vary with Secondary Market loans (like Fannie Mae) and there are special considerations around these exceptions. One critical piece to understand is that Cancellation LTV calculation is based on Actual Payments (Current Balance) and NOT Original Amortization like Termination. The Cancellation process is more or less a request from the customer to be evaluated for Cancellation eligibility. We recommend to most banks to handle this process manually because there are some automation limitations and most financial institutions have a process that needs to be gone through to determine Cancellation eligibility. This process may require things like a new appraisal, satisfactory payment history over a specified time period, and a customer request in writing.
Automatic Termination on the other had is a little more black and white. Termination is typically at 78% LTV, based on Original Amortization, regardless of Principal Curtailments. The loan needs to be Current and is based off when the loan would hit 78% based off the amortization of the Original Value, regardless of a declination in property value below the Original Value. It is sometimes handled incorrectly by taking into consideration additional payments that lower the Principal balance. Again, it is always based off Original Amortization.
There are special considerations for Modifications when there is a Principal Increase
Modifications may require getting Permission from the PMI Company to continue PMI with the new loan amount. A New Amortization schedule is also required to determine the new Termination Date. There are special considerations for automating this process.
There are other types of Qualified Mortgage Insurance, similar to PMI
PMI has been the target of this article, but there are other types of Qualified Mortgage Insurance that are similar to PMI. For instance, RD Guaranty Fees and VA Funding Fees can be PMI reportable, but may be handled differently than traditional PMI.
For further assistance with PMI Automation contact us at Peak Consulting LLC. We’d love to help you assess your portfolio, free of charge, and to answer general questions.
In Part 2 of 2 in this learning session we will discuss Notices and Annual Disclosures.
Remember, even if you have only a few accounts the automation will save time and more importantly help eliminate errors.