Recently had a BPO done on my house to see if I could get PMI removed from my mortgage earlier than scheduled. We've owned the house almost 2 years and had made substantial improvements since purchase. BPO was $150, while PMI is $85/month so I figured it was worth a shot. Got a letter in the mail saying our home value had increased but was still a few grand short of the 80% LTV needed for PMI removal.

My questions: does the new value reflected in the letter replace the value of the house for my mortgage moving forward? If I pay down to the new value now, can I get the PMI removed? Or does the value not reset because we didn't hit the 80% LTV threshold? Seems like that would be BS, but I've never done this before and want to understand the situation before dropping extra money on the loan with little benefit. Tried googling without success.

I think, and I'm sure a mortgage guy will come correct me, you have to be around 78% LTV to get the PMI removed.

78% is the automatic removal threshold, but I can request it be removed once I hit 80%.

Here is a chart: https://app.mbslive.net/asset/6051294a311f7fafb993f549

If I'm reading that correctly, that means I'll have to get a new BPO when I feel like I'm at 80% LTV if I do it within the 2-year window. If I'm outside the 2-year window, I'll need to get the BPO but be at 75% LTV. Either way I'm rolling the dice on a new BPO and have to put the money on the loan ahead of knowing what the goal is because the BPO I just got doesn't reset the value.

Is that right for a principal residence?

You have owned the home for under 2 years correct?

Yes. Purchased in April 2023, so just a few months left until the 2-year mark.

if you have owned for under 2 years the only way to drop MI is by paying down the actual mortgage to be under 80% of from the original value. So, you cannot use a stepped up improved value.

After two years, you CAN use a stepped up value but then has to meet the 75% threshold instead of 80%.

That's not what my PMI removal denial letter says. It's using the 80% cutoff for me right now.

In my experience with servicers is that they have no idea what they are doing when it comes to MI and consistently give contradictory info. also, I am not an expert on that side of the business either. But, that is what the above chart says.

Does Fannie or Freddie own your loan? You have gotten a letter 1-3 months after you closed that would have told you.

That's unfortunate. Rocket Mortgage is my servicer for now. Used to be Mr. Cooper. Neither of them provide enough information on their websites on how all this works, imo. Looks like Freddie Mac owns it based on the online lookup tool.

I appreciate you answering my questions.

ok, looks like the above chart might be a bit dated info. It looks based on this direct link to Freddie (https://guide.freddiemac.com/app/guide/section/8203.2) if you have "substantially improved" which is defined on the link and how you prove it, you do not have a 2 year waiting period AND no matter the time period can waive at 80% with improvements.

You would be looking at (b) which is "borrower-requested cancelation of borrower paid mortgage insurance based on current value".

That is incredibly helpful. We've definitely met the standard of substantial improvements already, and there are a couple more to come. Seems I just ordered the BPO a bit early. I'll have to consider whether to pay down to the BPO value I was given before ordering another. At some point, accelerating the PMI removal isn't worth it anymore. Thanks for your help!

I have yet to figure out how the mortgage service companies get paid by the mortgage insurance company, but they have to. No other reason for them to be so awful about this. They are intentionally slow playing or making tasks overly arduous every time. Only explanation is they are getting paid and want the money to keep rolling in.

They do not get paid by the MI companies, but the loan is worth more (if they sell the servicing rights) and better protected (if they have to foreclose) WITH MI then without. So there is an incentive to keep the MI in place for the servicer. Does not excuse shady tactics and slow play that servicers engage however.