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APPRAISERS Are Doing What the U.S. CONGRESS Could Not !

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David C. Johnson

Senior Member
Jan 15, 2002
APPRAISERS Are Protecting Homeowners Where U.S. Congressional Legislation Could Not !

-- and the Mortgage Industry Would Not

Except from:
Appraisers Update
Real Estate Appraisal Section of the
National Association of Realtors (NAR)

Volume IX, Issue IV

Appraiser Update recently spoke to David C. Johnson, a North Carolina
certified appraiser and cofounder of a company, PMI Rescue, that
specializes in PMI removal. We asked some questions regarding the
recent change in legislation and how other appraisers can get into the
PMI business.

How do you think new rules will affect the industry?

<span style='color:darkblue'>While it should end PMI charges over the entire length of a mortgage,
I still have concerns. Really, the only financially responsible method for
a homeowner to end PMI is to have it dropped at the very earliest point,
based on property value appreciation. If the new notifications tend to
"down play" this existing method, the homeowner may wait for automatic
elimination which is guaranteed to be many years and many thousands
of dollars to long. Automatic dropping will occur after 11-13 years while
many, or most, borrowers should be able to end PMI in a third of that time.</span>

Given the fact that much of your work involves PMI removal,
do you think the new notification process will affect your

<span style='color:darkblue'>It is hard to say how the residential appraisal business will be affected.
With lenders starting to use computer programs for the valuation of properties
for mortgage financing, there may be appraisers interested in "drumming up"
work. They may "seek out" homeowners who may be in a position to drop
their PMI and need an appraisal to do so. New underwriting techniques may
turn out to be a boon for getting the word out to homeowners regarding the
proper way to drop PMI.

Our company, for example, offers an information / instruction package that we
anticipate to become a viable product in the future. This is largely due to
inaccurate and incomplete information currently available online and elsewhere.
This misinformation continues to be disseminated by those who have the least
interest in homeowners -- who don't know enough about their PMI removal options.
Even some PMI companies seem to be short on knowledge sometimes. Not
knowing all the facts will continue to be very costly to homeowners.</span>

Any advice for appraisers who are looking to do PMI work?

<span style='color:darkblue'>There are methods to generate PMI work such as identifying likely subdivisions
for heavy concentrations of PMI-burdened homeowners through demographic and
economic analysis, and then pulling records to determine which homeowners
have PMI in the neighborhood. But these methods are open to many caveats so
appraisers should be sure to perform this type of "pre-marketing" very carefully.
Advertising that markets appraisers as "PMI Specialists" is another worthwhile

____________________ </span>

<span style='color:brown'>Why PMI? Appraisal Today, published by Real Estate Communications Resources,
recently outline some reasons why appraisers get into the PMI specialty area.
Consider these advantages:

* Few deadline pressures...good "filler" work

* Steady work that often pays in advance

* Easy to market yourself to targeted lists of borrowers

<span style='color:darkblue'>I read Pamela's thread titled: "Fannie Mae Reviews - Excessive value message" and clicked on her hyperlink and read from a hyperlink there titled "Mortgage Insurance and Loan-Level Price Adjustment Requirements charts." It reminded me to do this post on PMI based on the July/August 1999 edition of Appraiser Update. It's still new news because nothing has changed at all ('cept I rarely do residential work anymore). Still the average consumer -- including quite a few appraisers probably -- don't understand what has happened -- and it is costing the public billions of dollars every year. The "Homeowners Protection Act" is a sham, and is part of a scam. While it did officially outlaw one thoroughly outrageous everyday abusive mortgage lending practice, the new federal law was ruined in advance by highly paid lobbyist from a couple of special interests groups: the mortgage lending and the PMI industries. Thoroughly out-of-hand "special interest groups" (SIGs) are doing serious damage not only to our profession, but also the country -- and this sure is another case of it. </span>

Got A Sound Card? CLICK HERE
Then after Kenneth Harney's Article
go to the very bottom of that page

<span style='color:darkblue'>The legislation is a sham because it exacerbates the very scam it was supposed to fix! You see, the legislation allows the typical homeowner to have every reason to believe they are being protected by the government from the abuse of paying years too long for unnecessary (but mandatory) insurance regarding their mortgages, when in fact, the legislation basically guarantees that now most homeowners will pay years too long. So, due to this legislation, even greater fleecing of homeowners is occurring. United States Appraisers are doing for the United States what the United States Congress absolutely could not do -- but then, we don't accept special interests gifts and "campaign contributions."

As appraisers, we do not have the option of not understanding what is going on around us in our real estate markets, and what is happening to our profession and to our country due to mortgage lending abuses. Real estate is our turf. Regarding PMI abuses, we should all be explaining the TRUTH to homeowners. Let's please not be pawns to a real estate mortgage-based game of ripping off Americans! We can stop it. And get paid for it. Because it's our job.

I will reprint the balance of the article LATER in this thread. But NOT in this post! The author was very well-intentioned for sure, but the writing is wrong -- by Omission of detail. (We all know where the devil's at, right?) Most writing on the subject is similarly faulty. I will explain how it is wrong when I post it. Its very easy to get it wrong! And that was the whole intent by those who derailed the legislation several years ago. A few of these high-dollar MBA-types in office towers might regularly snatch candy from children, but they're sure clever as hell !! In fact, their masterful subterfuge was borderline "brilliant." We had no idea what "conniving" could really mean. It's absolutely amazing. While a few were grinning big, there were more than a few congressmen on the Hill who were 100% disgusted. They had every right to be.

Unlike the ranks of three-piece-suit-type Wall Street stockbrokers, appraisers can provide good honest advice to the public. And yes, can also be paid for the service of assisting them sometimes. (While it's not as easy these days for the enterprising appraiser if he or she has made the effort to contact a likely homeowner since many mortgage servicers -- to thwart such efforts by certified appraisers -- are now stipulating that they must pick the appraiser -- at the same time, any BPO is sometimes just fine.) I told you these guys are a bit conniving, and they are sure very uninterested in losing any of those unearned PMI income streams. But, put yourself in the homeowner's position for a minute: would you be willing to pay someone $300 -- and even thank them -- for saving you over $3,000? If the homeowner has had the property for a few years, odds are it will appraise high enough to qualify for PMI being eliminated in most parts of the country, rather than waiting for loan amortization to reduce the Loan-to-Value Ratio.


David Charles Johnson, PMI Rescue Cofounder
NC State-Certified General Real Estate Appraiser
[email][email protected][/email]

Please read the following hyperlinked post. Yes, I am a part of a crusade to stamp-out bad boards and replace them with better ones. John Walsh is on a similar campaign to stop child abductions. Both are showing serious progress. No, it's nothing really new for me I could provide a substantial list of public service endeavors over the last couple of decades -- someone is welcome to ax. Thank you for reading my post. I believe it's important:</span>

[url=http://appraisersforum.com/forums/viewtopic.php?t=2691]A Presidential Price for Bad Appointments

BTW: Here's another place Americans are getting taken to the cleaners -- the difference is, it can be a real quick fix. It sure worked for me:

Pull your credit cards out. Call the number printed on the back. Tell them you would like a lower interest rate. Also mention that your husband / wife said he / she was planning to payoff the whole balance this week unless it gets lowered. Be prepared to wait as long as two minutes before they let you know what your new rate is. Don't believe it? Try it.

Then tell your husband / wife you'll be dining at your favorite 4 star restaurant tonight, and it will be completely free, as will the next five visits this year -- and every other year until you get that card paid off. Or, let the lower rate help pay the card off quicker. It's up to you.

If they decline, you may already have the best rate you can get with them. Per a recent study, about 50% of callers get immediate rate reductions, and also get thanked for doing business with them (i.e., thanked for keeping a nice high balance with them!). They like people who keep balances -- a lot. (They like me a lot.) If declined, give it another couple months and try again -- it works. It sure did for me.

Anyway you look at it -- Congratulations! About half of us may have already had a more productive day than we thought!


Junior Member
Mar 13, 2002
Professional Status
Certified General Appraiser
David -

Pardon my ignorance, but it looks like you are the king on this matter...

I snagged a heck of a deal on my house about a year ago and I know that the loan to value is well under 80% at this point. I financed 100% FHA (don't stone me!) with a local bank and after a couple of months the loan was sold to GMAC. Your post reminded me about the whole PMI deal and I called to inquire about getting it taken off my loan, but the customer service chick told me that I had to make payments on the loan for 5 years (!?!?!?!) before I could get PMI taken off, regardless of what my loan to value was.. I was under the impression that you could take it off whenever you wanted as long as the loan to value was satisfactory.. are they just blowing smoke up my rear or do the requirements vary from lender to lender?


- Brandon "$25 a month to flush down the toilet" Boyce


Junior Member
Jan 15, 2002
Brandon, if you have an FHA loan, you are'nt paying PMI; you have mortgage insurance premium (mip) which is different. I may be wrong but I think that stays the life of the loan.

David C. Johnson

Senior Member
Jan 15, 2002
<span style='color:darkblue'>Fellas,

Right. PMI (Private Mortgage Insurance) by the Maes (and other more free enterprise-type banking entities), and MIP (Mortgage Insurance Premiums) by FHA, are two different beasts. FHA has had numerous systems over the years and many do not allow the discontinuation of this portion of your monthly mortgage payment. However, we view their system as being much more fair! Some other time on that though. Regardless, we inform people to speak with FHA (actually, we hyperlink to the appropriate page of their website which addresses the issue, and they can then telephone if necessary with a number provided from that site).

An irritation -- intended to cause confusion, in my opinion -- is, since "PMI" has recently gotten some unfavorable press, it has made sense to dump this term with all the "negative connotations" (e.g., remember Kentucky Fried Chicken -- now KFC?). Also, since it sounds so much like the much more benign MIP, the good reputation tends to carry over to the former PMI dog. Get it? Smart guys. (But then, they are just doing their jobs! -- make money for the shareholders at all costs.)


<span style='color:brown'>Brandon, I meant to add, the new name of the game is "MI" (i.e., "Mortgage Insurance").</span>


Junior Member
Mar 13, 2002
Professional Status
Certified General Appraiser
Doh! Ok, that makes sense now.. Thanks.

Leon Stewart

Jan 15, 2002
Many Lenders require a borrower to use an Appraiser from their "Roster of Approved Appraisers" to get PMI removed. So a borrower is taking a big risk by getting a PMI Appraisal before checking with their Lender first.


David C. Johnson

Senior Member
Jan 15, 2002
<span style='color:darkblue'>Leon,

Good point. What you say is very true. It's just a bad move. We are clear about this issue in our instructions, and tell homeowners to contact their mortgage servicer as one of their very first steps in the process.

It is interesting to note, however, that since these loans are commonly packaged and resold, the current mortgage servicer may be on the other side of the country from the property. And as you might imagine, they generally DO NOT have countrywide lists. They just get on the phone and find an appraiser. I received such a call this month (and decided to do the appraisal) from Sacramento, California. The property was in Raleigh. (Wonder if they noticed "PMI Rescue Cofounder" printed on my Qualifications of Appraiser sheet !? -- probably not, just looked at the bottom of the second page of the URAR and tossed it in the file.)

Even though rates are currently their lowest in thirty years, there are still those who cannot comfortably afford to refinance at this time (or may already have a good rate) where an extra $25 to $85 per month would make a good bit of difference. We will be seeing this for years. In fact, dropping PMI may prevent some from going into foreclosure at times. This is no additional risk for the lender since to have been able to drop it, the homeowner will have 20% equity at that point, which is plenty of margin for the lender if they do get the property back.

Appraisers on this forum are always welcome to use the PMI Threshold Calculator on our website whenever they like. This has been of help to homeowners for many years as it computes for them this ever changing value (i.e., the </span>) at any point in time in the amortization process for them to know what the current market value of their property must equal or exceed in order for PMI to be dropped (and also computes their current mortgage balance). We coined this term which is now even used by the industry itself (as the concept apparently had not been articulated in the past in public -- which actually was of some "strategic value" to servicers and PMI companies, and perhaps their common holding companies). In fact, now our calculator has also been replicated, but instead, it is programed to compute the number of years one must continue to pay based on the Wrong Way to go about it, and where no appraiser is required as the elimination is automatic based solely on the paydown of the loan's principle, and therefore does not consider property value appreciation, inflation, improvements, etc. As you might have guessed, the industry's website(s) always seem to overlook ever mentioning the Right Way for elimination!

On your way out after inspections, mention there's a much better way to end PMI payments (i.e., thousands of dollars cheaper and probably a full decade sooner) than collecting nice notices over the years about eventual automatic PMI removal. Awareness of the Right Way may not be common knowledge for a very long time, if ever. It's not just a considerate thing to do, it's also kind of a smart thing to do -- most people don't forget that kind of help. In life, it's good to have friends who trust and believe in you everywhere you go; and of course, you might just get a referral or two per year from such people you have helped somewhere down the road. You never know!


David C. Johnson, Raleigh[/color]

Leon Stewart

Jan 15, 2002

I avoid "Out of Town Lenders" since many are represented by local Mortgage Brokers who originate much of the "Preditory Paper". Many National Lenders have local branch offices that maintains a local Roster of Approved Appraisers that they can select from to do PMI's or recommend to borrowers who seek PMI Removal Services..

I don't think PMI Removal has been that successful in my area (Ohio) because most Lenders have not been as cooperative as they could be because I'm under the impression that they carry the PMI or get a kick-back or referral fee from the Carrier.


David C. Johnson

Senior Member
Jan 15, 2002
<span style='color:darkblue'>Leon,

More interesting observations. Thanks.

To follow is the First Section of the Appraiser Update article cited above that I previously omitted to try to avoid confusion. It's confusing since the whole PMI elimination issue is confusing. I have added our own [pertinent comments] in brackets (yes, I realize it is kind of hard to read as "marked up.")


PMI Bill Implemented

"As of July 29, 1999, the Homeowner Protection Act is in
effect. In terms of private mortgage insurance, this means
that loans originated after July 29, 1999, will automatically
have PMI fees removed [these "fees" being that unitemized
portion of a borrower's mortgage payment that goes to mortgage
insurance companies
], once the borrower has attained 22%
equity in his or her property [Wrong/Inadequate explaination since
in most cases this removal will occur LONG AFTER the borrower has
attained 22% equity since "equity" has conveniently and strategically
been defined here as being only a single component of true equity --
amortization of the loan -- known as principle paydown -- which is
nearly nonexistent in the first years of mortgage payment
and has a good track record of timely payments. Loans originated
prior to this date, however, may only have the fees removed upon a
consumer's written request at 20% [which has been a longtime
"borrower option," and one which certainly REMAINS IN TACT
surviving the NEW & IMPROVED legislation!!

Mortgagees with existing mortgages will receive a notice
annually from their lenders [as will new mortgagees],
disclosing [part of] what their rights are to cancel PMI
[but conveniently not disclosing the existing FAR SUPERIOR
alternative for elimination of PMI
], and a contact name
of the person who controls their PMI. According to the
NAR Legislative Department, there is no new requirement
[while there are still the old guidelines -- which, again, are far
] for lenders to cancel those mortgagee's PMI payments.
However, Fannie Mae and Freddie Mac have expanded their
cancellation policies, to include existing mortgages."[But, for
some reason, never made so much as a peep about the
legislation's inherent subterfuge before, during or after its

Jan 16, 2002
Many Lenders require a borrower to use an Appraiser from their "Roster of Approved Appraisers" to get PMI removed. So a borrower is taking a big risk by getting a PMI Appraisal before checking with their Lender first.



I get a lot of calls to remove PMI (great source of income as David has indicated). I explain the entire process to them, and one of the first things I mention is the so-called "approved list" pit-fall. They thank me, and the vast majority of them call back saying the lender said it was OK. After a while of doing this you'll know the lenders that are OK with it. Now, the only time I mention it is if it's a lender that I don't know. Many lenders send out copies of the "approved list" with a letter notifying people that they might have a chance of removing PMI (something the government regulators forced lenders to do). From this group, I find they all tend to pick somebody local (me) - I love these lists, there are guys from 300 miles away on the list, seems the property owner is smarter than the lender in this case. Property owners are so satified, they tell all their relatives and neighbors (who have PMI) to call me, after a while it
really works out well and has become a good "referral" part of my business.
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