Hello, Bill, and thank you for this excellent question.
By law, mortgage insurance must automatically drop off once your loan balance reaches 78 percent of the purchase price (assuming that the home value equaled or exceeded the purchase price). However, the automatic part of this law won't help you, and here's why:
The Homeowners Protection Act (PMI Cancellation Act) says, "A notice that PMI will automatically terminate on the date that, based on the amortization schedule and IRRESPECTIVE OF THE OUTSTANDING BALANCE ON THE MORTGAGE, the principal balance is first scheduled to reach 78 percent of the original value of the mortgaged property if the loan is current (12 U.S.C. 4903(a)(1)(A)(ii)(III))."
You are better off going with the part that gives you the right to cancel at 80 percent if you have accelerated your repayment. That involves a few more hoops. According to the Act,
“Borrower Requested Cancellation A borrower may initiate cancellation of PMI coverage by submitting a written request to the servicer. The servicer MUST take action to cancel PMI when the cancellation date occurs, which is when the principal balance of the loan reaches (BASED ON ACTUAL PAYMENTS) or is first scheduled to reach 80 percent of the “original value,” irrespective of the outstanding balance, based upon the initial amortization schedule (in the case of a fixed rate loan) or amortization schedule then in effect (in the case of an adjustable rate loan),8 or any date thereafter that:
• The borrower submits a written cancellation request;
• The borrower has a good payment history;
• The borrower is current; and
• The borrower satisfies any requirement of the mortgage holder for: (i) evidence of a type established in advance that the value of the property has not declined below the original value; and (ii) certification that the borrower’s equity in the property is not subject to a subordinate lien (12 U.S.C. 4902(a)(4)).
In other words, if you have gotten your balance down to 80 percent or lower, and you have not been late on your mortgage in the last 12 months (the government is pretty lenient in its definition of “good payment history,” btw) the worst your lender can do is require an appraisal to prove the home value has not declined. If you meet these requirements, PNC HAS to stop your PMI.
If they don’t, check out this forum. A borrower took his bank to small claims court and they offered him thousands to go away. https://www.expertlaw.com/forums/showthread.php?t=180460
I really hope this helps. I am quite certain that the original intent of this legislation was not to allow lenders and insurers to milk extra premiums out of borrowers and punish them for paying down their loans faster. And now I want to write an article covering this. Thank you.