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Lender offers up flimsy reason not to cancel PMI

Question: My home is appraised at $170,000. I bought it for $109,000. My mortgage balance is now $80,690. When I contacted my lender about canceling my PMI (private mortgage insurance), I was told I am only partly qualified, since my loan-to-value ratio is now 78 percent. However, the lender told me my PMI cannot be canceled until March 2006. Is this true?

Answer: Presuming you do not have an FHA mortgage (for which it is virtually impossible to cancel FHA mortgage insurance), your lender is giving you a creative new excuse not to cancel your monthly PMI premium. No "March 2006 PMI cancellation law" exists.

There is no valid reason for your mortgage lender to stonewall and refuse to cancel your PMI. When you bought your home with a low down payment, PMI was needed to protect your lender from loss if you defaulted. But with your current low 78 percent loan-to-value ratio, the lender's risk of foreclosure loss is nil.

Unless you have a very low interest rate mortgage you want to keep, if I were in your situation, I would refinance with another lender at today's low interest rates so you can avoid the unnecessary PMI cost.

Not worth an argument

Question: We bought a house at a foreclosure auction. Three days later, the company handling the sale said it had made a mistake, and we must pay the transfer tax of more than $500. It refuses to record the deed to us until we pay the tax. Must we pay?

Answer: If you got a good deal by purchasing at the foreclosure sale, it's not worth arguing over a $500 transfer tax. As the old saying goes, "Don't steal in slow motion."

Unless agreed otherwise, a property seller must deliver marketable title to the buyer. That means the seller must pay any expenses, such as a transfer tax, to convey marketable title, except if the buyer agreed to pay the transfer fees.

However, foreclosure sales are special situations because they are "as is" sales with no representations or warranties by the foreclosing lender. It's not worth your valuable time to arguing over $500. Pay the transfer tax, and enjoy your bargain purchase.

Refuse unwanted items

Question: My parents died and left us four kids a timeshare in Florida that none of us wants. The annual fees are low. But it will cost several thousand dollars to transfer title through probate. What can we do? I know there is virtually no market for timeshares, especially for older properties like this one. Will submitting to foreclosure hurt us?

Answer: Heirs don't have to accept inheritances they don't want. In the situation you describe, just notify the estate executor or administrator you renounce your timeshare inheritance.

If the annual timeshare payments aren't made, eventually the timeshare will be foreclosed. But the foreclosure will be against your deceased parents, so it should not adversely affect you or your siblings.

For more details, please consult the estate attorney.

Send questions to Robert J. Bruss at 251 Park Road, Burlingame, CA 94010. You can e-mail him at robertjbrussaol.com.

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