What to Do When Your PMI Cancellation Request Is Denied

You sent the letter. You waited. The servicer wrote back and denied the request. Here is what to do next.

First, read the denial carefully. Servicers are required to give you a reason. Common reasons include insufficient payment history, a subordinate lien on the property, a decline in property value, or a request that does not meet the servicer's documentation requirements.

Second, check the reason against the law. If the servicer says your payment history is not good enough, the law defines what that means. You cannot have any payments 30 days late in the 12 months before the request, or 60 days late in the 24 months before the request. If you have a clean record and they denied for payment history, they are wrong.

If the servicer says you have a subordinate lien, that means there is a second mortgage or home equity line of credit on the property. The law does allow them to deny cancellation for that reason. You may need to pay it off or restructure it before you can cancel PMI.

If the servicer says the home value has declined, they are allowed to require an appraisal or a broker price opinion to confirm current value. If the value is below the original value, cancellation can be denied. In that case the automatic termination at 78 percent still applies regardless of value, as long as you are current.

Third, resubmit with better documentation. Many denials are procedural, not substantive. The servicer did not get the right form, or the letter was missing a required signature, or the appraisal was ordered from the wrong vendor. Fix the issue and try again.

Fourth, escalate. If you believe the denial is wrong, you have the right to file a complaint with the Consumer Financial Protection Bureau. That complaint goes to the servicer's regulatory compliance team, not the customer service line. It usually gets a real response.

Fifth, consider the automatic path. Even if your request is denied, the automatic termination at 78 percent still applies. If your balance is close to that number, it may be faster to wait for the automatic cancellation than to fight the denial.

Do not assume the denial is final. Many are not.