HomeGain Press Release

September 14, 2000

Study Says 2.7 Million Homeowners May Be Paying Private Mortgage Insurance Needlessly

Emeryville, CA - As many as 2.7 million U.S. homeowners paying for private mortgage insurance (PMI) annually may be doing so needlessly and don't even know it. Sharp increases in home sale prices across the country in the past three years helped push equity stakes held by many PMI payers well past the 20 percent threshold required by most lenders to cancel the obligation.

HomeGain (www.homegain.com) studied home sale price increases in 62 American cities between June 1997 and June 2000 and found 95 percent registered sufficient increases in median sale prices to easily give many PMI payers equity in excess of 20 percent. For example, a typical resident of the San Francisco Bay Area who bought the median priced home in June 1997 with only a 10 percent down payment attained 42 percent in equity by June 2000. Borrowers buying a home with less than a 20 percent down payment are usually required by lenders to purchase PMI. The typical cost per year ranges from to 1 percent of the loan amount. For example, a homeowner with a $100,000 loan can expect to pay from $500 to $1,000 per year in PMI. When a borrower's equity reaches 20 percent, usually by paying down the loan balance and letting price appreciation lift the current value of the property, most lenders will drop the requirement when the homeowner meets certain criteria.

Based on the HomeGain study, homeowners in these 10 cities who purchased homes prior to July 1997 achieved the highest equity increases. The average equity stake among this top 10 is 33.8 percent and the typical homeowner in any of these cities would save an average of $1,188 per year if they dropped PMI tomorrow.


June 1997
Sale Price


June 2000
Loan Balance

June 2000
Sale Price



San Francisco, CA







San Diego















Orange County, CA























Minneapolis-St. Paul








New York City
























(Note: Sale price and equity information for 51 other U.S. cities can be found at: PMI Saver)

To help homeowners, HomeGain introduces the PMI Saver, the first free online tool to combine an instant home valuation with an equity calculation. PMI Saver asks the user to input a monthly PMI amount, the purchase price of their home, the down payment amount, current loan balance and the current value of their home. In seconds homeowners learn if they hold 20 percent or more in equity in their home and, if so, what the annual savings would be if they canceled PMI coverage.

"Consumers aren't getting this kind of help from their lender or their private mortgage insurance carrier," Bradley Inman, founder and CEO of HomeGain, said. "There's plenty of advice out there about canceling PMI once you've reached 20 percent, but no one shows you how to do it. Other Web sites expect you to guess at the current value of your home. Now, with PMI Saver you can pin down your present value and easily discover whether you've hit the magic equity mark or not.

"PMI becomes a burden after you've faithfully made payments over time," Inman added. "The secret lenders and PMI companies still don't divulge is that the lender's true risk evaporates once the gap between what's owed and what the home is worth today stretches past 20 percent. You don't need PMI anymore. More consumers should learn if price appreciation has kicked in for them so they can get PMI off their backs and out of their wallets."

Inman estimates approximately 27.4 million consumers purchased a new or existing home from January 1993 through August 1998. (Some lenders have a 24-month PMI payment minimum, so homeowners that took out loans after August 1998 may not yet be eligible to cancel.) Using industry figures, approximately 40 percent of consumers use some form of mortgage insurance to purchase a home and nearly 50 percent of that group have private mortgage insurance that can be canceled. Conservatively, if even 50 percent of the "cancelable" PMI group, approximately 2.7 million homeowners, took an average loan of $100,000, pay percent of that amount in PMI annually, and now have 20 percent or more in equity thanks to sale price appreciation, $114 million per month is squandered in needless PMI expense, according to Inman. That's $1.37 billion annually.

PMI definitely helps more consumers become homeowners sooner. But, despite well-intentioned efforts like the Homeowners Protection Act of 1998, more cloudiness than clear sky remains around PMI and how homeowners can eliminate the obligation.

Take, for instance, Fred Saenz, a Los Angeles homeowner who bought his house six years ago for $240,000. With a 10 percent down payment, he was required to take out PMI and continues to pay a monthly premium of $129. With real estate values rising in his neighborhood, Saenz earlier this year furnished his lender some sales comparables of nearby homes showing prices ranging from $295,000 to $310,000.

"I've been turned down twice for cancellation," Saenz said. "In April I was told I'd have to pay a lump sum of $6,500 to lower the loan-to-original value ratio to 80 percent. They're not even considering that prices around here have jumped 25 percent or more."

Saenz adds that a representative of his lender told him he does not qualify for PMI cancellation "because of the legislation that passed last year."

The Homeowners Protection Act of 1998, which became effective in July of last year, requires lenders to inform borrowers annually about PMI and their ability to cancel. It also mandates automatic cancellation of coverage once a borrower's equity reaches 22 percent. But that applies only to loans originating after July 29, 1999. And the 22 percent automatic "termination threshold", as it is called, is only reached once the borrower pays down the loan balance to 78 percent of the original purchase price. Consumers don't get credit for price appreciation. Homeowners who took out loans after July 29, 1999 can still appeal directly to their lender to drop PMI after they've paid down their loan-to-original value amount to 80 percent. Most lenders, however, require that a minimum period of time pass before they'll consider cancellation.

For the millions of homeowners like Fred Saenz and Nancy Levine of Berkeley, Calif., who took out loans prior to July 1999, the burden of removing PMI is still on their shoulders. In Levine's case, she bought her home 16 months ago for $210,000 and has eight months remaining before her lender will consider canceling her annual PMI obligation of $1,548. In correspondence with the lender, Levine is already receiving mixed signals as to how her equity stake will be determined.

"In one letter, they told me I would qualify to cancel PMI based on a new appraised value for my home," she said. "Then, I received a second letter that said they would base everything on the original value of my home. The lender went back on their word. If they don't honor their word, I'll take them to court."

In addition to providing consumers with an equity figure and potential dollar savings if PMI is canceled, HomeGain's PMI Saver tool also offers links to local appraisers, a PMI removal checklist and information for those considering refinancing options.

Different lenders have different requirements, so consumers are urged to check with their own lender on specifics about canceling PMI.

Sources for HomeGain PMI Saver Study: June 1997 and June 2000 median sale price data -- National Assn. of Realtors, Office of Federal Housing Enterprise Oversight, DataQuick. All other calculations developed by HomeGain.

See Study Results
HomeGain's PMI Calculator Tool

About HomeGain

HomeGain® is a leading provider of online marketing solutions that connect real estate agents and brokers with home buyers and sellers. HomeGain offers free services to find and compare real estate agents, research home values, and view homes for sale. Since 1999 REALTORS® have used HomeGain's real estate marketing programs to connect with consumers, promote their services and grow their business. HomeGain.com has been a top visited real estate website since 1999. HomeGain is your real estate connection.

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Classified Ventures™ is a strategic joint venture among six media companies whose objectives are to collectively capitalize on the revenue growth in the online advertising categories of real estate, automotive and rentals. To execute on its objectives, Classified Ventures has created three leading businesses - Homescape, Cars.com and Apartments.com. Homescape delivers online real estate solutions to a network of over 150 newspapers. Visit www.classifiedventures.com.

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