PMI Overpayment

I made PMI payments as discussed in my last post for about two and a half years.  Even though interest rates were low at the time my loan was made, the higher percentage due to it being an investor property, combined with the PMI, made the effective rate over 7% (and climbing).  I was looking for ways to get out of what by today’s standards would be seen as a high interest rate and ultimately refinanced at almost the best time in the history of recorded mortgage rates.  My parents wisely told me to verify that the final escrow statements of the two mortgages were correct.  I contacted both banks and asked how my escrow and any overpayment would be refunded.  The accounting mostly appeared correct to me.

Wellsfargo sent me exactly the amount they said they would (the remainder of the escrow).  Citi did not.  I called to find out why some money had mysteriously come out of my escrow.  They said it was used to make two PMI payments and that the PMI was paid two months in arrears.  I went back and looked over the full history of payments.  Citi was paying my PMI to a company called Genworth.  The payments made to Genworth did not seem to coincide in any way with the payments I made to Citi.  They were on a completely different payment schedule.  This would have been fine, except that when I added up the number of payments I made to Citi, it came out to 31 months and a few days, but Citi made 32 payments to Genworth on my behalf.  It appeared as though they were charging me for December because the PMI payment was made around mid-month, even though I paid Citi off on the third.

Lets consider this for a moment.  PMI is insurance.  Insurance is usually prorated to the day.  It’s not like, for example, an agreement you might have with your tenants.  If the lease says the tenants are to move out by the 31st, and they leave on the 15th, you don’t refund them 15 days of rent.  You can’t just re-rent the house for those 15 days.  It costs you money.  Insurance has no costs.  More specifically, insuring something that has zero risk is free money.  Since my mortgage was paid off, there was no risk of default, and I was forced to pay insurance for something that could never happen.

I reviewed the Deed of Trust, which had a section on mortgage insurance.  It does not specifically mention how the insurance is to be paid, but it does have a sentence that says “Borrower is not a party to the Mortgage Insurance.”  I’m not exactly sure what the implications of this are, but I’ve taken it to mean that there is some agreement between my lender and the mortgage insurance company.  And whatever this agreement is, I am somehow bound by it.  If that’s even close to true, it makes me wonder if such an agreement would even be upheld by a court.  Since I have no say over whatever agreement they might have, they could theoretically put whatever they want in it, and I would be the one to suffer the consequences.  I was unable to find any other settlement documents that might have specified the exact terms of the PMI.  Of course, if you have ever been to settlement, you know that there’s enough documentation to make medium sized book.  It’s possible I simply overlooked something.

I contacted Citi by email half a dozen times.  I could not get them to answer my question about the (possible) overpayment.  They kept referring to the fact that the PMI was paid in arrears.  One time they told me the insurance company would send me a refund if applicable.  I contacted Genworth and they told me they didn’t owe me anything.  So I made various threats to Citi, such as reporting them to the regulatory agency and so on.  They responded by saying that they would conduct some kind of review.  A few days later they mailed me a statement saying that the PMI was paid in arrears and that no refund was owed.

Finally, I called them again.  I insisted the customer service representative and I go over the entire history of payments until we could come up with the discrepancy that was causing our disagreement.  After several minutes of going back and forth it was established, according to him, that because I made a payment on the first of December, Citi had to make a PMI payment to Genworth.  Never mind that all the interest for the month except for two or three days was refunded to my escrow.  If I had known this ahead of time, I would have turned off automatic payments, and apparently I would not have paid any PMI for the month of December.  (Of course, if NASA FCU had sent my loan to underwriting on time, I would have settled long before December anyway.)  I am doubtful of what he was telling me.  It doesn’t make any sense that I could have gotten out of that last PMI payment by simply delaying my monthly payment until the mortgage payoff was received.

I asked him if he could send me a copy of the agreement with these terms.  He said would put in a request to send me the agreement signed by me.  Whoa!?!?  I signed this?  Well, maybe I did.  I’ll find out in a few days.

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