Mortgage Lenders insurance refund

From: Tibor Bode


I'd like to ask some people about their knowledge, opinion, fact about no refund on mortgage insurance. I had this email exchange with my broker and I think somehow that this is not right. I had asked him based on recent sales to organise a revaluation and a corresponding refund on the MLI premium as the property prices I have recently purchased and renovated have risen so several properties are under 80%.His response is below. I do not try to vindicate him, I just want to understand whether I am entitled or not for a refund.
Any advice would be greatly appreciated.

Tibor

"Firstly even if the new valuation suggests that the property has in fact increased in value, does not qualify for the mortgage insurance to be refunded. This premium was paid at the time of when the loan was drawn down and the risk was measured and paid for at that moment in time. Neither the
increased value of the property nor the amount of loan you have paid off will qualify for a refund. The LMI has obviously taken into account that the property bought will increase in value over time, otherwise the premiums would have been a lot higher if they that the risk was going to be greater.
So in saying this, the additional equity may be able to be used to purchase additional properties without using your own funds, but this is a vast uncertainty."
 
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Reply: 1
From: Robert Forward


Hi Tibor

I'd suggest going straight to the bank themselves and getting a reval. You can receive your LMI payments back, I was notified today that I will receive mine in 2 weeks time.

The deal on this property was a 95% P&I refinanced to another lender for less then an 80% lend within 3 months of purchase. I will receive approx 70% of my LMI payment back. The LMI company was Gemco, which is one of the companies that NAB use.

Cheers,
Robert

Property Inspection Reports @
http://www.creativefinance.com.au

The Sydney "Freestylers" Group Leader.
 
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Reply: 1.1
From: Tibor Bode


Thanks Robert,

I've copied your response back to my broker and he said he is going to contact the financial institution in question. All I am after is a fair deal and as much as I do not like to cheat others, I don't like to be cheated either.

Tibor
 
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Reply: 1.1.1.1
From: Paul Zagoridis


This thread adds another reason to never cross-collateralise your portfolio.

If a stand alone property suddenly comes within an 80% LVR you can try to get some of your premium back.

If you are cross collateralised your entire portfolio must reach 80%LVR - that's a bit harder.

Paul Zag
Dreamspinner
The Oz Film Biz site is archived at...
http://wealthesteem.dyndns.org/
 
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Reply: 1.1.1.1.1
From: Tibor Bode


Thanks Paul,

You just thought me something. Appreciated.

Tibor
 
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Reply: 2
From: Rolf Latham


Hi Tibor

While your broker has not expressed themselves in a straight forward way he/she is effectively right.

The lender is still entitled to having the loan insured UNLESS you renegotiate your loan contract with them or someone else. The value of the property increasing while in reality LOWERING the lenders risk, is not accpetable to the lender unless it is renegotiated as such. Having said all of that it should be no relatively easy to renegotiate the loan contract.

It is not the lender that will make the refund, but usually a third party.

Ta

Rolf
 
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Reply: 2.1
From: M D


Hi,

After reading about this LMI refund, I contacted CBA regarding my refund. My property is now below the LVR even though we only bought it some 10 mths ago. The bank said NO :( Said if that was the criteria for refunds, the bank would be running around refunding all those customers who have increased valuations within the 1st year. Valuations cost them money too. Was told they will only give the refund if the loan on the property is repaid. Therefore, my hopes of getting back some 2k plus back is dashed :)

Duncan, I saw that you are trying with CBA too. Please let us know how you go. Thanks.

May
 
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Reply: 2.1.1
From: Tibor Bode


Hi May,

The valuation you will have to pay for it. Its fair enough. But it seems to me a scandalous rip-off (might worth to contact local state fair Trading or ACCC) that while you are forced to take out an insurance for a period of time which protects the lending institution, when the risk diminished, you still have to pay for it. As I remember back in the 80s this was something similar with Consumer Credit Loans (compulsory life insurance on top of the 30% interest to protect the lender in case you die, getting unemployed etc) which was stamped out in one of the latter credit legislations if I remember correctly. If this would be the case with MLI, might worth to consider to start lobbying the local member, but somehow I have a feeling that the CBA might plays some funny game. Why the NAB refunded the money? They are not stupid. It bothers me as we are talking about considerable amount of money which would worth to pay for the valuation.

Tibor
 
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Reply: 2.1.1.1
From: Rolf Latham


Hiya Guys

Just a quick Note that the Mortgage Insurer for CBA is GE.

A third party to CBA. Soooooo you can see why they would be very very reluctant to go down that track. I suggest if you want to chase it further you may want to take it up with GEMICO rather than CBA

Ta

Rolf
 
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Reply: 2.1.1.1.1
From: M D


Thanks Guys!

Tibor, I did mentioned some banks refunded the LMI but was told there is no such policy. As I did not want to make such a big issue out of this, I had to accept what they said. Now that I know who the insurer is, kind courtesy of helpful Rolf, I am thinking of chasing it with them but not sure if I should, in case it may 'jeopardize' my future LMI loan borrowings. What do you think guys?

Also, Rolf, are there other loan providers apart from ANZ which give 95% borrowings using LMI? Thanks!


May
 
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Reply: 2.1.1.1.1.1
From: M D


Dear Rolf,

No need to answer my dumb query regarding the 95% lending. Sorry about that. Just found out I can find the info on the net. Thanks!

<:)May
 
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Reply: 2.1.1.1.1.1.1
From: Tibor Bode


Hi everyone,

Just another piece I came across yesterday while I was doing my papers.
I got a comparative premium for the 3 LMI insurers (PMI, CGU and GE) and the for is referring to either regulated or unregulated 24 Months CFC rates. It would indicate to me the LMI is taken out (we are paying premium for 2 years) for a reasonable period, therefore if the property value improves within the first 6 months, the majority of the premium should be refunded (depending on the Time On Risk calculation method)

How nice would be if lenders would supply this information to you up front as THEIR disclosure requirements. WE (borrowers) supposed to disclose everything (basically agreeable with it) but I was wondering what is the proper legal term for this kind of behaviour when the lender does it? Isn't it getting a financial gain (commission on the premium for the period) by deception (not disclosing fact) also?

Just a thought.


Tibor
 
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