Senate Banking Panel OKs Bill on Private Mortgage Insurance

A measure that could save the nation’s homeowners money they pay for unnecessary private mortgage insurance moved closer to passage Thursday when it was approved by the Senate Banking Committee.

The panel adopted by a vote of 16 to 1 the bill proposed by its chairman, Sen. Alfonse D’Amato (R-N.Y.), sending it to the full Senate. Similar legislation was passed by the House in April.

Homeowners would have the right to cancel without penalty their private mortgage insurance once they build up enough equity--20%--to secure their loans. In addition, the measure would require automatic cancellation of private mortgage insurance at the 22% equity level. Average insurance payments range from less than $20 to more than $100 a month.

Current law doesn’t require lenders to cancel at any time.

The bill also would oblige lenders to tell homeowners of their right to cancellation every year on their annual statements.

As many as 250,000 homeowners are paying for mortgage insurance coverage because they don’t know it can be canceled, or they can’t persuade lenders to cancel it, supporters of the legislation say.

“Thousands of hard-working Americans, who strive every day to afford a house of their own, are unfairly paying for mortgage insurance they don’t need,” D’Amato said. “We must stop this fleecing of the American homeowner with unneeded insurance. It is an unethical practice.”