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Jewish World Review August 16, 1999 /4 Elul, 5759

Bruce Williams

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Econophone

Thinking about PMI


http://www.jewishworldreview.com -- DEAR BRUCE: Usually, PMI covers the first 20 percent of your mortgage -- or less, in some cases -- and can be dropped after your equity increases. FHA PMI stays in place permanently. Could this coverage be thought of as FHA-required training wheels? -- Roger, via e-mail

DEAR ROGER: I have never thought of it quite that way, but it came as a shock to me that with FHA loans, the PMI is a permanent proposition. What PMI amounts to is a hired co-signer for the first 20 percent of a loan. If you default, the lender is guaranteed that he will recover his money. Why it would be necessary in the FHA rules to require someone with a 50-percent equity in a property to continue with a PMI is beyond my understanding. The government changed the rules for private mortgage lenders so that at 78 percent, you have a right to apply to have the PMI dropped. What is difficult for me to understand is that this does not apply to our government's own backed mortgages. Go figure.

DEAR BRUCE: I am ticked! I borrowed $5,000 from my local bank in December 1996, using my house as collateral. It was paid entirely in March 1997. In March 1998, I received a notice that I was delinquent for a $60 annual charge to keep my credit line open. I paid this with a letter telling them that I no longer wanted the line. I just finished making a trust with my assets and everything was fine, except that the recorder's office stated the bank was the owner of my home. Today I called and they promised a letter to clear this up. I'm glad I didn't die in the meantime. I know you will tell me I didn't read the papers carefully, but I believe that most of the public wouldn't put up with this, either. Am I out of line to think that banks should give clear, simple instructions to first-time borrowers? -- Reader, via e-mail

DEAR READER: Of course they should, and the smart banks, particularly some of the smaller ones, do exactly that, putting the contracts in reader-friendly language. Nonetheless, the responsibility is yours to understand what you are getting into. You could have canceled the line of credit a year earlier and saved yourself the $60. I doubt seriously that the bank became the beneficiary unless the bank was a lien holder and the lien had not been filed as satisfied. Even if you had died, your relatives would have received all of your assets, albeit with a bit of legal hassling. The bottom line? It is your (the borrower's) responsibility to see that a satisfaction of lien is recorded.

DEAR BRUCE: I will be 64 in September. A lot of my friends are telling me that I am losing money by not collecting Social Security. I am happily employed and I make over $50,000 a year. What should I do? -- E.R. Oklahoma City

DEAR E.R.: If you enjoy what you are doing and you are staying with it, forget about Social Security for awhile. If you don't need the money, there is no advantage to collecting it starting at 62, especially if you are lucky enough to enjoy a decent amount of longevity. The question becomes academic if you continue to earn the sort of money you and I both hope that you will.



Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).

Up

08/13/99:Short-term mutual funds a-OK
08/11/99: It's your job to shop around
08/10/99: Sometimes, roots need to be uprooted
08/09/99: 'Pre-approved' doesn't mean a thing
08/06/99: Only you can determine your investments
08/04/99: Bank IRA the lowest-risk option
08/03/99: Reverse mortgages good for the elderly
08/02/99: Get the survey BEFORE you buy the house!
07/28/99: Get a lawyer -- it's worth it!
07/27/99: If it ain't broke...

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