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I received a payoff statement as well from Citimortgage. It is good through 2/1/13. It also includes 3 months of PMI. I got the same type of explanation which seems bogus.

You asked if they can do that. From my experience, they can do pretty much whatever they want.

My loan is at 60% LTV. I have sent multiple letters to the PMI cancellation department to request that the PMI be dropped from the loan over the course of the past 2 years. I also cited the Homeowner's Protection Act of 1998, which basically outlines the rules for cancelling PMI. I've met all of the rules. Can you guess what their response was?

They told me that I may never be able to cancel PMI on the loan. I've never been late with a payment nor is my loan a High Risk loan that would not qualify. So just like with this payoff statement, they will make up reasons to avoid following the law.

What can an individual do against a bank empire? A class action suit is the only thing that I know of to try and make them pay up. I've searched for class action suits against Citimortgage. There are a couple out there but none that involve shady PMI practices.

My advice is to either put 20% down on your next loan, or try to wait until you can buy a house without the aid of a mortgage. These options obviously aren't possible for most home buyers. But from my experience an individual can't fight a bank regardless of the circumstances.
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