When private mortgage insurance (PMI) companies mistreated hundreds of thousands of homebuyers, most people were powerless to do anything but cuss.
But when one PMI company tormented Rep. Jim Hansen, R-Utah, he got even - as only a member of Congress can.Last week, he culminated a crusade to reform the PMI industry - which he says was running a national scam - when President Clinton quietly signed a reform bill he pushed.
To comprehend what happened to Hansen, understand that mortgage buyers are usually required to buy PMI when they don't have a down payment worth at least 20 percent of their home's price.
The insurance covers defaults for banks, thus allowing consumers to buy homes with down payments as small as 5 percent. For most homeowners, PMI adds $20 to $100 a month to their payments.
But consumers often found it difficult to cancel the insurance when the value of their home finally rose - or when they had paid enough through the years so that their equity amounted to 20 percent of the outstanding loan value.
Hansen said he was given the royal runaround for four years when he tried to cancel such insurance when it was no longer necessary - and it made him so angry that he pushed the new law to make cancellation easier now.
He says it began when he came to Congress 18 years ago and bought a condo in the Washington area. Later, he noticed he was paying $20 a month for private mortgage insurance.
"Being a tightwad, I called the people up and said, `What does it take to get off this?' They said, `All you have to do is pay us $4,200' to arrive at the 20 percent equity level," he told a House committee last year. "I paid them that."
But Hansen was surprised to find on his statements that the PMI remained in force. He asked why.
"Then they wanted an appraisal on it," he said.
He said he provided it. "They said, no, it's on the wrong form, and they wanted another one" with their own appraiser, Hansen said.
He said they then said they heard Hansen had rented the condo, which he had not, "but I still had to prove that to them."
Other obstacles came, including having to prove he had a good payment history. Finally, after four years of wrangling, he was able to cancel his private mortgage insurance - but only with the help of direct intervention by his mortgage investor.
So Hansen started pushing a bill to require PMI companies to notify home-buyers annually about what PMI is and how it may be canceled - and to automatically cancel it when the value to loan ratio is 78 percent.
In hearings, Congress heard that hundreds of thousands of people continue to pay for PMI because they do not realize they no longer need it - and PMI companies don't volunteer that information.
Also, Congress heard how many others - like Hansen - were given a runaround when they did try to cancel it.
Hansen found many allies in both political parties, but the fight was still far from easy.
PMI companies - and members of Congress from areas where the largest such companies have their headquarters - argued that changes Hansen wanted would drive up the cost of the insurance and therefore stop many people from affording mortgages.
It stalled the legislation and led to rewriting several provisions. But after years of pushing the bill, both houses finally passed compromise versions and Clinton signed it.
"He did it quietly. We didn't find out he signed it until it was over," said a sad Hansen - who had hoped for a big White House ceremony to hail pro-consumer legislation. "I think the trouble was the president saw the sponsors were Hansen and (Senate Banking Committee Chairman Alfonse) D'Amato, two Republicans."
So Hansen had to quietly celebrate getting even with PMI companies by himself, even if not many other people notice - until they receive their new annual notices telling them how they may be able to cancel PMI and save hundreds of dollars a year.
But Hansen gave the companies one last shot: "PMI insurers got their hands caught in the cookie jar one too many times, and Congress decided to put them on a diet."