Okay, this is actually kind of old news, but I never told the end of the story (you can read the beginning of the story here and continuation here).
After I sent a letter by certified mail asking for our PMI to be cancelled since our loan-to-value ratio was below 80%, it took about a week and a half for someone to sign for it.
A week later we got another letter telling us the same information as before: pay down to 78%, or get an appraisal to prove the value has gone up and the LTV ratio is now 75%. At this point, I had about given up and was about to start filing complaints, even though I figured nothing would happen.
Then, a few days later, I got another (rather condescending) letter. This one, though, actually had useful information! Well, sort of. This letter explained that in order for WFHM to cancel our PMI at 80% LTV, we would need to get an appraisal to prove that the value of our home has not gone down, so that it truly was below 80%.
This is actually in accordance with the Homeowner's Protection Act, but previously everyone has told me that we'd have to prove the value has gone UP, not that it has remained the SAME. That is a BIG DIFFERENCE!
At this point, we realized that we didn't HAVE to pay for an appraisal, and it would be a huge hassle to have someone home for an appraisal... and we don't have to pay PMI, but we DO eventually have to pay our full principal, one way or another. We were about a month away from having enough "cushion" savings to pay off the principal to 78% without completely draining our non-emergency savings, so that's what we did.
To my pleasant surprise, just a few days after the payment cleared I got a message from WFHM saying that our PMI had been cancelled, and our next payment due would reflect the lower escrow payment now required. Hooray! That was a really welcome reduction after spending so much money on the darn thing :)
So, I can't really tell you how to cancel PMI with WFHM at 80% LTV... I'd start with writing a letter, probably, because the people on the phone really don't seem to know what to do, and ask specifically in the letter how to set up a WFHM-approved appraisal.
In my experience, though, once you hit 78% they will handle the cancellation quickly and efficiently, which is a nice change from our previous dealings with Wells Fargo.