HPA – With regard to PMI cancellation and termination for non-high risk residential mortgage transactions, how can a borrower request cancellation?

Compliance > Homeowners Protection Act
Q:  With regard to PMI cancellation and termination for non-high risk residential mortgage transactions, how can a borrower request cancellation? 
 
A:    A borrower may initiate cancellation of PMI coverage by submitting a written request to the servicer. The servicer must take action to cancel PMI when the cancellation date occurs, which is when the principal balance of the loan reaches (based on actual payments) or is first scheduled to reach 80 percent of the “original value,”  irrespective of the outstanding balance, based upon the initial amortization schedule (in the case of a fixed rate loan) or amortization schedule then in effect (in the case of an adjustable rate loan), or any date thereafter that:
 
  • the borrower submits a written cancellation request;
  • the borrower has a good payment history;
  • the borrower is current; and
  • the borrower satisfies any requirement of the mortgage holder for: (i) evidence of a type established in advance that the value of the property has not declined below the original value; and (ii) certification that the borrower’s equity in the property is not subject to a subordinate lien (12 USC §4902(a)(4)).
     
Once PMI is canceled, the servicer may not require further PMI payments or premiums more than 30 days after the later of: (i) the date on which the written request was received or (ii) the date on which the borrower satisfied the evidence and certification requirements of the mortgage holder described previously (12 USC §4902(e)(1)).
 
 
This Q&A was based on information contained in the FDIC’s Compliance Examination Manual for Homeowner’s Protection Act – September 2015, which may be found here:  https://www.fdic.gov/regulations/compliance/manual/5/v-5.1.pdf
 

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