HPA – What initial disclosures are required for fixed rate residential mortgage transactions that are not high risk?

Compliance > Homeowners Protection Act
Q:  What initial disclosures are required for fixed rate residential mortgage transactions that are not high risk? 
 
A:    When PMI is required for non-high risk fixed rate mortgages, the lender must provide to the borrower at the time the transac­tion is consummated:
 
(i) a written initial amortization sched­ule, and
 
(ii) a written notice that discloses:
 
  • The borrower’s right to request cancellation of PMI, and, based on the initial amortization schedule, the date the loan balance is scheduled to reach 80 percent of the origi­nal value of the property;
  • The borrower’s right to request cancellation on an earlier date, if actual payments bring the loan balance to 80 per­cent of the original value of the property sooner than the date based on the initial amortization schedule;
  • That PMI will automatically terminate when the LTV ratio reaches 78 percent of the original value of the property and the specific date that is projected to occur (based on the initial amortization schedule); and,
  • The Act provides for exemptions to the cancellation and automatic termination provisions for high risk mortgages and whether these exemptions apply to the borrower’s loan (12 USC §4903(a)(1)(A)).
 
 
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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