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

Compliance > Homeowners Protection Act
Q:  What initial disclosures are required for adjustable rate residential mortgage transactions that are not high risk? 
 
A:    When PMI is required for non high-risk adjustable rate mort­gages, the lender must provide to the borrower at the time the transaction is consummated a written notice that discloses:
  • The borrower’s right to request cancellation of PMI on (i) the date the loan balance is first scheduled to reach 80 per­cent of the original value of the property based on the amortization schedule then in effect or (ii) the date the balance actually reaches 80 percent of the original value of the property based on actual payments. The notice must also state that the servicer will notify the borrower when either (i) or (ii) occurs;
  • That PMI will automatically terminate when the loan bal­ance is first scheduled to reach 78 percent of the original value of the property based on the amortization schedule then in effect. The notice must also state that the borrower will be notified when PMI is terminated (or that termina­tion will occur when the borrower becomes current on payments); and,
  • That there are exemptions to the cancellation and automat­ic termination provisions for high-risk mortgages and whether such exemptions apply to the borrower’s loan (12 USC §4903(a)(1)(B)).
 
 
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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