PRIVATE MORTGAGE INSURANCE CANCELLATION POLICIES
NEW! Click for Step by Step Guide to PMI Cancellation
- Applies to single family residential loans originated on or after July 29, 1999
Borrower Disclosures Required
- The originator (lender) must provide to borrowers, at closing, disclosure regarding the right to cancel private mortgage insurance
- The servicer must provide an annual disclosure to borrowers regarding their right to cancel PMI, either:
- On the escrow statement
- Or on the IRS Disclosure of Interest Payments Statement
- For those loans originated before July 29, 1999, servicers are required to give annual notice
- That the possibility of cancellation exists
Cancellation at 80% LTV
- Borrower is allowed to cancel MI when the loan amortized to 80% LTV based on the initial amortization schedule provided
- Borrower must make written request
- Borrower must provide evidence (as determined by investor) that property value has not depreciated below the original value
- Pay history is good (current and 0x30 in the last 12 months and 0x60 in the last 24 months)
Automatic Cancellation at 78% LTV
- Servicer must cancel MI when the LTV reaches 78% (based on the initial amortization schedule) if the borrower is current. If the borrower I not current at this time, the coverage is terminated when the borrower becomes current
- Exceptions to automatic cancellation
- Cancellation of MI on a high-risk conforming loan (as defined by the agencies) at the mid-point of the amortization period provided the borrower is current
- Cancellation of MI on a high-risk non-conforming loan (as defined by the investor) at 77% LTV provided the borrower is current
Refunds of Premium
- Refunds of unearned premium must be transferred to the borrower within 45 days
- Mortgage insurer has no longer than 30 days to transfer premium to servicer
Law went into effect on July 28, 1999
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