Homeowners Protection Act

Disclosures for High-Risk Loans

--PMI is not required when the borrower reaches the midpoint of the amortization of the loan --Termination of PMI is automatic at the midpoint of the amortization period if the borrower is current on payments

Disclosures for ARMs

--A written notice that the borrower can request cancellation of PMI on the cancellation date (the date that the loan-to-value ratio will reach 80%), and that the loan servicer will notify the borrower when the cancellation date is reached --Written notice that cancellation of PMI is automatic on the termination date (the date when the loan-to-value ratio reaches 78% of the original value of the property), and that the loan servicer will notify the borrower when the cancellation date is reached

Cost of PMI

.50% to 1% of the total amount of the loan.

Disclosures for Fixed-Rate Mortgages

An initial amortization schedule Written notice that the borrower can request cancellation of PMI on the cancellation date (the date that the loan-to-value ratio will reach 80%) Written notice that the borrower can accelerate payment on the loan, thereby reaching an 80% loan-to-value ratio and the ability to cancel PMI ahead of schedule Written notice that cancellation of PMI is automatic on the termination date (the date when the loan-to-value ratio reaches 78% of the original value of the property)

Who Regulates HPA

CFPB

Penalties for Violations of the HPA (not subject to federal regulators)

For entities not subject to federal regulators, the penalties in individual actions cannot exceed $1,000, and in class action lawsuits, penalties cannot

Loans Exempt from the HPA

Government-insured FHA or VA loans Loans protected by PMI paid for by the lender

PMI is automatically cancelled when

HPA requires automatic discontinuation once the loan has reached 78% LTV.(22% equity)

HPA

Homeowners Protection Act 1998 to facilitate the cancellation of private mortgage insurance (PMI).

Annual Disclosures

Loan servicers are required to provide borrowers with an annual notice that reminds them of their right to the cancellation or termination of their PMI.

When can a Borrower request PMI to be cancelled

Per federal legislation known as the Homeowners Protection Act (HPA), borrowers may request discontinuation of PMI when they reach 20% equity position (80% LTV). It is up to lenders descretion.

PMI

Private Mortgage Insurance required by lenders on conventional loans when the loan-to-value (LTV) is higher than 80%. The intention of PMI is to provide some security to the lender in the event of default. Borrowers also qualify for a loan with a lower down payment when they are willing to pay PMI.

Notification of Cancellation or Termination

Within 30 days of the cancellation or termination of PMI, PMI will automatically terminate when the LTV ratio reaches 78% of the original value of the property and when the date on which that is projected to occur arrives

Loans Covered by the HPA

applies to residential mortgages on single-family homes used as the borrower's principal dwelling. The law is applicable to lenders, loan servicers, and insurers.

Penalties for Violations of the HPA (for entities that are subject to federal regulators)

for entities that are subject to the enforcement authority of the FDIC, the OTS, the NCUA, or the Farm Credit Administration. For these entities, penalties in individual actions are not to exceed $2,000. In a class action lawsuit, penalties may not exceed the lesser of $500,000 or 1% of the net worth of the liable party.