A borrower with a conventional loan requests PMI cancellation. The servicer determines the property value has declined since origination, and the current LTV based on original value is 82%. The borrower has never been late on payments. How should the servicer respond?
Correct Answer
C) Deny the request and explain the LTV requirement
Under the HPA, PMI cancellation based on original property value requires the loan balance to reach 80% of the original property value, regardless of current market conditions. If the LTV is 82% based on original value, the borrower does not qualify for cancellation, even with perfect payment history.
Why This Is the Correct Answer
Under the HPA, PMI cancellation based on original property value requires the loan balance to reach 80% of the original property value, regardless of current market conditions. If the LTV is 82% based on original value, the borrower does not qualify for cancellation, even with perfect payment history.
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