A covered, non-high-risk loan has borrower-paid PMI and an HPA original value of $400,000. The balance now reaches $320,000 on its unchanged amortization schedule. The borrower is current and meets the other statutory cancellation conditions. What requested-cancellation and scheduled automatic-termination thresholds apply?
Correct Answer
B) Request cancellation at 80%; automatic termination at the scheduled 78% date if current
B. Requested cancellation applies at 80%; the usual scheduled automatic threshold is 78%. $320,000 ÷ $400,000 = 80%, satisfying the stated balance condition for a cancellation request. The scheduled automatic balance is $400,000 × 78% = $312,000, provided payments are current at the applicable date. Scope and exceptions: Requested cancellation requires a written request and applicable payment, lien and value conditions. Early principal reduction can support a request but does not move the scheduled automatic trigger by itself. Investor-based current-value cancellation is a different route. Source: 80% requested cancellation and 78% scheduled termination — https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/
Why This Is the Correct Answer
B. Requested cancellation applies at 80%; the usual scheduled automatic threshold is 78%. $320,000 ÷ $400,000 = 80%, satisfying the stated balance condition for a cancellation request. The scheduled automatic balance is $400,000 × 78% = $312,000, provided payments are current at the applicable date. Scope and exceptions: Requested cancellation requires a written request and applicable payment, lien and value conditions. Early principal reduction can support a request but does not move the scheduled automatic trigger by itself. Investor-based current-value cancellation is a different route.
Why the Other Options Are Wrong
Option A: She may request it at any time, as cancellation is always on request
An arbitrary request does not always require cancellation.
Option C: She must wait for the automatic termination, which arrives at 78%
The borrower need not wait for automatic termination when request conditions are met.
Option D: She may request it at 78%, and it ends automatically at 75% of value
It substitutes incorrect thresholds for both routes.
Exam Tip
Use original value and distinguish a cancellation request from scheduled termination.
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