An HPA-covered mortgage with borrower-paid PMI reaches the midpoint of its unchanged 30-year amortization period. PMI has not previously ended and the borrower is current. Even though the balance remains above 78% of original value, what final-termination protection applies?
Correct Answer
A) PMI must end by the first day of the month immediately following the amortization midpoint
A. Final termination applies by the first day of the following month. Half of the stated unchanged 30-year amortization period is fifteen years. Final termination is a backstop independent of reaching 78% LTV, subject to the borrower being current. Scope and exceptions: Do not confuse borrower-paid PMI with lender-paid insurance or FHA MIP. A loan modification may require recalculating termination dates; the original claim that the midpoint is always permanently fixed was too broad. Source: Midpoint termination — https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/ Final Termination and Loan Modifications — https://files.consumerfinance.gov/f/201508_cfpb_compliance-bulletin_private-mortgage-insurance-cancellation-and-termination.pdf
Why This Is the Correct Answer
A. Final termination applies by the first day of the following month. Half of the stated unchanged 30-year amortization period is fifteen years. Final termination is a backstop independent of reaching 78% LTV, subject to the borrower being current. Scope and exceptions: Do not confuse borrower-paid PMI with lender-paid insurance or FHA MIP. A loan modification may require recalculating termination dates; the original claim that the midpoint is always permanently fixed was too broad.
Why the Other Options Are Wrong
Option B: Insurance continues for the full 30 years unless the borrower refinances
It ignores the statutory backstop.
Option C: Insurance continues until the balance is scheduled to reach 78%
The midpoint protection does not wait for the 78% date.
Option D: Insurance ends only if a new appraisal shows 80% or better equity
A new appraisal or an 80% equity showing is not this trigger.
Exam Tip
Separate requested cancellation, scheduled automatic termination and midpoint final termination.
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