An investor owns 3 rental houses, each financed conventionally at 90% loan-to-value with private mortgage insurance.
Correct Answer
D) The Act does not reach them: it covers a principal residence only
The Homeowners Protection Act applies to a residential mortgage, defined as a security interest in a single-family dwelling that is the principal residence of the mortgagor, so rental property is outside it and cancellation is governed by the contract and the investor guidelines instead. Other choices: being a single-family dwelling is half the definition and the occupancy half is what fails here; the 78% automatic point is a provision of an Act that does not apply; and a seasoned loan that is current is still a rental, which is what puts it outside a definition built on occupancy. Source: 12 USC 4901(15), definition of residential mortgage
Why This Is the Correct Answer
The Homeowners Protection Act applies to a residential mortgage, defined as a security interest in a single-family dwelling that is the principal residence of the mortgagor, so rental property is outside it and cancellation is governed by the contract and the investor guidelines instead. Other choices: being a single-family dwelling is half the definition and the occupancy half is what fails here; the 78% automatic point is a provision of an Act that does not apply; and a seasoned loan that is current is still a rental, which is what puts it outside a definition built on occupancy. Source: 12 USC 4901(15), definition of residential mortgage
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