An MLO is reviewing procedures for a case where a borrower asks to cancel PMI at the scheduled 80 percent point. What is the proper handling?
Correct Answer
C) Cancel PMI if the written 80 percent request meets conditions
Why this is correct: The Homeowners Protection Act (HPA) procedure is straightforward: if a borrower submits a written request for PMI cancellation at the scheduled 80% LTV point and is current on the loan, the PMI must be canceled. This is the proper handling. Why the other choices are wrong: "Treat prior mortgage experience as a substitute for the required compliance condition" is wrong because prior experience does not replace the specific statutory conditions of the HPA. "Use a generic national checklist instead of the requirement in this supervisory exam response" is wrong because a generic checklist must still incorporate the specific HPA rules; ignoring them is non-compliant. "Document that HPA PMI was reviewed, but take no required corrective action" is wrong because documentation alone is insufficient if the required action (cancellation) is not taken when conditions are met. Exam tip: The HPA's PMI rules are specific and must be followed precisely; 'substantial compliance' is not a safe assumption.
Why This Is the Correct Answer
The correct response is "Cancel PMI if the written 80 percent request meets conditions" because Lines 76-85; CFPB PMI cancellation page, borrower-requested cancellation section.
Why the Other Options Are Wrong
Option A: Treat prior mortgage experience as a substitute for the required compliance condition.
Treat prior mortgage experience as a substitute for the required compliance condition. is not correct because it does not apply the rule tested by this file scenario.
Option B: Use a generic national checklist instead of the requirement in this supervisory exam response.
Use a generic national checklist instead of the requirement in this supervisory exam response. is not correct because it does not apply the rule tested by this file scenario.
Option D: Document that HPA PMI was reviewed, but take no required corrective action.
Document that HPA PMI was reviewed, but take no required corrective action. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
Homeowners Protection Act PMI rules: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to Homeowners Protection Act PMI rules; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
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