Before closing, the team discovers that the loan schedule reaches the automatic PMI termination point. What is the safest compliant answer?
Correct Answer
B) Automatically terminate PMI at 78 percent if current
Why this is correct: Under the Homeowners Protection Act (HPA), servicers must automatically terminate PMI when the loan's scheduled balance falls to 78% of the original value, assuming the borrower is current. This is a mandatory compliance step. Why the other choices are wrong: "Ignore the HPA PMI issue unless the borrower complains" is wrong because the duty to terminate is automatic and not contingent on a borrower request. "Use borrower consent as a substitute for the governing mortgage rule" is wrong because automatic termination is a legal requirement, not something that can be replaced by consent. "Wait until after the file documentation check to decide whether the disclosure, filing, or license issue matters" is wrong because the termination point is schedule-based and must be acted upon promptly, not deferred. Exam tip: The key phrase is "automatic termination"—it happens by law when the 78% threshold is reached and the borrower is current.
Why This Is the Correct Answer
The correct response is "Automatically terminate PMI at 78 percent if current" because Lines 76-85; CFPB PMI cancellation page, automatic termination section.
Why the Other Options Are Wrong
Option A: Ignore the HPA PMI issue unless the borrower complains.
Ignore the HPA PMI issue unless the borrower complains. is not correct because it does not apply the rule tested by this file scenario.
Option C: Use borrower consent as a substitute for the governing mortgage rule.
Use borrower consent as a substitute for the governing mortgage rule. is not correct because it does not apply the rule tested by this file scenario.
Option D: Wait until after the file documentation check to decide whether the disclosure, filing, or license issue matters.
Wait until after the file documentation check to decide whether the disclosure, filing, or license issue matters. 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
More Federal Laws Questions
A mortgage file is paused during a lock-desk handoff because of FCRA Adverse Action Notices. Which answer should identify which rule controls the file?
Before the team acts on a production meeting, a training manager must address SCRA Interest Rate Cap. Which response is most defensible?
Before the team acts on a production meeting, the MLO must address FCRA Adverse Action Notice. Which response is most defensible?
A team member asks about RESPA Kickbacks and Referrals in an investor-delivery review while trying to confirm the rule-based response. Which response should the loan team use?
During a disclosure desk review, the loan team encounters an RESPA Servicing Transfer issue. Which response should avoid a shortcut that would misapply the rule?
A mortgage team asks a quality-control reviewer about TRID Loan Estimate timing during a record-retention audit. Which answer should guide the file?
A mortgage team asks a branch supervisor about TILA APR and finance-charge rules during a renewal checklist. Which answer should guide the file?
A mortgage file is paused during a risk-control review because of TILA QM DTI Calculation. Which answer should choose the most defensible file action?
A disciplinary-risk review raises a question about TILA APR and finance-charge rules. Which action should the renewal specialist recommend?
An MLO is reviewing procedures for a case where a compliance analyst asks why covered mortgage application data is collected. What is the proper handling?
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