The supervisor compares the file facts with Homeowners Protection Act PMI during a new-hire scenario. Which conclusion is accurate?

Correct Answer

B) Cancel PMI at 80 percent if request conditions are met

Why this is correct: The Homeowners Protection Act (HPA) provides specific rules for cancelling Private Mortgage Insurance (PMI). One key rule is that a borrower has the right to request cancellation once the principal balance of the loan is first scheduled to reach or actually reaches 80 percent of the original value of the property, provided the borrower is current and meets other conditions (like a good payment history). The answer "Cancel PMI at 80 percent if request conditions are met" accurately reflects this borrower-requested cancellation trigger. Why the other choices are wrong: "Treat the Homeowners Protection Act PMI review as complete because the file contains a related SAFE Act testing note" is wrong because HPA compliance and SAFE Act testing are separate legal requirements; one does not satisfy the other. "Ignore mortgage-insurance costs when comparing loan options" is wrong because lenders must provide accurate cost disclosures, and PMI is a material cost that affects the loan's annual percentage rate (APR) and must be considered. "Apply PMI cancellation rules to a loan product outside the covered PMI rule" is wrong because the HPA's PMI cancellation rules apply only to certain residential mortgage transactions; applying them to an uncovered product (like a commercial loan) misapplies the law. Exam tip: Know the HPA's three PMI termination triggers: borrower request at 80% LTV (if conditions met), automatic termination at 78% LTV, and final termination at midpoint of amortization. Do not confuse them with other laws.