A compliance review finds that a borrower asks to cancel PMI at the scheduled 80 percent point. What should the MLO do next?
Correct Answer
D) Cancel PMI if the written 80 percent request meets conditions
Why this is correct: Under the Homeowners Protection Act (HPA), a borrower who is current on payments can submit a written request to cancel PMI once the principal balance is scheduled to reach 80% of the original property value. If the request meets all statutory conditions, the servicer must cancel the PMI. The correct action is to cancel PMI if the written 80 percent request meets conditions. Why the other choices are wrong: "Use a generic national checklist instead of the requirement in this file documentation check" is wrong because compliance requires applying the specific HPA rules to the individual file, not a generic list. "Document that HPA PMI was reviewed, but take no required corrective action" is wrong because if the request is valid, the required action is cancellation, not just documentation. "Use an informal exception and leave the required record unchanged" is wrong because the HPA does not allow informal exceptions to its mandatory cancellation rules. Exam tip: When a borrower makes a written request for PMI cancellation at the 80% point, you must verify the borrower is current and the LTV is based on the original value. If conditions are met, cancellation is required.
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: Use a generic national checklist instead of the requirement in this file documentation check.
Use a generic national checklist instead of the requirement in this file documentation check. is not correct because it does not apply the rule tested by this file scenario.
Option B: 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.
Option C: Use an informal exception and leave the required record unchanged.
Use an informal exception and leave the required record unchanged. 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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