The loan team is resolving HPA PMI Cancellation during a loan-team coaching session. Which action best fits the rule?

Correct Answer

A) Apply final termination at the midpoint when required

Why this is correct: The Homeowners Protection Act (HPA) establishes rules for the cancellation and termination of private mortgage insurance (PMI) on conventional loans. It provides for three main paths: 1) Borrower-requested cancellation based on equity and good payment history, 2) Automatic termination when the loan balance reaches 78% of the original value based on the original amortization schedule, and 3) Final termination at the midpoint of the loan's amortization period if PMI is not otherwise cancelled earlier. "Apply final termination at the midpoint when required" correctly identifies one of these mandatory HPA requirements. Why the other choices are wrong: "Treat government mortgage insurance as conventional PMI" is wrong because HPA rules apply to private mortgage insurance (PMI) on conventional loans, not to government insurance like FHA MIP or VA funding fees. "Ignore mortgage-insurance costs when comparing loan options" is wrong because lenders must provide disclosures about PMI costs, and borrowers should consider them. "Apply PMI cancellation rules to a loan product outside the covered PMI rule" is wrong because applying HPA rules to a loan not covered by the Act (e.g., an FHA loan) is incorrect and non-compliant. Exam tip: HPA applies to conventional loans with PMI. Know the three triggers: borrower request, automatic at 78% LTV (original schedule), and final at the midpoint.