In a training scenario, a borrower asks to cancel PMI at the scheduled 80 percent point. What action best follows the rule?

Correct Answer

B) Cancel PMI if the written 80 percent request meets conditions

Why this is correct: The Homeowners Protection Act (HPA) governs private mortgage insurance (PMI) cancellation. A key borrower right is to request cancellation in writing once the loan's principal balance is first scheduled to reach or actually reaches 80% of the original property value, provided certain conditions are met (e.g., the borrower is current, the value hasn't declined). The correct action is to honor a written request that meets these statutory conditions. Why the other choices are wrong: "Treat government mortgage insurance as conventional PMI" is wrong because the HPA rules for borrower-requested cancellation apply specifically to conventional private mortgage insurance, not to government insurance like FHA MIP or VA funding fees. "Treat the PMI borrower requested cancellation review as complete because the file contains a related ability-to-repay note" is wrong because the HPA sets specific conditions for cancellation (like the 80% LTV threshold and borrower being current); an unrelated note about ability-to-repay does not satisfy these conditions. "Apply PMI cancellation rules to a loan product outside the covered PMI rule" is wrong because the HPA's cancellation rules apply only to loans with conventional PMI; they do not apply to loans that are not covered, such as those with government insurance. Exam tip: For borrower-requested PMI cancellation, focus on the 80% LTV threshold (scheduled or actual), a written request, and the borrower being current on payments.