In a mortgage origination file, a borrower asks to cancel PMI at the scheduled 80 percent point. Which action should be taken?
Correct Answer
B) Cancel PMI if the written 80 percent request meets conditions
Why this is correct: The Homeowners Protection Act (HPA) establishes a borrower's right to request PMI cancellation at the scheduled 80% LTV point. The law requires the servicer to cancel the PMI upon receiving a written request, provided the borrower is current. This is a mandatory compliance step. Why the other choices are wrong: "Treat the compliance requirement as optional because closing is near" is wrong because HPA requirements are never optional based on timing. "Continue processing without correcting the disclosure, licensing, compensation, or consumer-protection issue" is wrong as it advocates ignoring a known compliance issue, which is never correct. "Ignore the issue if the borrower orally agrees to continue" is wrong because the HPA's written request requirement is statutory; an oral agreement does not override it. Exam tip: For borrower-requested cancellation, the key triggers are the scheduled 80% LTV, a written request, and current payment status.
Why This Is the Correct Answer
The correct response is "Cancel PMI if the written 80 percent request meets conditions". Borrower-requested PMI cancellation can occur at the scheduled 80 percent point if the statutory conditions are satisfied.
Why the Other Options Are Wrong
Option A: Treat the compliance requirement as optional because closing is near.
Treat the compliance requirement as optional because closing is near. is not correct because the governing rule requires the compliant answer shown in the explanation.
Option C: Continue processing without correcting the disclosure, licensing, compensation, or consumer-protection issue.
Continue processing without correcting the disclosure, licensing, compensation, or consumer-protection issue. is not correct because the governing rule requires the compliant answer shown in the explanation.
Option D: Ignore the issue if the borrower orally agrees to continue.
Ignore the issue if the borrower orally agrees to continue. is not correct because the governing rule requires the compliant answer shown in the explanation.
Memory Technique
80 percent is borrower-requested; 78 percent is automatic termination.
Exam Tip
80 percent is borrower-requested; 78 percent is automatic termination.
Common Mistakes to Avoid
- -The 78 percent automatic rule does not eliminate the 80 percent request right.
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