A mortgage file is paused during a lock-desk handoff because of HPA PMI Termination. Which answer should choose the compliant next step?
Correct Answer
B) Apply final termination at the midpoint when required
Why this is correct: The Homeowners Protection Act (HPA) provides three distinct paths for terminating private mortgage insurance (PMI): borrower-requested, automatic, and final termination. Final termination is the backstop: if neither of the other two paths has removed the coverage, it ends on the first day of the month after the midpoint of the amortization period, provided the borrower is current. It has no LTV condition at all, which is what distinguishes it from automatic termination at 78%. The correct answer, "Apply final termination at the midpoint when required," directly references this mandatory, automatic termination rule. Why the other choices are wrong: "Treat government mortgage insurance as conventional PMI" is wrong because government mortgage insurance (like FHA MIP) is not subject to HPA's PMI termination rules. "Ignore mortgage-insurance costs when comparing loan options" is wrong because MLOs must provide accurate loan comparisons, and PMI is a material cost. "Use the rate-lock standard to decide the HPA PMI Termination issue before confirming the trigger facts" is wrong because HPA termination is based on specific loan-to-value and payment history facts, not the rate-lock status. Exam tip: Remember the three HPA PMI termination types: borrower-requested (at 80% LTV), automatic (at 78% LTV), and final (at midpoint if current).
Why This Is the Correct Answer
The correct response is "Apply final termination at the midpoint when required" because HPA has separate borrower-requested, automatic, and final PMI termination rules.
Why the Other Options Are Wrong
Option A: Treat government mortgage insurance as conventional PMI.
Treat government mortgage insurance as conventional PMI. is not correct because it does not apply the rule tested by this file scenario.
Option C: Ignore mortgage-insurance costs when comparing loan options.
Ignore mortgage-insurance costs when comparing loan options. is not correct because it does not apply the rule tested by this file scenario.
Option D: Use the rate-lock standard to decide the HPA PMI Termination issue before confirming the trigger facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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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