An operations lead compares the file facts with Homeowners Protection Act during a borrower follow-up call. Which conclusion is accurate?
Correct Answer
D) Check payment history and property-value conditions
Why this is correct: The Homeowners Protection Act (HPA) governs the cancellation and termination of private mortgage insurance (PMI) on conventional loans. The core requirement is for the servicer to check specific borrower and loan conditions. The correct action, "Check payment history and property-value conditions," directly aligns with the HPA's rules for borrower-requested or automatic termination, which require verifying the loan is current and the principal balance has reached a certain threshold (e.g., 78% of original value) based on the original amortization schedule or a current appraisal. Why the other choices are wrong: "Treat government mortgage insurance as conventional PMI" is wrong because HPA rules apply only to conventional PMI, not to government insurance like FHA MIP or VA funding fees. "Delay the Homeowners Protection Act step until a later anti-steering review instead of acting now" is wrong because HPA compliance is a separate, time-sensitive duty, not part of an anti-steering review. "Apply PMI cancellation rules to a loan product outside the covered PMI rule" is wrong because applying HPA rules to an ineligible loan type (e.g., an FHA loan) is non-compliant. Exam tip: HPA = Private MI on conventional loans. Key triggers are payment history (loan must be current) and loan-to-value ratios (e.g., 80% for borrower request, 78% for automatic).
Why This Is the Correct Answer
The correct response is "Check payment history and property-value conditions" 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 B: Delay the Homeowners Protection Act step until a later anti-steering review instead of acting now.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option C: Apply PMI cancellation rules to a loan product outside the covered PMI rule.
Apply PMI cancellation rules to a loan product outside the covered PMI rule. 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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