A Utah lender requires private mortgage insurance (PMI) on a conventional loan. Under what condition can the borrower request PMI cancellation under the federal Homeowners Protection Act?
Correct Answer
B) When the loan-to-value ratio reaches 80% based on the original purchase price or appraised value at loan origination
Under the federal Homeowners Protection Act (HPA), which applies in Utah, a borrower has the right to request PMI cancellation when the loan-to-value ratio reaches 80% based on the original purchase price or the original appraised value at loan origination — whichever is lower. The borrower must also have a good payment history and meet the lender's requirements. PMI must be automatically terminated when the LTV reaches 78% based on the original amortization schedule. Cancellation based on a new or current appraisal showing increased home value is not a borrower right under the HPA and requires lender discretion. These rules apply to conventional loans; FHA loans have separate mortgage insurance premium rules.
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Related Topics & Key Terms
Related Topics:
Key Terms:
Related Concepts
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
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