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.