• The Homeowners Protection Act (HPA) of 1998 limits how long borrowers must pay private mortgage insurance (PMI) and creates clear rules and disclosures for canceling PMI on eligible mortgages.
– HPA applies to most private, traditional residential first‑mortgage loans originated after July 29, 1999. It does not apply to FHA, VA, or USDA government‑insured loans.
– Under HPA: borrowers can request cancellation once their loan‑to‑value (LTV) reaches 80% (based on original value or the lender’s required measure), and lenders must automatically terminate borrower‑paid PMI when the LTV reaches 78% per the original amortization schedule, provided the borrower is current on payments.
– The Consumer Financial Protection Bureau (CFPB) supervises enforcement; lenders must provide disclosures about PMI rights and cancellation procedures.
What the Homeowners Protection Act does — in plain terms
The HPA (sometimes called the PMI Cancellation Act) was passed to stop homeowners from paying PMI longer than necessary. Before the HPA, rules for canceling PMI varied widely and many homeowners couldn’t get coverage ended even after they accrued substantial equity.
Key protections under the law
– Mandatory disclosures: Lenders must disclose at origination (and at other required times) important information about PMI, including when it can be canceled, the automatic termination date, and the borrower’s right to request cancellation.
– Borrower-requested cancellation: A borrower can ask the lender in writing to cancel PMI once the mortgage balance reaches 80% of the original value of the property (or other value the lender uses under its policy). The lender may require proof (for example, an appraisal) and that the borrower be current on payments.
– Automatic termination: For borrower‑paid PMI, HPA requires lenders to terminate PMI automatically when the scheduled remaining principal balance reaches 78% of the original value (based on the original amortization schedule), so long as the borrower is current on payments.
– No “life‑of‑loan” PMI: For borrower‑paid PMI products, the law prohibits PMI that would remain for the life of the loan regardless of equity accumulation.
– Coverage: HPA generally applies to private mortgage insurance on most conventional, privately underwritten loans originated after July 29, 1999. It does NOT apply to FHA, VA, or USDA insured mortgages.
Definitions you should know
– Private Mortgage Insurance (PMI): Insurance that protects the lender if the borrower defaults on a conventional mortgage with a high loan‑to‑value (LTV).
– Loan‑to‑Value (LTV) ratio: The outstanding loan balance divided by the original value or current appraised value of the home (the way LTV is computed for cancellation may vary by lender and type of request).
– Original value: Typically the purchase price or appraised value at the time the loan was made (this is the baseline HPA uses for the 80% and 78% thresholds unless the lender allows a new value for a borrower‑requested cancellation).
Who is covered (and who isn’t)
– Covered: Most conventional/private mortgages for single‑family principal residences originated after July 29, 1999.
– Not covered: FHA, VA, and other government‑insured loans, and some specialized loan products. Also some second liens or home equity lines of credit may be treated differently.
Practical steps to cancel PMI under the HPA
1. Confirm your loan type and origination date
• Check your mortgage note or statement to verify loan type (conventional vs. FHA/VA) and origination date. HPA protections apply to most loans originated after July 29, 1999.
2. Calculate your current LTV
• Find your current principal balance (from your latest statement).
• Decide which value to use: original purchase price or current market value. For automatic termination, lenders use the original value and the original amortization schedule. For borrower requests, lenders may accept a current appraisal or other evidence of value.
• LTV = current principal balance ÷ value of home. Example: $160,000 balance ÷ $200,000 original value = 80% LTV.
3. Determine if you qualify for immediate cancellation or automatic termination
• Borrower‑requested cancellation: when your LTV reaches 80% (or you have 20% equity) you can request cancellation in writing. Lenders can require you be current on payments and may require an appraisal or other documentation.
• Automatic termination: lender must stop borrower‑paid PMI when the scheduled balance reaches 78% of the original value per the original amortization schedule, provided you are current on payments.
4. Prepare and send a written cancellation request (if you’ve reached ~80% LTV)
• Address it to your loan servicer and include: your name, property address, loan number, current balance, and a clear request to cancel PMI under the Homeowners Protection Act (cite HPA if you wish).
• Ask the servicer to explain any requirements (appraisal, supporting documents, fees) and the timeline for processing.
• Send via certified mail or other method that provides proof of delivery. Keep copies of everything.
5. Be ready to provide documentation
• The servicer may require an appraisal, homeowner’s insurance proof, or evidence you are current on all payments. Appraisal costs usually fall on the borrower unless the lender waives them.
6. Follow up and keep records
• Keep records of all communications. If the servicer delays or denies without explanation, ask for the specific reason in writing.
7. If you’re denied or treated unfairly, complain to the CFPB
• The CFPB accepts complaints about mortgage servicing and PMI issues. They can help escalate problems or confirm compliance requirements.
Sample cancellation letter (short template)
[Your name]
[Property address]
[Loan/Account number]
[Date]
To [Loan Servicer Name]
Please accept this letter as my formal request to cancel private mortgage insurance (PMI) on the above‑referenced loan under the Homeowners Protection Act. My current loan balance is $[balance], which equals approximately [XX]% of the original value of the property ($[original value]). Please advise what documentation you require to process my request, including whether you require an appraisal, and the timeline for your decision. Please confirm in writing when PMI coverage will terminate and that I will not be charged for PMI after that date.
Sincerely,
[Your name]
[Contact information]
What to expect (timelines and costs)
– Timeline: Processing times vary. Lenders typically respond in a few weeks, but may take longer if an appraisal is required. Expect to pay for an appraisal if the lender requires one for a borrower‑requested cancellation.
– Cost: Appraisal fees and possible administrative fees. There is no federal fee required to request cancellation, but appraisal costs are commonly charged to the borrower.
– If automatic termination applies, the lender must stop charging PMI at the scheduled 78% point (provided you are current). You should receive a written notice.
Common situations and FAQs
– I refinanced my loan. Does HPA still apply? If you refinance into another conventional loan subject to PMI, HPA rules apply to that new loan as of its origination date. If you refinance into FHA/VA, those programs have different mortgage insurance rules.
– My home value rose quickly — can I get PMI removed earlier? Some servicers allow earlier cancellation based on a qualified appraisal showing current LTV at 80% or less. The servicer may require that you be current on payments and have a good payment history.
– Do I have to be current on payments? Yes — both borrower‑requested and automatic cancellation require that you are current on your mortgage payments and meet any other servicer requirements (for instance, no subordinate liens in some cases).
Enforcement and where to get help
– Consumer Financial Protection Bureau (CFPB): enforces HPA provisions, accepts complaints, and provides educational materials on PMI and cancellation rights.
– Your loan servicer: is the first contact for requests and questions; ask them for a copy of the PMI disclosure you were given at loan closing.
– State attorney general or HUD: can be other resources depending on the situation (HUD mostly deals with FHA matters).
Sources and further reading
– Investopedia, “Homeowners Protection Act”
– U.S. Consumer Financial Protection Bureau (CFPB), information on private mortgage insurance and cancellation rights:
– Homeowners Protection Act (Public Law 105‑216), legislative text
– Calculate your LTV if you give me your current balance and original value.
– Draft a cancellation letter tailored to your loan.
– Point you to the CFPB complaint page and direct contact details for common servicers.