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Cancelling Borrower-Paid MI

Cancelling Borrower-Paid MI

Under the Homeowners Protection Act

The Homeowners Protection Act (HoPA) of 1998 established rules for both automatic termination and borrower cancellation of borrower-paid private mortgage insurance (BPMI) on certain home mortgages. The HoPA requires that BPMI be cancelled when a borrower has built up a certain amount of equity in their home. The act covers privately insured first mortgages on single-family primary residences, whose sales were closed on or after July 29, 1999. There are provisions for both borrower-requested cancellation and lender-required automatic termination.
Homeowners protection Act
applies only to single-family, 1-unit primary
Borrower-Requested BPMI Cancellation Based on Original Value*
Borrower can request when loan balance is 80% of original property value (provided borrower has a good payment history, is current on the loan and satisfies the lender’s requirements to demonstrate that there are no subordinate liens on the property and the property value has not declined below its original value).

Under Fannie Mae® and Freddie Mac®

Fannie Mae and Freddie Mac each have additional guidelines for both borrower- requested cancellation and automatic termination of BPMI that apply to loans owned or guaranteed by them, which closed on or after July 29, 1999. In addition to the requirements shown below, each GSE requires the borrower to demonstrate that they are current on the mortgage payments.

BORROWER-REQUESTED BPMI CANCELLATION BASED ON ORIGINAL VALUE*

1-Unit Primary or Second Home

2-4 Unit Primary or 1-4 Unit Investment Property

Fannie Mae Borrower can request when loan balance is 80% of original property value. Borrower can request when loan balance is 70% of original property value.
Freddie Mac Borrower can request when loan balance is 65% of original property value.

Loan Amortization Illustration

INITIAL LTV NOTE RATE: LTV AT YEAR END
85% 90% 95% 97%
Year 6.0% 7.0% 8.0% 6.0% 7.0% 8.0% 6.0% 7.0% 8.0% 6.0% 7.0% 8.0%
1 84.0% 84.2% 84.3% 88.9% 89.1% 89.3% 93.8% 94.1% 94.2% 95.8% 96.1% 96.2%
2 82.8% 83.3% 83.6% 87.7% 88.2% 88.5% 92.6% 93.0% 93.4% 94.5% 95.0% 95.4%
3 81.7% 82.3% 82.7% 86.5% 87.1% 87.6% 91.3% 91.9% 92.5% 93.2% 93.9% 94.4%
4 80.4% 81.2% 81.8% 85.2% 86.0% 86.6% 89.9% 90.7% 91.5% 91.8% 92.7% 93.4%
5 79.1% 80.1% 80.9% 83.7% 84.8% 85.6% 88.4% 89.5% 90.4% 90.3% 91.4% 92.3%
6 77.7% 78.8% 79.8% 82.3% 83.5% 84.5% 86.8% 88.1% 89.2% 88.7% 89.9% 91.1%
7 77.5% 78.7% 80.7% 82.1% 83.3% 85.2% 86.6% 87.9% 87.0% 88.5% 89.7%
8 77.4% 79.0% 80.6% 82.0% 83.4% 85.1% 86.5% 85.1% 86.9% 88.3%
9 77.2% 79.0% 80.5% 81.5% 83.4% 85.0% 83.2% 85.1% 86.8%
10 77.3% 79.0% 79.5% 81.6% 83.4% 81.2% 83.3% 85.1%
11 77.3% 77.4% 79.6% 81.6% 79.0% 81.3% 83.3%
12 77.5% 79.7% 76.7% 79.2% 81.4%
13 77.6% 76.9% 79.3%
14 77.0%
Year in which MI will be auto cancelled based on Original Value
Year in which cancellation can be requested by borrower based on Original Value
This content is intended to provide an informational overview of BPMI cancellation and does not constitute legal advice. The HoPA contains numerous additional provisions that we do not address herein. To assure compliance with any obligations your organization may have under the HoPA, you should review the HoPA itself along with your independent legal counsel. Individual states may also have mortgage insurance cancellation laws that may apply. Fannie Mae and Freddie Mac requirements were taken from the most recent versions of their Seller/Servicer Guides and are subject to change. See those Guides for the most up-to-date mortgage insurance cancellation information.