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....Read more
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).
Guidance on validating that property value has not declined and borrower payment history requirements can be found in Freddie Mac Servicing Guide Sections 8203.1 through 8203.7 and 9205.11 and Fannie Mae Servicing Guide Section B-8.1-04
Homeowners protection Act
applies only to single-family, 1-unit primary
Automatic Termination of BPMI Based on Original Value*
Automatic termination on the earlier of
1.
The date the mortgage balance is the first scheduled to reach 78% of the original properly value, if borrower is current on their mortgage payment;
OR
2.
The first day of the month after the date that is the midpoint of the mortgage loan amortization period, if borrower is not current on their mortgage payment.
Guidance on validating that property value has not declined and borrower payment history requirements can be found in Freddie Mac Servicing Guide Sections 8203.1 through 8203.7 and 9205.11 and Fannie Mae Servicing Guide Section B-8.1-04
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
Freddie Mac
Borrower can request when loan balance is 80% of original property value.
Borrower can request when loan balance is 70% of original property value.
Borrower can request when loan balance is 65% of original property value.
Borrower requests can be either verbally or in writing.
Guidance on validating that property value has not declined and borrower payment history requirements can be found in Freddie Mac Servicing Guide Sections 8203.1 through 8203.7 and 9205.11 and Fannie Mae Servicing Guide Section B-8.1-04
For borrower-requested BPMI cancellation based on Original Value, there is no minimum seasoning requirement and the borrower may request BPMI cancellation after making a pre-payment and the reduced LTV now meets the minimum noted above.
Fannie Mae
Freddie Mac
1-Unit Primary or Second Home
Borrower can request when loan balance is 80% of original property value.
2-4 Unit Primary or 1-4 Unit Investment Property
Borrower can request when loan balance is 70% of original property value.
Borrower can request when loan balance is 65% of original property value.
Guidance on validating that property value has not declined and borrower payment history requirements can be found in Freddie Mac Servicing Guide Sections 8203.1 through 8203.7 and 9205.11 and Fannie Mae Servicing Guide Section B-8.1-04
For borrower-requested BPMI Cancellation based on Original Value, there is no minimum seasoning requirement and the borrower may request BPMI Cancellation after making a pre-payment and the reduced LTV now meets the minimum noted above.
Borrower-requested BPMI Cancellation based on current value*
1-Unit Primary or Second Home
2-4 Unit Primary or 1-4 Unit Investment Property
Fannie Mae
Freddie Mac
Borrowers can request when current LTV is:
- ≤ 75%, if 2-5 years have elapsed since origination
- ≤ 80%, if ≥5 years have elapsed since origination
- ≤ 80%, if <2 years have elapsed, and documented substantial property improvements* have been made since origination
Borrower can request when loan balance is 70% of current property value and the seasoning of the mortgage loan must be at least 2 years.
Borrower can request when loan balance is 65% of current property value and the seasoning of the mortgage loan must be at least 2 years.
Servicer must obtain a new appraisal that is based on an inspection of both the interior and exterior of the property. Servicer warrants that it has reviewed the appraisal and is satisfied that the option of value is both reasonable and adequately supported by market data. Fannie Mae can waive its two-year mortgage seasoning requirement in the case of a borrower (who is the original borrower) who has made improvements to the property.
National MI will cancel the MI upon receiving the servicer’s notification to us via our MI cancellation process www.nationalmi.com/policy-servicing/
Fannie Mae
Freddie Mac
1-Unit Primary or Second Home
Borrowers can request when current LTV is:
- ≤ 75%, if 2-5 years have elapsed since origination
- ≤ 80%, if ≥5 years have elapsed since origination
- ≤ 80%, if <2 years have elapsed, and documented substantial property improvements* have been made since origination
2-4 Unit Primary or 1-4 Unit Investment Property
Borrower can request when loan balance is 70% of current property value and the seasoning of the mortgage loan must be at least 2 years.
Borrower can request when loan balance is 65% of current property value and the seasoning of the mortgage loan must be at least 2 years.
Servicer must obtain a new appraisal that is based on an inspection of both the interior and exterior of the property. Servicer warrants that it has reviewed the appraisal and is satisfied that the option of value is both reasonable and adequately supported by market data. Fannie Mae can waive its two-year mortgage seasoning requirement in the case of a borrower (who is the original borrower) who has made improvements to the property.
National MI will cancel the MI upon receiving the servicer’s notification to us via our MI cancellation process www.nationalmi.com/policy-servicing/
Automatic Termination of BPMI**
1-Unit Primary or Second Home
2-4 Unit Primary or 1-4 Unit Investment Property
Fannie Mae
Freddie Mac
Automatic termination on the earlier of
- the date the mortgage balance is first scheduled to reach 78% of the original property value;
- the first day of the month after the date that is the midpoint of the mortgage loan amortization period.
or
Automatic termination on the first day of the month after the date that is the midpoint of the mortgage loan amortization period.
Not eligible for automatic termination.
Borrower requests can be either verbally or in writing.
For automatic termination of BPMI, the amortization schedule must be used to determine the BPMI cancellation point.
Fannie Mae
Freddie Mac
1-Unit Primary or Second Home
Automatic termination on the earlier of:
- The date the mortgage balance is first scheduled to Reach 78% of the original property value;
- The first day of the month after the date that is the midpoint of the mortgage loan amortization period.
OR
2-4 Unit Primary or 1-4 Unit Investment Property
Automatic termination on the first day of the month after the date that is the midpoint of the mortgage loan amortization period.
Not eligible for automatic termination.
Borrower requests can be either verbally or in writing.
**For automatic termination of BPMI, the amortization schedule must be used to determine the BPMI cancellation point.
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.