About Mortgage Insurance

The Homeowners Protection Act
The Homeowners Protection Act of 1998 (HPA), which took effect on July 29, 1999, addresses private mortgage insurance cancellation. It provides for cancellation of borrower paid private mortgage insurance (MI) when certain conditions are met. Genworth Mortgage Insurance fully supports the important consumer benefits brought about by this legislation. We have taken all steps to be fully compliant with the law. The HPA applies to loans closed on or after July 29, 1999 which are:

  • For single-family dwellings that are the borrower's primary residence, and
  • For the acquisition, initial construction, or refinancing of that dwelling.
Many borrowers have questions about the new law. These are some of the more common questions about borrower paid MI and their answers:

How the HPA May Affect You
If your loan closed on or after July 29, 1999, the new federal law ensures that private MI will be cancelled when your payments have lifted you beyond the period of greatest risk. This law has two built-in consumer protections:
1.Lenders must inform homebuyers, at closing and annually, about their right to request private mortgage insurance cancellation and how to do it.
2.If you choose not to request cancellation (as described below), your lenders must automatically cancel the private MI for you.
Disclosure and Cancellation
The HPA addresses two issues: Disclosure and Cancellation. Disclosure simply guarantees that you're informed of the status of your private MI. Cancellation deals with your right (or your lender's obligation) to cancel your private mortgage insurance at a certain point.

Your Rights Under the Disclosure Section of the Act
If your loan closed on or after July 29, 1999, your lender must give you two types of disclosure:
  • Initial disclosure - At closing, your lender must give you a written notification, explaining that you have private MI on your mortgage - and that you may qualify to have it cancelled at a given point.
  • Annual disclosure - The law requires your lender to send you an annual reminder that you have private MI and can request cancellation once you've met cancellation requirements.*

Cancelling Your Private MI
There are two types of cancellation under the law. They are:
  • Borrower-initiated cancellation - When your mortgage balance reaches 80 percent of your home's original value (i.e., the lesser of the sales price or the appraised value at origination), your lender must cancel private MI at your request.** You must have a good payment history and you must have no other loans on the house - and your lender must be satisfied that your property value has not declined.
  • Automatic termination - When your mortgage balance reaches 78 percent of your home's original value based only on the original amortization schedule (and without regard to any prepayment), your private MI will be cancelled automatically by your lender.** Again, you must be current on your payments. (If you're not, the private MI will be cancelled automatically once you become current.)

Qualifications
Not all loans qualify for cancellation under the Act. There are exceptions for borrowers in "high risk" mortgages. Check with your servicer about whether your mortgage falls into this category. Also, the cancellation provisions don't apply if your loan has "lender paid MI." Ask your lender about this. Some states have private MI laws in place that provide broader protection to consumers. Check with your lender for details.

* This requirement applies to all loans with cancelable private MI.

** Applies to most loans originated on or after July 29, 1999.

This information is intended to be an overview of the ramifications of the HPA. It does not constitute legal advice or counsel. Contact your lender for more information on the law and your specific mortgage.
For more information on mortgage insurance, log on to www.privatemi.com.