MI Cancellation and Termination – The When and How Under ...

[Pages:18]MI Cancellation and Termination ? The When and How Under the Homeowners Protection Act

Includes Highlights of CFPB Bulletin 2015-03 October 2015

Genworth Mortgage Insurance Corporation

?2015 Genworth Financial, Inc. All rights reserved.

Instructions

MI Cancellation and Termination - The When and How

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Agenda

Today's module will cover:

? Homeowners Protection Act (HPA) of 1998 and the CFPB Bulletin 2015-03 ? Automatic termination ? Borrower Initiated MI Cancellation ? Fannie Mae and Freddie Mac Guidelines using "Current Value" ? Initial and Annual Disclosures ? Resources

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CFPB Bulletin 2015-03



MI Cancellation and Termination - The When and How

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Homeowners Protection Act of 1998

Changed MI cancellation rules

? HPA (Homeowners Protection Act) of 1998 was signed into law on July 29, 1998, amended December 27, 2000 and applies to loans closed on or after July 29, 1999.

? Covers single family, primary residences only ? Establishes provisions for:

? Borrower initiated cancellation and automatic termination of mortgage insurance

? HPA, when it applies, supersedes any investor requirements if they are more restrictive

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CFPB Bulletin 2015-03

DOES NOT change the MI cancellation rules ? Provides guidance to assist mortgage servicers in their compliance with PMI cancellation

and termination provisions of the HPA of 1998 ? The Bulletin explains the HPA requirements and describes examples from CFPB's

supervisory experience of PMI cancellation and termination procedures that violate the HPA or create a substantial risk of noncompliance.



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Cancellation/Termination Requirements*

* a

Automatic Termination LTV = 78%

Cancellation/Termination Requirements

Borrower Initiated Cancellation

a*

b **

a Original Value b Appreciated Value**

LTV < 80%

LTV< 75% Yrs 2-5

LTV < 80% After yr 5

Let's Start With Option "A" Automatic Termination

**Other Restrictions May Apply

*Policies for One Unit Primary Residence Properties

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Automatic Termination Requirements

HPA requires the servicer to automatically terminate MI on:

? The date on which the principal balance of the mortgage is first scheduled to reach 78% of the original value based on the original amortization schedule* (irrespective of the outstanding balance for that mortgage on that date) if the borrower is current.

? If borrower is NOT current on the "termination date", HPA requires MI automatically terminate on the first day of the month beginning after the date that the borrower becomes current on the loan.

? HPA does NOT define or provide a definition of "current on the loan".

? Under automatic termination guidelines, the borrower does nothing, MI automatically is terminated if the HPA requirements are met even if the value of the property has declined below the original value

? Servicers cannot charge for an appraisal or estimate of value or require any evidence of a property's current value because value is NOT a factor under automatic termination

? Prepayments are not a factor under automatic termination; It is based, off of "Original Amortization Schedule*

*For fixed rate mortgages, the amortization calculation is based on the initial amortization schedule. For adjustable-rate mortgages, the amortization calculation is based on the amortization schedule then in effect for the mortgage

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