The PMI cancellation provision of the homeowner's protection act

Criteria

The homeowner’s protection act only applies to residential mortgage transactions, consummated on or after July 29, 1999. The purpose of the transaction must be to finance or refinance a single family dwelling that serves as a borrower’s primary residence. Single family residences include condominiums, townhouses and cooperatives or mobile homes.

  Application

The cancellation and termination provisions apply only to residential mortgage transactions for which the borrower pays PMI. The provisions do not apply to loans where someone other than the borrower makes the payment; E.g: Lender-paid PMI. When it is lender-paid PMI, the PMI is included in the interest rate, therefore it would be difficult to calculate a PMI termination date.

Conversely when it is borrower paid PMI, the monthly charges for PMI are reflected as a separate charge in the loan history. Therefore, it becomes easy to calculate the PMI cancellation date.

Finally, the cancellation provision of the homeowner’s protection act does not apply to property acquired for investment purposes. The easiest way to ascertain the purpose of the acquisition is to examine the loan application and see if the borrower selected residential or investment.