Homeowners Protection Act Quiz

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Questions and Answers

What is the maximum time frame within which a lender must terminate PMI after a borrower's request and fulfillment of conditions?

60 days

90 days

30 days (correct)

45 days

Which condition does NOT need to be fulfilled for a borrower to request PMI cancellation?

Current on the mortgage

Good payment history for the last 36 months (correct)

Principal balance at 80 percent of original value

Written cancellation request

What does the Homeowners Protection Act prohibit regarding borrower-paid PMI?

Variable interest rates

Permanent PMI coverage (correct)

Early termination fees

Fixed PMI rates

When does PMI automatically terminate according to the amortization schedule?

At 78 percent LTV Signup and view all the answers

Which of the following is a requirement for PMI termination on high-risk loans?

Category-specific termination requirements Signup and view all the answers

Which value determines the original value for PMI cancellation purposes?

The lower sales price or appraised value for purchases Signup and view all the answers

What must a borrower provide to demonstrate that their property value hasn't declined?

Evidence established in advance Signup and view all the answers

What is NOT a typical requirement for PMI cancellation requests from the borrower?

The borrower must apply through a formal application process Signup and view all the answers

When must PMI on a conforming high-risk loan be terminated if the borrower is current on the loan?

On the first day of the month following the midpoint of the loan’s amortization schedule Signup and view all the answers

What is the PMI termination threshold for lender-defined high-risk loans based on the amortization schedule?

When the principal balance reaches 77 percent of the original value Signup and view all the answers

What is required to be provided to borrowers when PMI is needed for non-high-risk fixed-rate mortgages?

A disclosure of the right to request cancellation of PMI Signup and view all the answers

How does Lender Paid Mortgage Insurance (LPMI) differ from Borrower Paid Mortgage Insurance (BPMI)?

LPMI can only be terminated upon refinancing or paying off the mortgage Signup and view all the answers

What does the Dodd-Frank Act establish in relation to borrower protections?

Creation of a federal agency to enforce consumer protection laws Signup and view all the answers

Which provision is NOT included when a lender discloses information on LPMI to a borrower?

LPMI typically results in a lower payment than BPMI Signup and view all the answers

What must lenders provide when PMI is required for adjustable-rate mortgage transactions?

Updated notices of LTV thresholds for PMI termination Signup and view all the answers

At what LTV ratio does PMI automatically terminate for non-high-risk fixed-rate mortgage transactions?

At 78 percent of the original value Signup and view all the answers

What happens to PMI if a borrower is not current on the loan at the midpoint of the amortization schedule?

PMI stops only when the borrower becomes current Signup and view all the answers

What rule influences how mortgage loan originators interact with borrowers?

TILA-RESPA Integrated Disclosure Rule (TRID) Signup and view all the answers

Study Notes

Homeowners Protection Act (HPA) of 1998

Purpose: Addresses difficulties canceling private mortgage insurance (PMI).
PMI Cancellation Provisions: Establishes guidelines for lender PMI cancellation.
Protection for Homeowners: Prohibits lifelong PMI coverage.
PMI Termination/Cancellation:
- Borrower Request: PMI terminates within 30 days of request if:
  - Loan balance reaches 80% of original value.
  - Written cancellation request submitted.
  - Good payment history (no 30+ day late payments in 24 months).
  - Mortgage is current.
  - Meets mortgage holder requirements.
  - Evidence of property value not declining below original value.
  - Equity not subject to subordinate lien.
- Automatic Termination:
  - Loan balance reaches 78% of original value (current on mortgage).
  - If borrower isn't current, termination on first day of month following becoming current.
- High-Risk Loans: Exceptions to 80%/78% rules. PMI has specific termination requirements.
  - Conforming high-risk loans terminate at midpoint of amortization.
  - Lender-defined high-risk loans terminate when balance reaches 77% of original value.
Disclosures and Notices:
- Non-High-Risk Mortgages: Initial amortization schedule, cancellation rights, and automatic termination dates.
- Adjustable-Rate Mortgages (ARMs): Updated notices due to potential amortization changes.
- High-Risk Mortgages: Early PMI termination notice (midpoint of amortization period).
Lender-Paid Mortgage Insurance (LPMI):
- Important Differences: Cannot be canceled or automatically terminated.
- Higher Interest Rates: Usually results in higher mortgage interest rates.
- Termination: Only terminates on refinancing or payoff.
- Notice Requirements: Differences compared to Borrower Paid Mortgage Insurance (BPMI), costs/benefits over 10 years, and potential tax deductions.

Dodd-Frank Act (2010)

Far-Reaching Reform: Provisions and controls affecting all segments of the financial sector.
Consumer Protection: Includes the Consumer Financial Protection Bureau (CFPB).
CFPB Authority: Enforces and interprets existing laws, and creates new ones.
TRID (TILA-RESPA Integrated Disclosure Rule): Direct result of Dodd-Frank and CFPB.
Mortgage Loan Originators: Key influence on their interactions, disclosures, and services to borrowers.

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Description

Test your knowledge on the Homeowners Protection Act (HPA) of 1998. This quiz covers important provisions related to the cancellation of private mortgage insurance (PMI) and protections for homeowners. Learn about the guidelines for PMI cancellation and the criteria needed for termination.