Cancellation of Private Mortgage Insurance (PMI)
Automatic, and By Request

If you put less than 20 percent down on a home mortgage, lenders often require you to have private mortgage insurance (PMI), which protects the lender if you default on the loan. The Homeowners Protection Act of 1998 (also known as the PMI Act) establishes rules for automatic termination and borrower cancellation (by request) of private mortgage insurance.

Eligibility

The PMI Act applies to home mortgages signed on or after July 29, 1999 for the purchase, initial construction, or refinance of a single-family home that is the primary residence of the borrower.

These protections do not apply to government-insured FHA or VA loans or to loans with lender-paid PMI. If you signed your mortgage before July 29, 1999, you can ask to have the private mortgage insurance canceled once you exceed 20 percent equity in your home, but federal law does not require your lender or mortgage servicer to cancel the insurance.

Automatic Termination

If you meet the eligibility criteria, your PMI must - with certain exceptions - be terminated automatically when you reach 22 percent equity in your home (based on the original purchase price or on the appraised value of your home at the time the loan was obtained, whichever is less), if your mortgage payments are current. If your loan is delinquent on the date of automatic termination, the lender must terminate the coverage as soon thereafter as the loan becomes current. For high risk loans, mortgage lenders or servicers are required to cancel PMI coverage automatically when you reach 23 percent equity in your home, provided you are current on your loan.

Cancellation by Request

Your PMI may also be canceled at your request - with certain exceptions - when you reach 20 percent equity in your home (based on the original purchase price or on the appraised value of your home at the time the loan was obtained, whichever is less), if your mortgage payments are current. You need a good payment history, meaning that you have not been 30 days late with your mortgage payment within a year of your request, or 60 days late within two years. Your lender may also require evidence that the value of the property has not declined below its original value and that the property does not have a second mortgage, such as a home equity loan.

Lenders must terminate the coverage within 30 days of cancellation or the automatic termination date, and are not permitted to require PMI premiums after this date. Any unearned premiums must be returned to you within 45 days of the cancellation or termination date.

Final Termination

Under the PMI Act, if your PMI has not been canceled or otherwise terminated, coverage must be terminated when your loan reaches the midpoint of the amortization period (if you are current on the payments required by the terms of the mortgage). For example, on a 30-year loan with 360 monthly payments, the chronological midpoint would occur after 180 payments. No payments or premiums may be required from you more than 30 days after this final termination date.

Cancellation of Private Mortgage Insurance (PMI)
Savings, Home Appreciation
Savings

Your savings could be significant. On a $100,000 loan with 10 percent down ($10,000), private mortgage insurance (PMI) might cost you $40 a month. If you can cancel the PMI, you can save $480 a year and many thousands of dollars over the loan. Check your annual escrow account statement or call your lender to find out exactly how much PMI is costing you each year.

Appreciation in Home Value

During the first few years of a typical mortgage, most of the monthly payment amount is interest charges. As a result, it may be many years before you reach 20 percent equity in your home. However, if home prices in your area are rising quickly, or if you make significant home improvements, you may see a jump in the current value of your home (and in your equity value). While the PMI Act does not require a mortgage servicer to consider the current property value, you should contact them to see if they are willing, and if so, what documentation they require to demonstrate the higher property value.

Additional provisions in the law (also see Disclosures Required)

New borrowers covered by the law must be told - at closing and once a year - about PMI termination and cancellation
Mortgage servicers must provide a telephone number for all their mortgage borrowers to call for information about termination and cancellation of PMI
Even though the law's termination and cancellation rights do not cover loans that were signed before July 29, 1999, or loans with lender-paid PMI signed on any date, lenders or mortgage servicers must tell borrowers about the termination or cancellation rights they may otherwise have under those loans (such as rights established by the contract or state law)

Be sure to ask your lender or mortgage servicer (a company that collects your payments) for more information about cancelling your private mortgage insurance

Cancellation of Private Mortgage Insurance (PMI)
Disclosures Required

For Loans Obtained on or after July 29, 1999

The PMI Act requires that your lender notify you of your cancellation and termination rights at loan closing, and that your mortgage loan servicer notify you of these rights annually and upon cancellation or termination of your PMI.

At loan closing, lenders are required to disclose:

A written initial amortization schedule (fixed-rate loans only)
Your right to request cancellation of PMI and the date on which this request may be made
The requirement that PMI be automatically terminated and the date on which this will occur
Any exemptions to your right of cancellation or automatic termination

Annually, your mortgage loan servicer must send you a written statement that discloses your PMI cancellation and termination rights, and an address and telephone number to contact the mortgage servicer to determine whether you may cancel your PMI.

When your PMI coverage is cancelled or terminated, you must be notified in writing by your mortgage loan servicer within 30 days that your PMI has been terminated, that you no longer have PMI coverage, and that no further PMI premiums, payments, or other fees are due.

For Loans Obtained before July 29, 1999

Annually, your mortgage loan servicer must send you a written statement that discloses that under certain circumstances PMI may be cancelled (such as with consent of the lender). It should also provide an address and telephone number to contact the mortgage loan servicer to determine whether you may cancel your PMI.

While the PMI Act's cancellation and automatic termination rules do not apply to loans made before July 29, 1999, lenders may choose to follow similar policies for these loans. Be sure to call your mortgage loan servicer for specific information related to your mortgage.

In addition, some states may have laws that apply to early termination or cancellation of PMI -- even if you signed your mortgage before July 29, 1999. Call your state consumer protection agency for more information about your state's rules.

Private Mortgage Insurance (PMI)
Complaints and Enforcement Authorities
Complaining to Your Lender

Should you have a grievance with your lender, you may use our sample lender complaint letter to help you present the lender with a "qualified written request" under Section 6 of the Real Estate Settlement Procedures Act (RESPA). This law requires that lenders acknowledge the complaint within 20 business days and resolve the complaint within 60 business days by correcting the account or giving a statement of the reasons for its position.

Complaining to a Regulatory Agency

If you feel that your lender is not complying with the PMI Act, you may contact the appropriate federal regulators and enforcement authorities. For contact information and more details, see our guide:

Mortgage and Lender Complaints: Federal and State Regulatory Agencies

If you are unable to resolve your complaint directly (for example by using our sample lender complaint letter), you may want to contact the appropriate federal or state regulators and enforcement authorities. Depending upon their authority under applicable state or federal law, regulators may either attempt to help you resolve your complaint or record your complaint and recommend other action.

National Banks

Office of the Comptroller of the Currency (OCC)
OCC handles complaints and regulates National Banks (which usually have "National" in their names or "N.A." after their names).
How to file a complaint with OCC...

State Member Banks of the Federal Reserve System

The Federal Reserve Board
The Fed handles complaints and regulates state-chartered banks and trusts. It also administers the Truth-in-Lending, Equal Credit Opportunity, and Fair Credit Reporting Acts.
How to file a complaint with the Federal Reserve...

Federally Insured Non-Member State-Chartered Banks and Savings Banks

Federal Deposit Insurance Corporation (FDIC)
FDIC handles questions about deposit insurance coverage and complaints about FDIC-insured state banks that are not members of the Federal Reserve System.
How to file a complaint with FDIC...

Federally Insured Savings and Loan Institutions and Federally Chartered Savings Banks

Office of Thrift Supervision (OTS)
OTS handles complaints about federal savings and loans and federal savings banks.
How to file a complaint with OTS...

Federal Credit Unions

National Credit Union Administration (NCUA)
The NCUA is the regulator for federal credit unions.
How to file a complaint with NCUA...

State-Chartered Credit Unions

If your complaint is with a state-chartered credit union, you should contact the appropriate state regulatory agency for its credit unions.

Mortgage Companies and Other Lenders

Federal Trade Commission (FTC)
The FTC handles complaints involving credit reporting agencies or lenders other than credit unions, banks or savings and loans.
How to file a complaint with FTC...

Entities in the Farm Credit System

Farm Credit Administration (FCA)
FCA regulates banks, associations, and related entities that comprise the Farm Credit System, including the Federal Agricultural Mortgage Corporation (Farmer Mac).
How to file a complaint with FCA...

Housing Discrimination, Land Sales, or Manufactured (Mobile) Homes

Department of Housing and Urban Development (HUD)
HUD handles complaints involving housing discrimination; fraud and abuse when buying or leasing land from developers; and the construction of manufactured (mobile) homes.
How to file a complaint with HUD...

State Agencies / Regulators

You may also contact your state's consumer protection offices, banking authorities, and offices of the attorney general to complain against lenders doing business in your state.

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