The Homeowners Protection Act (“HPA”), also known as the Private Mortgage Insurance Cancellation Act of 1998, is a federal law that establishes rules for the cancellation and termination of private mortgage insurance (“PMI”) on certain residential mortgage loans. PMI is typically required when a borrower makes a down payment of less than twenty percent of the home’s value. Under the HPA, borrowers generally have the right to request cancellation of PMI once the loan balance reaches eighty percent of the property’s original value, provided certain conditions are met, such as a good payment history. The law also requires lenders to automatically terminate PMI when the loan balance reaches seventy-eight percent of the original property value if the borrower is current on payments. Additionally, lenders must provide annual disclosures informing borrowers of their rights regarding PMI cancellation and termination.
For Mortgage Loan Originators (“MLOs”), the HPA is significant because it governs how PMI requirements and borrower rights must be disclosed during the mortgage origination process. MLOs must ensure that borrowers understand when PMI is required, how it affects monthly payments, and the circumstances under which it may be canceled or terminated. Accurate communication regarding PMI obligations and HPA disclosure requirements helps borrowers make informed financing decisions and supports compliance with federal consumer protection laws. Failure to comply with HPA requirements can result in regulatory penalties, borrower disputes, and reputational harm for lenders and mortgage professionals.
