Home Owners Protection Act

Question 1

The Homeowners Protection Act (HPA) was enacted in 1998 to facilitate the cancellation of _____

Answer 1

PMI

Question 2

Purpose of Private Mortgage Insurance (PMI): Lenders may require borrowers to purchase PMI when their first mortgage has a loan-to-value ratio of more than ____%. PMI protects lenders when borrowers have minimal cash for a down payment, reducing the risk associated with riskier loans.

Answer 2

80 %

Question 3

The HPA applies to residential mortgage transactions consummated on or after July 29, _______, securing the borrower’s principal residence or used to finance the purchase, construction, or refinance of a dwelling.

Answer 3

1999

Question 4

Cancellation of PMI: Borrowers can request PMI cancellation when their loan balance reaches _____% of the home’s value.

Answer 4

80%

Question 5

Lenders may continue PMI until the loan-to-value ratio reaches ______%, based on payment history and other factors.

Answer 5

78%

Question 6

Regulatory Agency: _______________________________________________________ enforces HPA compliance for large depository institutions, while smaller ones are regulated by federal bank agencies or the Farm Credit Administration.

Answer 6

The Consumer Financial Protection Bureau (CFPB)

Question 7

Loans Covered:

HPA applies to residential mortgages on single-family homes used as the borrower’s principal dwelling, involving lenders, loan servicers, and insurers.
- Exemptions:
- Government-insured FHA or VA loans' - loans with lender-paid PMI` are exempt from HPA provisions.

Question 8

Cancellation Date:

The date when PMI can be canceled based on:

1) an ______________ or
2) actual payments reducing the principal balance to ____% of the home’s original value.

Answer 8

amortization
80%

Question 9

Termination Date: The date when the principal balance is scheduled to reach ______% of the home’s original value based on the loan’s amortization schedule.

Answer 9

78%

Question 10

Final Termination: If neither borrower-requested nor automatic termination occurs, PMI terminates at the ___________ of the loan’s amortization period.

Answer 10

Midpoint

Midpoint of Amortization Period: The halfway point between the loan’s start and end dates, which may change if the loan is modified

Question 11

PMI for conforming high-risk loans terminates at the __________ of the loan’s amortization period

Answer 11

Midpoint

Question 12

PMI for nonconforming high-risk loans terminates automatically when the loan balance is ____% of the home’s original value or at the midpoint of the loan’s amortization period.

Answer 12

77%

Question 13

What types of residential mortgage transactions does the HPA apply to?

Answer 13

The HPA applies to residential mortgage transactions consummated on or after July 29, 1999, securing the borrower’s principal residence or used to finance the purchase, construction, or refinance of a dwelling.

Question 14

Under what conditions can borrowers request the cancellation of PMI?

Answer 14

Borrowers can request PMI cancellation when their loan balance reaches 80% of the home’s value, provided they have a good payment history and meet lender requirements

Question 15

What is the role of the Consumer Financial Protection Bureau (CFPB) regarding HPA enforcement?

Answer 15

The CFPB enforces HPA compliance for large depository institutions, while smaller ones are regulated by federal bank agencies or the Farm Credit Administration.

Question 16

What are the exemptions to the provisions of the Homeowners Protection Act?

Answer 16

Exemptions include government-insured FHA or VA loans and loans with lender-paid PMI.

Question 17

Prohibited practices include receiving payments or premiums for PMI more than 30 days after termination or cancellation, failure to return unearned premiums within _______ days, and charging fees for required notices.

Answer 17

45 days

Question 18

Penalties for violations may include actual damages, interest on damages, statutory damages up to $__________, filing costs, and attorney’s fees.

Answer 18

$2000

Question 19

PMI for conforming loans meeting the Fannie Mae/Freddie Mac

definition of high-risk loans is subject to termination when the borrower reaches the _________________ of the amortization period of the loan.

Answer 19

midpoint

Question 20

Nonconforming loans: lenders must automatically terminate PMI for non-conforming

loans that they identify as high-risk when the loan balance is scheduled, on the

amortization schedule, to reach ___ % of the original value` of the home. PMI for these

loans is also subject to “final termination” at the midpoint of the amortization period.

Answer 20

77%

Question 21

Automatic Termination when loan to value ratio reaches ___% ?

Answer 21

78%

Question 22

6. Which loans are exempt from the HPA provisions?
   
   • a) Conforming loans
   • b) FHA or VA loans and loans with lender-paid PMI
   • c) Jumbo loans
   • d) All fixed-rate mortgages

Answer 22

• Answer: b) FHA or VA loans and loans with lender-paid PMI
• Explanation: Government-insured FHA or VA loans and loans with lender-paid PMI are exempt from HPA provisions.

Question 23

4. Under the HPA, when can borrowers request PMI cancellation?
   
   • a) When the loan balance reaches 90% of the home’s value
   • b) When the loan balance reaches 85% of the home’s value
   • c) When the loan balance reaches 80% of the home’s value
   • d) When the loan balance reaches 75% of the home’s value

Answer 23

• Answer: c) When the loan balance reaches 80% of the home’s value
• Explanation: Borrowers can request PMI cancellation when their loan balance reaches 80% of the home’s value.

Question 24

8. What does “Automatic Termination” of PMI refer to?
   
   • a) PMI terminates when the borrower misses a payment
   • b) PMI terminates automatically when the borrower reaches retirement age
   • c) PMI terminates automatically when the principal balance reaches 78% of the home’s original value
   • d) PMI terminates automatically when the borrower reaches 70 years of age

Answer 24

• Answer: c) PMI terminates automatically when the principal balance reaches 78% of the home’s original value
• Explanation: PMI terminates automatically when the loan balance reaches 78% of the home’s original value if the borrower is current on payments.

Question 25

10. What is required for a borrower to request PMI cancellation under the HPA?
    
    • a) A written request to the lender
    • b) Demonstration of a good payment history
    • c) Current status on mortgage payments
    • d) All of the above

Answer 25

• Answer: d) All of the above
• Explanation: Borrowers must submit a written request, demonstrate a good payment history, and be current on their mortgage payments to request PMI cancellation.