Homeowners Protection Act Flashcards
The bank has recently received complaints from mortgage loan borrowers that their private mortgage insurance (PMI) has been required for far too long. An investigation reveals that some customers with 30-year mortgage loans have had PMI required for 17 years. When drafting an action plan, what is the compliance officer’s BEST course of action?
A. Immediately terminate those customers’ PMI and refund the premiums paid past the midpoint of the mortgage term
B. Immediately terminate those customers’ PMI and refund the premiums after the time where the loan-to-value ratio fell below 80%
C. Nothing is necessary, as the bank and borrower agreed to PMI for the entire term of the loan
D. Immediately terminate those customers’ PMI if their home values have not fallen more than 10% of the value when the loans were originated
A. Immediately terminate those customers’ PMI and refund the premiums paid past the midpoint of the mortgage term
The Homeowners Protection Act requires termination of private mortgage insurance at the midpoint of the loan term (15 years for a 30-year loan). Therefore, PMI that has been in place for 17 years must immediately be terminated, and excess premiums for 2 years refunded to borrowers. This is true even if the customer had agreed to PMI for the entire term of the loan, and regardless of whether the value of the home had fallen more than 10% of the original value.
