If a borrower is unable or chooses not to make a down payment on a home purchase of at least 20 percent, many lenders require that borrower to obtain private mortgage insurance (PMI).
PMI allows these prospective buyers to obtain mortgage financing at affordable rates. PMI also protects the lender in case borrowers default on their mortgage payments when the house is not worth enough to entirely repay the lender through a foreclosure sale.
The premium for PMI is included in the borrower’s monthly mortgage payment and varies depending on the type and size of the loan, the down payment amount, and the credit of the borrower. Many borrowers do not realize that eventually they can eliminate PMI premiums.
This course explains how the Homeowners Protection Act (Act) establishes the right to cancel PMI, including three different types of cancellation and exceptions to the requirements. The course also covers required PMI-related disclosures and notices. Finally, the course describes suggested practices to build a control environment and consequences of noncompliance with the Act.
Note: Fannie Mae and Freddie Mac have updated their own mortgage insurance policies, in accordance with the Act, for privately insured first mortgages. This course will not discuss the Fannie and Freddie guidelines in any detail, so please check to see if those guidelines apply to your bank.
What You’ll Learn
By the end of Homeowners Protection Act for Compliance Professionals, you will be able to:
- Explain the provisions of the Homeowners Protection Act (Act) as they pertain to the right to cancel private mortgage insurance (PMI)
- Describe the requirements for borrower requested cancellation, automatic termination, and final termination of PMI on non-high-risk loans
- Explain exceptions from the PMI cancellation and termination requirements for high-risk loans
- Describe required PMI-related disclosures and notices for loans with PMI and with lender paid mortgage insurance (LPMI)
- Describe suggested practices to build a control environment and consequences of noncompliance with the Act
ABA Professional Certifications: 1.00 CRCM
Brenda Albo, CRCM
CAMS Analyst, Compliance Department
FirstBank, Lakewood, CO
Brenda Albo has worked in the financial industry since the beginning of 1998. Her entire banking career has been at FirstBank, starting on the teller line and moving through different operations before getting directly involved with compliance in 2011.
FirstBank is a large bank mainly operating out of Colorado with branches in California and Arizona. Brenda is an Analyst in the Compliance Department and holds the designations of Certified Regulatory Compliance Manager and Certified Anti-Money Laundering Specialist. She is also a member of the Association of Certified Anti-Money Laundering Specialists and its Colorado Chapter.
Created: May 2022