12 U.S.C. § 4902 : US Code - Section 4902: Termination of private mortgage insurance

Search 12 U.S.C. § 4902 : US Code - Section 4902: Termination of private mortgage insurance

(a) Borrower cancellation
A requirement for private mortgage insurance in connection with a
residential mortgage transaction shall be canceled on the
cancellation date or any later date that the mortgagor fulfills all
of the requirements under paragraphs (1) through (4), if the
mortgagor -
(1) submits a request in writing to the servicer that
cancellation be initiated;
(2) has a good payment history with respect to the residential
mortgage;
(3) is current on the payments required by the terms of the
residential mortgage transaction; and
(4) has satisfied any requirement of the holder of the mortgage
(as of the date of a request under paragraph (1)) for -
(A) evidence (of a type established in advance and made known
to the mortgagor by the servicer promptly upon receipt of a
request under paragraph (1)) that the value of the property
securing the mortgage has not declined below the original value
of the property; and
(B) certification that the equity of the mortgagor in the
residence securing the mortgage is unencumbered by a
subordinate lien.
(b) Automatic termination
A requirement for private mortgage insurance in connection with a
residential mortgage transaction shall terminate with respect to
payments for that mortgage insurance made by the mortgagor -
(1) on the termination date if, on that date, the mortgagor is
current on the payments required by the terms of the residential
mortgage transaction; or
(2) if the mortgagor is not current on the termination date, on
the first day of the first month beginning after the date that
the mortgagor becomes current on the payments required by the
terms of the residential mortgage transaction.
(c) Final termination
If a requirement for private mortgage insurance is not otherwise
canceled or terminated in accordance with subsection (a) or (b) of
this section, in no case may such a requirement be imposed on
residential mortgage transactions beyond the first day of the month
immediately following the date that is the midpoint of the
amortization period of the loan if the mortgagor is current on the
payments required by the terms of the mortgage.
(d) Treatment of loan modifications
If a mortgagor and mortgagee (or holder of the mortgage) agree to
a modification of the terms or conditions of a loan pursuant to a
residential mortgage transaction, the cancellation date,
termination date, or final termination shall be recalculated to
reflect the modified terms and conditions of such loan.
(e) No further payments
No payments or premiums may be required from the mortgagor in
connection with a private mortgage insurance requirement terminated
or canceled under this section -
(1) in the case of cancellation under subsection (a) of this
section, more than 30 days after the later of -
(A) the date on which a request under subsection (a)(1) of
this section is received; or
(B) the date on which the mortgagor satisfies any evidence
and certification requirements under subsection (a)(4) of this
section;
(2) in the case of termination under subsection (b) of this
section, more than 30 days after the termination date or the date
referred to in subsection (b)(2) of this section, as applicable;
and
(3) in the case of termination under subsection (c) of this
section, more than 30 days after the final termination date
established under that subsection.
(f) Return of unearned premiums
(1) In general
Not later than 45 days after the termination or cancellation of
a private mortgage insurance requirement under this section, all
unearned premiums for private mortgage insurance shall be
returned to the mortgagor by the servicer.
(2) Transfer of funds to servicer
Not later than 30 days after notification by the servicer of
termination or cancellation of private mortgage insurance under
this chapter with respect to a mortgagor, a mortgage insurer that
is in possession of any unearned premiums of that mortgagor shall
transfer to the servicer of the subject mortgage an amount equal
to the amount of the unearned premiums for repayment in
accordance with paragraph (1).
(g) Exceptions for high risk loans
(1) In general
The termination and cancellation provisions in subsections (a)
and (b) of this section do not apply to any residential mortgage
transaction that, at the time at which the residential mortgage
transaction is consummated, has high risks associated with the
extension of the loan -
(A) as determined in accordance with guidelines published by
the Federal National Mortgage Association and the Federal Home
Loan Mortgage Corporation, in the case of a mortgage loan with
an original principal balance that does not exceed the
applicable annual conforming loan limit for the secondary
market established pursuant to section 1454(a)(2) of this
title, so as to require the imposition or continuation of a
private mortgage insurance requirement beyond the terms
specified in subsection (a) or (b) of this section; or
(B) as determined by the mortgagee in the case of any other
mortgage, except that termination shall occur -
(i) with respect to a fixed rate mortgage, on the date on
which the principal balance of the mortgage, based solely on
the initial amortization schedule for that mortgage, and
irrespective of the outstanding balance for that mortgage on
that date, is first scheduled to reach 77 percent of the
original value of the property securing the loan; and
(ii) with respect to an adjustable rate mortgage, on the
date on which the principal balance of the mortgage, based
solely on the amortization schedule then in effect for that
mortgage, and irrespective of the outstanding balance for
that mortgage on that date, is first scheduled to reach 77
percent of the original value of the property securing the
loan.
(2) Termination at midpoint
A private mortgage insurance requirement in connection with a
residential mortgage transaction described in paragraph (1) shall
terminate in accordance with subsection (c) of this section.
(3) Rule of construction
Nothing in this subsection may be construed to require a
residential mortgage or residential mortgage transaction
described in paragraph (1)(A) to be purchased by the Federal
National Mortgage Association or the Federal Home Loan Mortgage
Corporation.
(4) GAO report
Not later than 2 years after July 29, 1998, the Comptroller
General of the United States shall submit to the Congress a
report describing the volume and characteristics of residential
mortgages and residential mortgage transactions that, pursuant to
paragraph (1) of this subsection, are exempt from the application
of subsections (a) and (b) of this section. The report shall -
(A) determine the number or volume of such mortgages and
transactions compared to residential mortgages and residential
mortgage transactions that are not classified as high-risk for
purposes of paragraph (1); and
(B) identify the characteristics of such mortgages and
transactions that result in their classification (for purposes
of paragraph (1)) as having high risks associated with the
extension of the loan and describe such characteristics,
including -
(i) the income levels and races of the mortgagors involved;
(ii) the amount of the downpayments involved and the
downpayments expressed as percentages of the acquisition
costs of the properties involved;
(iii) the types and locations of the properties involved;
(iv) the mortgage principal amounts; and
(v) any other characteristics of such mortgages and
transactions that may contribute to their classification as
high risk for purposes of paragraph (1), including whether
such mortgages are purchase-money mortgages or refinancings
and whether and to what extent such loans are low-
documentation loans.
(h) Accrued obligation for premium payments
The cancellation or termination under this section of the private
mortgage insurance of a mortgagor shall not affect the rights of
any mortgagee, servicer, or mortgage insurer to enforce any
obligation of such mortgagor for premium payments accrued prior to
the date on which such cancellation or termination occurred.