(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.
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(c) Final termination. If a requirement for private mortgage insurance is not otherwise
canceled or terminated in accordance with subsection (a) or (b), 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), more than 30 days after the later of—
(A) the date on which
a request under subsection (a)(1) is received; or
(B) the date on which the mortgagor
satisfies any evidence and certification requirements under subsection
(a)(4);
(2) in the case of termination under subsection (b), more than 30
days after the termination date or the date referred to in subsection
(b)(2), as applicable; and
(3) in the case of termination under subsection (c), more than 30
days after the final termination date established under that subsection.
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(f) Return of unearned
premiums.
(1) 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) Not later than 30 days after notification
by the servicer of termination or cancellation of private mortgage
insurance under this Act 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).
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(g) Exceptions for high risk loans.
(1) The termination and cancellation provisions
in subsections (a) and (b) 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 305(a)(2) of the Federal Home Loan Mortgage Corporation
Act, so as to require the imposition or continuation of a private
mortgage insurance requirement beyond the terms specified in subsection
(a) or (b) of section 3; 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) A private mortgage
insurance requirement in connection with a residential mortgage transaction
described in paragraph (1) shall terminate in accordance with subsection
(c).
(3) 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) Not later than 2 years after the date
of the enactment of this Act, 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). 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.
[12 USC 4902.
As amended by act of Dec. 27, 2000 (114 Stat. 2956, 2957, 2958).]
