CANCELING PRIVATE MORTGAGE INSURANCE

More and more Borrowers are opting for Conventional loan products as mortgage insurance is not required to be on their loan for the life of it as it is with an FHA loan.  Following you’ll find what it takes to remove mortgage insurance from your conventional loans:

The Federal Homeowners Protection Act has provisions for canceling private mortgage insurance. In addition, Fannie Mae and Freddie Mac have additional guidelines for both borrower-requested and automatic MI cancellation that apply to their respective loans.

With borrower-requested cancellation, homeowners can—under certain circumstances— initiate cancellation earlier than would otherwise occur automatically (when the loan balance is scheduled to drop to 78% of the original value of the property). Canceling early allows a homeowner to reduce his or her total monthly mortgage payment.

The following guidelines published by Fannie Mae and Freddie Mac provide cancellation options for a wide range of borrowers:

Borrower-Requested MI Cancellation

Note: This information is not intended to be comprehensive. Other restrictions, including state law, may apply. The mortgage servicer can provide the specifics of eligibility for a given loan.

Auto Termination MI

1 Borrower(s)  with acceptable payment  history can request a cancellation of MI based on an increase in the current property value in certain circumstances. For more information,  see Fannie Mae’s document “Handling Mortgage  Insurance Termination and Cancellation”

2  Borrower(s)  must have had no payment 30 days or more past due in the preceding 12 months and no payment 60 days or more past due in the preceding 24 months.

3 Requires servicer’s  warranty  that  current  property  value  is at least equal  to the original  property  value  based on BPO certification of value or a new appraisal at the borrower’s expense.

4 Automatic  cancellation  of mortgage  insurance by the lender is not affected  by past late payments  or possible declines in property  value. The rule states that the borrower must be current on mortgage payments—or become current—for cancellation to occur.

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