12 U.S.C. § 4902 — Termination of private mortgage insurance
submitted 28 years ago by Pub. L. 105-216 to r/title-12-BANKS-AND-BANKING · 1,240 words · no verdicts yet
This section provides rules for canceling or ending private mortgage insurance, including borrower requests, automatic and final termination, loan modifications, refunds, high-risk loans, and accrued premiums.
(a) The insurance requirement must be canceled on the cancellation date* or later when the mortgagor* requests cancellation in writing, has a good payment history*, is current, and meets the mortgage holder’s advance evidence requirement that property value has not fallen below original value and certification that the residence equity has no subordinate lien.
(b) The requirement ends on the termination date* if the mortgagor is current. If not current then, it ends on the first day of the first month after the mortgagor becomes current.
(c) If not otherwise canceled or terminated, insurance may not be required after the first day of the month after the loan’s amortization midpoint, if the mortgagor is current.
(d) If the mortgagor and mortgagee* or holder modify the loan, the cancellation date, termination date, and final termination must be recalculated for the modified terms.
(e) After cancellation or termination, no further payments or premiums may be required after the applicable 30-day period: for subsection (a), 30 days after the later of the request or completion of evidence and certification; for subsection (b), 30 days after the termination date or the date the mortgagor becomes current; and for subsection (c), 30 days after the final termination date.
(f) The servicer* must return all unearned premiums within 45 days after cancellation or termination. An insurer holding them must transfer them to the servicer within 30 days after the servicer gives notice, so the servicer can repay the mortgagor.
(g) Subsections (a) and (b) do not apply to a transaction that had high lending risks at closing, as determined under Fannie Mae and Freddie Mac guidelines for loans within the applicable conforming limit, or by the mortgagee for other loans. For the latter loans, termination still occurs at 77% of original value based on the applicable fixed- or adjustable-rate schedule. High-risk insurance still ends at the midpoint under subsection (c). Nothing requires Fannie Mae or Freddie Mac to buy a covered loan. Within two years after July 29, 1998, the Comptroller General must report to Congress the volume and characteristics of these exempt loans, including comparison numbers and the income and races of borrowers, down payments, property types and locations, principal amounts, purchase versus refinance status, low-documentation status, and other risk characteristics.
(h) Cancellation or termination does not affect a mortgagee’s, servicer’s, or insurer’s right to enforce premium obligations that arose before cancellation or termination.
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—
submits a request in writing to the servicer* that cancellation be initiated;
has a good payment history* with respect to the residential mortgage*;
is current on the payments required by the terms of the residential mortgage transaction; and
has satisfied any requirement of the holder of the mortgage (as of the date of a request under paragraph (1)) for—
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
certification that the equity of the mortgagor in the residence securing the mortgage is unencumbered by a subordinate lien.
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—
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
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.
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.
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.
No payments or premiums may be required from the mortgagor in connection with a private mortgage insurance requirement terminated or canceled under this section—
in the case of cancellation under subsection (a), more than 30 days after the later of—
the date on which a request under subsection (a)(1) is received; or
the date on which the mortgagor satisfies any evidence and certification requirements under subsection (a)(4);
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
in the case of termination under subsection (c), more than 30 days after the final termination date established under that subsection.
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.
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).
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—
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
as determined by the mortgagee in the case of any other mortgage, except that termination shall occur—
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
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.
A private mortgage insurance requirement in connection with a residential mortgage transaction described in paragraph (1) shall terminate in accordance with subsection (c).
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.
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). The report shall—
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
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—
the income levels and races of the mortgagors involved;
the amount of the downpayments involved and the downpayments expressed as percentages of the acquisition costs of the properties involved;
the types and locations of the properties involved;
the mortgage principal amounts; and
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.
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.
Source credit: (Pub. L. 105–216, § 3, July 29, 1998, 112 Stat. 899; Pub. L. 106–569, title IV, §§ 402(a)(2), (c)(1), 403(a), 404, 405(b), (c), Dec. 27, 2000, 114 Stat. 2956–2958.)
- 1998Enacted · Pub. L. 105-216 · 112 Stat. 899
- 2000Amended · Pub. L. 106-569 · 114 Stat. 2956
A history note hasn’t been published yet. The record shows enactment by Pub. L. 105-216 on 1998-07-29.
all 0 arguments · sorted by: best
no arguments yet — make the first case