I am being told by our doc prep vendor that automatic termination of PMI is 78% on fixed rate loans that are single family primary residences and midpoint of amortization for ARMs and all other properties and programs - non owner occupied, multi-unit primary residences, etc. I am reading the reg as automatic cutoff is 78% for both fixed rate and ARM loans secured by single family primary residences; and, that midpoint cancellation is on non owner occupied & multi-unit primary residences. Am I missing an amendment or OSC to this Act? Any assistance is greatly appreciated. Thanks!

Our doc prep vendor reps & warrants the APR; however, we need to manually enter MI information when we perform our tests with the vendor that completes our predatory lending. I just want to be sure the appropriate cut-offs are entered so we do not get false negatives on the APRs.

HOPA does not apply to non-owner occupied property. It only applies to the principal residence.

(14) Residential mortgage

The term "residential mortgage" means a mortgage, loan, or other evidence of a security interest created with respect to a single-family dwelling that is the principal residence of the mortgagor.

(15) Residential mortgage transaction

The term "residential mortgage transaction" means a transaction consummated on or after the date that is 1 year after July 29, 1998, in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained against a single-family dwelling that is the principal residence of the mortgagor to finance the acquisition, initial construction, or refinancing of that dwelling.

The PMI must be terminated, provided the account is in good standing, either when the outstanding balance reaches 78% LTV of the original value of the property based on the original amortization schedule, or when the loan reaches the midpoint of the original amortization schedule. Whichever comes first. To the best of my knowledge this applies to both fixed rate and ARM loans.

For clarification, if I have a 2-unit primary residence or a 2nd home, we should calculate MI for the full term of the loan, correct? Thanks for your help!

A 2 unit primary residence I assume is referring to a duplex. I have not encountered this situation, but I would say it is the borrower's primary residence and HOPA would apply.

A second home is not the borrower's primary residence, therefore HOPA does not apply.

Don't forget that you are free to follow the same cancellation/termination policy for all loans (an not just the ones where HOPA applies.) Often, it is cheaper and easier to implement a "one size fits all" approach than to implement a system and train staff to make case-by-case decisions.

I'm starting to confuse myself My issue is that we are rep'd and warranted on the APR by our doc prep vendor. We also have to manually enter the cutoff factors in our predatory lending program. As of today, I am being told our doc prep vendor only cuts off MI at 78% on 1 unit primary residences fixed rate loans (I am waiting for a response on the ARMs). The reg states "if a requirement for PMI 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....here's where I am confused - wouldn't midpoint of the amortization always put me at 50% LTV?

OK, I went back and read the definitions. A duplex would not be subject to HOPA.

(17) Single-family dwelling

The term "single-family dwelling" means a residence consisting of 1 family dwelling unit.

What the Reg. is saying is that once the loan reaches it's midpoint of the original amortization schedule, you must terminate the PMI regardless of what the current LTV is. And no, the midpoint will not necessarily, in fact very seldom will, put you at a 50% LTV.

If you read the Reg. there is no distiction between fixed rate and ARM loans for the termination dates. The only disticition is for the required notices at consummation.

Duhhhh! Thanks, Dan. Now that I think about it. Since the interest portion of your P&I progressively declines further down the amortization, midpoint would not be 50% LTV. I knew I was confusing myself.