Servicing Guide

Published September 9, 2020

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What are the requirements to remove conventional mortgage insurance based on the current value of the property?

The servicer must not solicit a borrower for MI termination based on current value of the property. The servicer must only terminate MI based on current value of the property in response to a borrower-initiated request for termination.

If the borrower’s written or verbal request for termination based on the current value includes the information necessary to reach a decision, the servicer must evaluate the request based on the following:

1. Verify the LTV ratio of the mortgage loan meets Fannie Mae’s eligibility criteria.

Satisfaction that the mortgage loan meets the applicable LTV ratio eligibility criterion must be evidenced by obtaining a property valuation based on an inspection of both the interior and exterior of the property from Fannie Mae's servicing solutions system by following the procedure in Ordering Property Values for Mortgage Insurance Termination in F-1-02, Escrow, Taxes, Assessments, and Insurance.

The following table describes the LTV ratio eligibility criteria.

If the mortgage loan is... Then...
secured by a one-unit principal residence or second home

the LTV ratio must be

  • 75% or less, if the seasoning of the mortgage loan is between two and five years.

  • 80% or less, if the seasoning of the mortgage loan is greater than five years.

If Fannie Mae’s minimum two-year seasoning requirement is waived because the property improvements made by the borrower increased the property value, the LTV ratio must be 80% or less.

Note: The borrower must provide details to the servicer on the property improvements made since the mortgage loan's origination. Improvements that increase value are typically renovations that substantially improve marketability and extend the useful life of the property (e.g. kitchen and bathroom renovations and/or the addition of square footage). Repairs that are made to keep the property maintained and fully functional are not considered improvements.

secured by a one- to four-unit investment property or a two- to four-unit principal residence the LTV ratio must be 70% or less and the seasoning of the mortgage loan must be greater than two years.

2. Verify the borrower has an acceptable payment record.

An acceptable payment record is achieved when the mortgage loan

  • is current when the termination is requested, which means the mortgage loan payment for the month preceding the date of the termination request was paid;

  • has no payment 30 or more days past due in the last 12 months; and

  • has no payment 60 or more days past due in the last 24 months.  

Note: When assessing the payment history for a mortgage loan and the borrower has made property improvements, the servicer must apply the acceptable payment record criterion to the length of time the mortgage loan has been outstanding.

If a mortgage loan has been assumed by a new borrower, the servicer must not agree to the termination unless the new borrower has a 24-month payment history for the mortgage loan.

The servicer must notify the borrower if the request for termination is denied and provide the reasons for denial, including the results of the BPO or appraisal. This notice must be sent within 30 days after the later of

  • the date the servicer received the borrower’s request for termination, or

  • the date the servicer received the BPO or appraisal.

See below for related Q&A's:

What requirements must be followed when determining if a mortgage loan is eligible for automatic termination of conventional mortgage insurance?

What are the requirements to remove conventional mortgage insurance based on the original value of the property? 

For more information please see: B-8.1-04, Termination of Conventional Mortgage Insurance.

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