B-8.1-04, Termination of Conventional Mortgage Insurance (05/15/2019)

The servicer must not charge the borrower a fee for processing an automatic termination.

The servicer must take the following steps to terminate the MI, as applicable:

1. Determine when the MI is due to automatically terminate.

The servicer’s review must determine whether

• a mortgage loan is eligible for automatic termination of MI based on the scheduled termination date (or the mid-point of the amortization period, as applicable), and

• the borrower’s payments are current on that date.

The following table describes the timing of the automatic termination.

Note: The servicer must determine the original value of the property in accordance with applicable law.

2. Verify the borrower’s payments are considered current.

The borrower’s payments are considered current if the payment due in the month preceding the scheduled termination date, or the mid-point of the amortization period, as applicable, was paid by the end of the month in which the payment was due.

The following table describes the action the servicer must take depending upon the status of the borrower’s payments.

The servicer must take the following steps to evaluate the borrower's written or verbal request for MI termination due to reduction in the UPB through the payment of scheduled monthly payments or an unscheduled principal curtailment:

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

The following table describes the LTV ratio eligibility criteria.

Note: The servicer must determine the original value of the property in accordance with applicable law.

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 that has been outstanding for fewer than 24 months (or for a new borrower who assumed a mortgage loan within the last 23 months), the servicer must apply the acceptable payment record criterion to the length of time the mortgage loan has been outstanding (or that has elapsed since the new borrower assumed the mortgage loan).

The 12- and 24-month payment histories must be measured backward from the later of the date

• the balance is first scheduled to reach, or actually reaches, 80% of the original value of the property; or

• the borrower actually requests termination.

3. Verify the current value of the property is not less than its original value.

The servicer must obtain a property valuation from Fannie Mae's servicing solutions system to verify that the current value of the property is at least equal to the original value of the property and take the required actions based on the following table.

Note: The AVM value in Fannie Mae's servicing solutions system will be updated after 120 days.

If the request for termination is denied, the servicer must

• notify the borrower and provide the grounds for denial, including the results of the AVM value, BPO, or appraisal used to make the determination, and

• send this notice within 30 days of the date the servicer received the AVM value, BPO, or appraisal, if applicable and in accordance with applicable law.

The servicer is authorized to identify a mortgage loan that is close to or has reached the LTV requirements for MI termination based on original value and notify the borrower of the actions required to terminate MI. The servicer must terminate MI based on original value of the property only after receiving a direct response from the borrower to do so.

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 InsuranceF-1-02, Escrow, Taxes, Assessments, and Insurance.

The following table describes the LTV ratio eligibility criteria.

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.

When verifying an acceptable payment history for a borrower that was impacted by a disaster event in which the servicer provided either a forbearance plan, a repayment plan, or a Trial Period Plan, or disaster payment deferral and the borrower complied with the terms of such workout option, the servicer must not consider any payment that is 30 or more days past due in the last 12 months, or 60 or more days past due in the last 24 months that is attributable to the disaster event. This applies when reviewing the borrower's request for termination of conventional MI based on either original or current value of the property.

The MI termination eligibility criteria for a modified mortgage loan must be based on the terms and conditions of the modified mortgage loan, including the amortization schedule of the modified mortgage loan, and must comply with applicable law.

The servicer must automatically terminate the MI on the applicable termination date and must approve a borrower-initiated request for termination if the previously stated requirements for the applicable type of MI termination are met.

The servicer must not collect MIPs as part of the borrower’s mortgage loan payment more than 30 days after the later of

• the date the servicer received the borrower’s request for termination (or the scheduled termination date or the mid-point of the amortization period, as applicable, for an automatic termination), or

• the date all eligibility criteria for termination were satisfied.

The following table provides the requirements for finalizing and reporting the termination of the MI.

The following table outlines the actions the servicer must take depending on whether it performs a new escrow analysis at the time the MI is terminated.