Servicing Guide

Published September 9, 2020

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

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 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.

If the mortgage loan is secured by... Then the LTV ratio eligibility criterion is met...
  • a one-unit principal residence or

  • second home

on the date the mortgage loan balance is first scheduled to reach 80% (or actually reaches 80%) of the original value of the property.
  • a one- to four-unit investment property or

  • a two- to four-unit principal residence

on the date the outstanding principal balance of the mortgage loan reaches 70% of the original value of the property.

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.

If... Then the servicer must...
Fannie Mae's servicing solutions system renders a current property value and the value is at least equal to the original value of the property terminate the MI and notify the borrower within 30 days of receiving the value.
Fannie Mae's servicing solutions system renders a current property value and the value is less than the original value of the property deny the borrower’s request for termination unless the borrower
  • pays down the mortgage loan balance to the point that satisfies Fannie Mae's LTV ratio eligibility criterion, or

  • chooses to verify that the current value of the property is at least equal to the original value of the property by following the procedure in Ordering Property Values for Mortgage Insurance Termination in F-1-02, Escrow, Taxes, Assessments, and Insurance.

Fannie Mae's servicing solutions system does not render a property value deny the borrower's request for termination unless the borrower chooses to verify that the current value of the property is at least equal to the original value of the property by following the procedure in Ordering Property Values for Mortgage Insurance Termination in F-1-02, Escrow, Taxes, Assessments, and Insurance.
The BPO or appraised value is at least equal to the original value of the property terminate the MI and notify the borrower within 30 days of receiving the value.
The BPO or appraised value is less than the original value of the property deny the borrower's request for termination unless the borrower pays down the mortgage loan balance to the point that it satisfies Fannie Mae's LTV ratio eligibility criterion.

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.  

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 current value of the property? 

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

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