Servicing Guide

Published September 9, 2020

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

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.

If the mortgage loan closed... Then the MI is eligible to be terminated...

on or after July 29, 1999 and is secured by a one-unit principal residence or second home

on the applicable termination date, provided the borrower’s payments are current on the termination date.

The applicable termination date is

  • the date the principal balance of the mortgage loan is first scheduled to reach 78% of the original value of the property, or

  • the first day of the month following the date the mid-point of the mortgage loan amortization period is reached, if the scheduled LTV ratio for the mortgage loan does not reach 78% before the mid-point.

before July 29, 1999, regardless of the property type; or

on or after July 29, 1999 and is secured by a one- to four- unit investment property or a two- to four-unit principal residence

on the first day of the month after the date that is the mid-point of the original amortization period, provided the borrower’s payments are current on that date.

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.

If the borrower’s payments are... Then the servicer...

current and the mortgage loan is eligible for automatic termination based on its scheduled amortization

must terminate the MI immediately.

current and the mortgage loan is eligible for automatic termination based on the mid-point of the amortization period

must terminate the MI no later than the first day of the month following the mid-point date.

not current

must not terminate the MI, even if the other eligibility criteria for automatic termination are met.

The servicer must

  • notify the borrower within 30 days after the termination date the MI was not automatically terminated because the payments were not current, and

  • terminate the MI immediately if the borrower’s payments are current at the time of a subsequent review.

See below for related Q&A's:

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

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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