Homeowners Protection Act: when PMI must end at 80%, 78% and the midpoint of your loan

The Homeowners Protection Act gives you a legal date on which private mortgage insurance must stop, and a right to request it earlier — no more paying for a lender’s protection you no longer need.

Before 1999, private mortgage insurance was often collected for the life of a loan because nobody was obliged to stop it. The Homeowners Protection Act of 1998, effective for loans closed on or after July 29, 1999, fixed that with a short statute at 12 U.S.C. 4901–4910. It has no implementing regulation; the CFPB and the banking agencies enforce the statute directly, and Fannie Mae and Freddie Mac layer their own, somewhat more generous, servicing policies on top. The Act governs only private mortgage insurance on a single-family primary residence; it does not touch FHA mortgage insurance premiums, the VA funding fee or the USDA guarantee fee.

Scope and exclusions

A “residential mortgage transaction” under the Act is a loan to buy, build or refinance a single-family dwelling (including a condominium or a unit in a planned development) that is the borrower’s principal residence, with borrower-paid PMI. Outside the Act:

second homes and investment properties — Fannie Mae and Freddie Mac apply similar cancellation policies to them by contract, but the statutory rights do not exist;
government-insured loans: FHA annual MIP follows HUD’s own schedule (11 years with 10% or more down, otherwise for the life of the loan), VA and USDA have no monthly PMI;
lender-paid PMI, where the cost is built into the rate: the Act requires only a disclosure that it cannot be cancelled and a comparison with borrower-paid insurance;
loans closed before July 29, 1999, which get only an annual notice reminding the borrower that cancellation may be possible under the servicer’s policies;
“high-risk” loans, as defined by Fannie Mae and Freddie Mac or by the lender for non-conforming loans, lose the borrower-requested cancellation right; automatic termination then occurs when the balance is scheduled to reach 77% of original value, and in any case at the midpoint.

The three dates

Cancellation on request at 80%. You may ask in writing for PMI to be cancelled on the date the principal balance is first scheduled to reach 80% of the original value (the lesser of the purchase price or the appraised value at origination) under the original amortization schedule, or earlier if extra payments bring the actual balance to 80%. The servicer may require: a good payment history (no payment 30 days late in the 12 months before the cancellation date or request, and none 60 days late in the 12 months before that), evidence that the property value has not fallen below the original value (an appraisal or broker price opinion at your expense is customary), and certification that there is no subordinate lien.

Automatic termination at 78%. On the date the balance is first scheduled to reach 78% of original value, the servicer must terminate PMI with no request from you, provided you are current. If you are behind on that date, termination occurs on the first day of the month after you become current. Extra payments do not accelerate this date; it runs off the original schedule.

Final termination at the midpoint. If PMI has somehow survived (for example on a high-risk or interest-only loan, or because the balance never reached 78% on schedule), it must end on the first day of the month after the midpoint of the amortization period — month 181 of a 30-year loan — if you are current.

Within 45 days of cancellation or termination, the servicer must refund any unearned premiums it collected. Once PMI ends under the Act, the servicer may not require any further premium.

Disclosures you should have received

At consummation of a fixed-rate loan, the lender must give you a written notice with the amortization schedule showing the 80% and 78% dates, your right to request cancellation, and the conditions. On an adjustable-rate loan the notice is general, and the servicer must tell you when the 80% point is reached. Every year, the servicer must send a reminder of your cancellation rights and the address to write to. When PMI is cancelled or terminated, a notice confirming it is due within 30 days. A lender-paid PMI loan needs a disclosure at application and at consummation explaining that it cannot be cancelled and what the alternative would cost.

Beyond the statute: the Fannie Mae and Freddie Mac route

The Act uses original value. Fannie Mae and Freddie Mac servicing guides, which bind most conventional servicers by contract, allow cancellation based on current value: generally at 75% LTV if the loan is two to five years old, at 80% after five years, and at 80% at any time when the reduction in LTV comes from documented improvements. A new appraisal or BPO ordered by the servicer, at your cost, is required, along with the same payment-history conditions. This is how owners in markets that have appreciated remove PMI years early; it is not a statutory right, so the servicer’s process and fees are set by the guides, not the Act. See our PMI removal guide for the step-by-step.

What the Act does not do

It does not require a lender to waive PMI at origination, or set its price. It does not apply to FHA loans, the most common place borrowers are surprised to find insurance they cannot cancel. It does not oblige a servicer to accept a current-value appraisal; that comes from the investor guides. And it does not forbid a servicer from refusing cancellation when the loan has a second mortgage or a late-payment history that fails the test.

Enforcement and remedies

The CFPB supervises larger servicers and the banking agencies examine the institutions they charter. The Act also gives borrowers a private right of action: actual damages, statutory damages up to $2,000 in an individual suit (the lesser of $500,000 or 1% of net worth in a class action), costs and attorney’s fees, within two years of discovering the violation. In practice, the first step is a written request citing the Act and the 80% date from your original disclosure; if the servicer does not respond or refuses without one of the permitted reasons, a RESPA notice of error starts a 30-business-day clock and a CFPB complaint costs nothing. Premium overcharges after the termination date are the easiest violation to prove: the amortization schedule shows the date, and the statements show the charges. The CFPB’s plain-English summary is at Ask CFPB; the PMI guide for first-time buyers explains how the premium is priced in the first place.

Key points

Enacted 1998, effective July 29, 1999; 12 U.S.C. 4901 et seq.; no implementing regulation, enforced directly by the CFPB and bank regulators.
Applies to borrower-paid PMI on a single-family principal residence; FHA MIP, VA, USDA, second homes and investment loans are outside the Act.
Cancellation on written request when the balance reaches 80% of original value (scheduled or actual), with good payment history and no value decline.
Automatic termination when the balance is scheduled to hit 78% of original value, if current; otherwise when the loan becomes current.
Final termination at the midpoint of the amortization term, even on high-risk loans, if current.
Disclosures at closing (with the 80%/78% dates on fixed-rate loans), annually, and within 30 days of termination; unearned premiums refunded within 45 days.
Fannie Mae and Freddie Mac guides add cancellation on current value: 75% LTV at 2–5 years, 80% after 5 years, at borrower’s request with a new valuation.
Private right of action: actual damages plus up to $2,000 statutory, attorney’s fees; two-year limitations period.

How HPA / PMI applies to you

Frequently asked questions

What is the difference between the 80% and 78% PMI rules?

At 80% loan-to-value, measured against the original value, you may request cancellation in writing, and the servicer may require a good payment history, proof the value has not dropped and no second lien. At 78% on the original amortization schedule, the servicer must terminate PMI automatically, with no request and no appraisal, as long as the loan is current. The first is a right you exercise; the second is a duty the servicer owes.

Can I remove PMI early because my home went up in value?

Not under the Homeowners Protection Act, which uses original value. But Fannie Mae and Freddie Mac servicing guides allow borrower-requested cancellation based on current value: generally 75% LTV if the loan is between two and five years old, 80% after five years, or 80% at any time when improvements caused the equity gain. Expect to pay for an appraisal or broker price opinion ordered by the servicer.

Does the Homeowners Protection Act apply to FHA mortgage insurance?

No. FHA annual mortgage insurance premium is governed by HUD rules: on most loans since 2013 it lasts 11 years when the down payment was 10% or more, and for the life of the loan otherwise. The usual way to end it is to refinance into a conventional loan once equity reaches 20%. VA and USDA loans have no monthly PMI, so the Act does not apply to them either.

What if my servicer keeps charging PMI after the 78% date?

Premiums collected after the automatic termination date must be refunded, and the servicer owes a refund of unearned premiums within 45 days. Send a written notice of error under RESPA citing the scheduled 78% date from your closing disclosure; the servicer must respond within 30 business days. If it refuses, file a CFPB complaint. The Act also allows a private suit for actual damages plus up to $2,000 in statutory damages within two years.