Homeowners Protection Act and VA loans: no PMI to cancel, but no funding-fee refund either
The Homeowners Protection Act does not apply to VA loans because there is no private mortgage insurance to cancel; the one-time funding fee replaces PMI and is refundable only when a disability rating is granted retroactively to before closing.
The HPA exists to force cancellation of private mortgage insurance at 80% loan-to-value on request and automatically at 78%. A VA-guaranteed loan has no PMI at any down payment, so there is nothing for the Act to regulate. Veterans still meet the HPA in two situations: when they hold a conventional loan today, and when a lender mistakenly prices a VA loan as if insurance applied.
What replaces PMI on a VA loan, and what it costs
The guaranty is funded by the one-time funding fee — 2.15% of the loan on first use with less than 5% down, 1.5% with 5% to 9.99% down, 1.25% with 10% or more, 3.3% on subsequent use with little down, and 0.5% on an IRRRL. Unlike PMI, it is paid (or financed) once and never cancels, never adjusts with equity, and never needs a request at 80% LTV. Over a loan kept for 30 years the financed fee costs more than a few years of PMI; over a loan refinanced or sold within five years it usually costs less. The comparison is worth running with real numbers: see our PMI guide for conventional premiums at your credit score.
The only refund path
The funding fee is not refundable for equity, prepayment or sale. It is refundable when VA later awards a disability rating with an effective date before the loan closed, or when a fee was collected from a borrower who was exempt at the time. The refund comes from VA through the servicer, and if the fee was financed the refund is applied to the principal balance. File the request with VA’s regional loan center as soon as the rating letter arrives; lenders do not do it for you.
Veterans holding a conventional loan now
If you bought with 5% or 10% down on a conventional loan before using your VA benefit, the HPA applies in full: written request at 80% of the original value with a good payment history and no second lien, automatic termination at 78% on schedule, final termination at the loan’s midpoint, and annual notices of your cancellation rights. Refinancing into a VA loan to “remove PMI” is often proposed by VA-heavy lenders; it replaces a cancellable monthly premium with a permanent financed fee (3.3% if you used the benefit before, 2.15% if not) and resets the term. Run the PMI removal math first — a request to cancel at 80% may cost nothing.
Mistakes to catch on the disclosures
- A monthly “mortgage insurance” line on a VA Loan Estimate — it should be zero.
- An HPA PMI disclosure packaged with VA documents, which signals the lender’s system defaulted to a conventional template.
- A funding fee charged despite an exemption on the COE.
The cancellation mechanics are on the HPA page.
What to check
- Expect no monthly mortgage insurance on a VA loan; a non-zero MI line on the Loan Estimate is an error to fix before locking.
- Compare the one-time funding fee against cancellable conventional PMI over the years you expect to keep the loan.
- Claim a funding-fee refund from VA if a disability rating is later made effective before your closing date.
- If you currently pay PMI on a conventional loan, request HPA cancellation at 80% before considering a VA refinance pitched as “PMI removal.”
Frequently asked questions
Do VA loans have PMI or mortgage insurance?
No. The VA guaranty replaces private mortgage insurance, so there is no monthly premium regardless of the down payment. Instead, most borrowers pay a one-time funding fee — 2.15% on first use with no money down — which may be financed. Borrowers receiving VA disability compensation, Purple Heart recipients on active duty and surviving spouses on DIC are exempt.
Can I get the VA funding fee back?
Only in specific cases: a disability rating awarded with an effective date before closing, or a fee collected from someone who was exempt at the time. Equity growth, selling or refinancing does not trigger a refund. Apply through VA; if the fee was financed, the refund reduces your principal balance rather than arriving as a check.
The rule in full: Homeowners Protection Act (PMI cancellation). The borrower profile: Veterans and service members. Related guides: Conventional vs FHA vs VA vs USDA: the four loan types compared · Closing costs explained: what is negotiable, what is not · PMI removal: the 80% request, the 78% automatic cancellation, and the appraisal route · PMI for first-time buyers: what it costs and how to get rid of it.
Other federal rules for veterans and service members
TILA / Reg Z · RESPA · TRID disclosures · ECOA · Fair Housing Act · HMDA · SAFE Act / NMLS · ATR / QM · HOEPA · Servicing rules · FCRA · Flood insurance · MARS rule · SCRA · LO compensation
HPA / PMI for other borrowers
First-time buyers · Conventional borrowers · Self-employed · Investors · Retirees · Bad credit · Foreign nationals · Physicians · Heroes · Rural buyers · Condo & second home · Refinancing