The Federal Homeowner’s Protection Act (“HPA”) was passed into law on July 29, 1998 to provide for cancellations of private mortgage insurance (“PMI”) for most conventional loans. Part of the law stipulates that it supersedes state laws related to the same subject matter, with exemptions for state laws existing at the time of its passage (or within two years thereof), in which case HPA supersedes these laws to the extent of any inconsistencies between the two, though “inconsistencies” does not include cases where state law allows for PMI to be terminated at an earlier date than provided for under HPA (see 12 USCA § 4908[a]).
One state with such laws is New York (enacted in 1984), which provides for the automatic cancellation of PMI in such a way that it is possible for PMI to be cancelled before the times set forth under HPA (see N.Y. Ins. Code § 6503[d] through [f]). Our system is configured to determine whether PMI will be cancelled earlier under the HPA or New York law.
HPA requires a disclosure to be provided to a mortgagor informing him of when cancellation or termination of PMI may occur under the HPA (see 12 USCA § 4903). However, in order to provide clarity to the mortgagor, we will be adding the following footnote to our standard HPA disclosures (Cx29, Cx862, Cx4668, Cx14292, Cx14293, & Cx14294):
“Please Note: New York state law (N.Y. Ins. Code § 6503) allows for the termination of PMI when the unpaid principal amount of the loan equals 75% (for most first lien loans) or 65% (for second lien loans) of the original appraised value of the subject property. It is possible, therefore, for automatic termination of PMI coverage to occur before the 78% value referenced, which is Federally mandated. Please be aware that according to our calculations at the time of closing, PMI coverage for your loan is expected to automatically terminate under New York law before it will automatically terminate under Federal law.”
This footnote will only appear under the following conditions:
- Property State = New York
- State Mortgage Insurance Cutoff Law Supersedes Federal = Yes
These changes will take effect on November 24, 2015. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.