As previously announced, FNMA updated their requirements regarding borrower-initiated cancellation of private mortgage insurance (PMI) this past July. Mandatory compliance with these changes begins September 1, 2019, but servicers may optionally begin complying with these changes starting on January 1, 2019.
These PMI cancellation requirements are promulgated in PMI disclosures provided for loans secured by subject property in California, Connecticut, or Washington, pursuant to Cal. Civ. Code § 2954.6, Conn. Gen. Stat. Ann. § 36a-726(a), and Wash. Rev. Code Ann. § 61.10.020(1), respectively. We are modifying these documents to reflect FNMA’s changes. Substantial edits include the following:
- Replacing the “Evidence of Property Value” requirements section in the “Borrower-Initiated Cancellation of Mortgage Insurance Based on Original Value” with the following:
“Your servicer must obtain a property valuation from Fannie Mae’s Automated Property Service™ (APS) or follow Fannie Mae’s Ordering Property Values for Mortgage Insurance Termination requirements to verify that the current value of the property is at least equal to the original value of the property. Depending upon the outcome of the APS, broker’s price opinion (BPO), or appraised value, your servicer will terminate the mortgage insurance (and notify you of such), deny your request for termination, or conditionally deny your request. You will be notified of any denials and the results of the APS, BPO, or appraisal used to make the determination.”
- Replacing the “Evidence of Property Value” requirements section in the “Borrower-Initiated Cancellation of Mortgage Insurance Based on Current Value” with the following:
“Your servicer must obtain a property valuation from Fannie Mae’s Valuation Management System (VMS) application, as described in Fannie Mae’s Ordering Property Values for Mortgage Insurance Termination requirements.”
- Replacing the 75% value with 80% in the third item listed in the “Earliest Date Borrower-Initiated Cancellation Requests” row of the “Earliest Date for Borrower-Initiated Cancellation of Mortgage Insurance Based on Current Value” table, for the first lien, single unit-version of the forms.
These changes take effect on September 1, 2019. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
Update: FNMA announced in FNMA SVC-2018-09 that they are postponing the effective date of their revisions from March 1, 2019 to September 1, 2019. Optional compliance is still permitted starting January 1, 2019.
Update: The changes are available immediately for clients that wish to begin using the new text prior to the mandatory date. Field “Use 2019 FNMA PMI Cancellation Requirements” (131635) can be imported or mapped to “Yes” to trigger the new changes to FNMA’s PMI cancellation requirements.